Aug 19, 2020 03:10 PM EDT
Kudos on making the most crucial step: creating a working prototype of your product. You have probably spent years transforming your groundbreaking idea into a viably marketable and usable product. Half the battle is won - the other equally important half is finding the right partner to mass produce your product. This is neither a trivial decision nor an easy task.
With startups, new businesses, or first-time entrepreneurs, the odds are high that you don't know anyone in the manufacturing industry. That's why you need to go above and beyond to score the best in class. Whether this is your debut or 50th product that is ready to go into production, your manufacturing partner will be the throbbing heart at the forefront of your supply chain. If the partner drags their feet, experiences delays, or delivers shoddy products, you will disappoint many people down the line.
What are we saying? Cultivating a good relationship with a trustworthy and reliable manufacturing partner is tantamount to starting your product's journey on the right foot. Keep reading to learn 6 key questions you should ask your manufacturing partner before signing on the dotted line.
This is arguably the most important question to broach right out of the gate because you don't want to work with a manufacturer whose payment terms and conditions are unfeasible or don't align with your long-term goals. Are the terms negotiable or set in stone? What happens if your situation changes along the way?
Although payments for invoices are supposed to be made within 30 days, you can always negotiate for fairer terms in the event things aren't going your way. Good partners should be willing to stretch the due date by a further 30-60 days.
When considering payment terms, the deposit matters the most because you may still be looking for funding or courting new investors. Most manufacturing suppliers ask for an upfront down payment of some sort prior to starting a pre-production run. For tooling costs, the deposit is typically 50 percent with the rest will be paid upon completion.
You should also know whether this is a fixed amount or a rolling percentage. If a specific manufacturer asks for everything upfront, that could be a telltale sign of a bad partner. It would be best if you kick off your relationship on a pillar of trust.
Countless entrepreneurs and brands all over the world fill their orders with the help of manufacturing partners. Although cost-effective, this model isn't perfect. Some products are delivered broken, poorly made, or looking nothing like your prototype. Not all manufacturing partners are reputable, especially those based overseas.
This is where a liability insurance certificate will come to your rescue. You should get written proof that your manufacturing partner has sufficient funds to cover expenses in case their products (or components) break down or malfunction. Don't forget to ask for a new copy of the policy every year to ensure they don't fail to renew it, exposing your business to further risk.
More often than not, you will get a quote for the cost of tooling, materials, and/or the product. That isn't to say there are no other in-between fees, surcharges, and costs that will likely bulge your eventual bill. If the terms are Freight on Board (FOB), who will be responsible for the delivery charges?
Make sure to ask what your total costs will be. Are there extra fees or charges you should be aware of? For instance, will you have to make payments for fuel surcharges, delivery fees, or restocking fees for returns? Take a closer look at the terms to fish out any line item that may later cost you additional money.
As mentioned above, some products will occasionally arrive looking utterly different from your original design or prototype. Some more frequently occurring quality issues include: missing parts, malfunctioning components, use of the wrong color, and whatnot. Because errors are bound to happen, it's imperative that you work with a partner that sticks to strict quality assurance practices (GxP).
GxP goes beyond having a Quality Management System (QMS) in place. Dickson notes that GxP encompasses a wide range of guidelines and compliance standards to which companies in regulated industries must adhere. In light of this, let your candidate walk you through clear-cut good manufacturing and quality assurance practices they've laid out to ensure consistently high-quality products.
This is one question that most entrepreneurs forget to ask, assuming that ownership transfer will occur at their convenience. Don't follow the flock: ask about this right off the bat. Does ownership of the product transfer to you once you receive it? Or do you get a number of days as a grace period?
Ideally, you want a vendor that will give you a certain grace period so you can thoroughly check the products to make sure they're in tip-top condition. This comes in the form of a 3 to 5-day period to inspect the order before you assume full ownership of the goods.
Delays are inevitable if you use a manufacturing partner and are the main paint-point for most companies. Since this is a rampant issue, you want to know what happens if your goods don't arrive on time. Will you get a discount for delayed orders, and how much discount should you expect?
What about products that fail to arrive in a completed state? Ask if and how much discount will be offered if your orders are not fulfilled and you have to source them from another supplier. You would be surprised at the number of relationships that sour because the contract manufacturer didn't hold its end of the bargain by delaying orders or entirely failing to deliver.
The value of finding the right manufacturing partner is absolute. That's because many businesses and entrepreneurs have great products but don't have the means to produce them en masse. These are only six of many questions you should bring up during your meeting to gauge if you're a good match.
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