How do I choose manufacturers abroad?
I run a household retail company and I make purchases from numerous suppliers around the world. I am considering launching my own lines and using manufacturers in the developing world to produce them as they seem to offer the best value. I would welcome advice on how to best go about this to ensure that I get a high quality of goods without paying for things I don’t want.
A. Tony Caldeira writes:
You’re right to try and source your products from around the world, especially from developing countries. Your company could reduce its costs, give its customers best value and gain a crucial competitive advantage.
However, despite the obvious long term advantages, the strategy will be difficult to achieve and is risky in the short term. The combination of attempting to launch your own lines, travelling the world to seek the best manufacturers and having to pay for more of your products in advance is likely to place significant constraints upon your company’s time, resources and cashflow. Do you have plans for these issues in place?
Very few household retail companies have successfully transferred all of their production overseas because a complex specialist supply chain skill set is required. Most leading retailers have varying combinations of international and domestic suppliers, to optimise the trade-off between value and flexibility.
Consolidate your proposed new supply chain to a few core suppliers and build lasting relationships. This will help reduce your management costs and help communication as partnerships evolve but can take years to perfect, especially when your supply chain operates in a different time zone.
Remember, prevention is better than cure. Put quality assurance systems in place to maintain the reputation of your company and do everything you can to prevent your products from being copied. It’s very difficult to send back a container full of sub-standard goods when you have already paid for them.
Despite all these issues, it’s possible for you to achieve your goals. The key to the project’s success is to find the right partners and take a step-by-step approach. Start with small orders and iron out the inevitable teething problems before taking the next step.
You will need to take calculated risks, put in the air-miles, have a flexible team and a strong cash position. Get this right and you’ll be more profitable and have a major competitive advantage, get it wrong and the consequences for your cashflow could be disastrous.