alt=“”

Don’t make ‘em like they used to

Don’t make ‘em like they used to

Working with foreign factories

Working with foreign factories

MAKING IT WORK PODCAST

Season 1 | Episode 4

Finding a factory to make your product is a bit like dating. Seduction, quality time, being stood up… it's all part of the game. Our panel of entrepreneurs share their stories and advice on maintaining a manufacturing relationship that is often long distance and cross cultural.

With personal accounts, and a heart-wrenching story or two, we talk about what it takes to find your perfect match as well as that delicate balance between quality and profit margin.

So, when should you commit to a supplier? And when should you keep looking?

Listen now

SHOW NOTES

How do you work with factories abroad?

From groceries to manufacturing, buying local is back in vogue. From the environmental to the sentimental, there are many reasons that businesses will endeavor to keep their production within the confines of their country, state, or even town.

But there’s no escaping the reality of the bottom line and as a result, many more find themselves outsourcing their production abroad. It’s a decision that, along with its rewards, inevitably brings challenges – not all of them predictable.

 

The local dilemma

Skateboard wheel maker Shark Wheel initially began with local production, something that founder David Patrick still vouches for. “Producing in the US is still the best idea. It makes everything flow really well – your shipping costs, your carrying time.” However, he found himself sourcing parts from China out of pure practicality. “Some of the best product I've ever gotten is out of China. It's really, really a good price and I do not have a US supplier for it. So, in that particular case, there is no choice. And I'm getting this incredible quality at a great price.”

For Brian Munoz, founder and designer of Penny Luck Shoes, there simply was no local option that could provide the materials and workmanship that his unique brand demanded. But instead of taking the traditional route of reaching out to Italy, he went somewhere a little closer to home: “I make my shoes in Mexico. And the reason is that I knew that in Leon, Mexico, they made some of the best shoes in the world – shoes that rivaled Italy.”

 

A diligent approach

For Brian and David – and indeed many entrepreneurs – guaranteeing quality is the overarching consideration. Tivan Amour, CEO and co-founder of SaveMySales (now Attentive) started out making and selling anti-theft bicycles, and stressed that due diligence is vital to achieving that goal. “It starts with working with factories that have a high-quality standard. Understanding what the factories are manufacturing, and using those existing products as a proxy for what might come out if you were to work with them.”

Dana Donofree, founder of AnaOno – who make lingerie for mastectomy patients – couldn’t agree more. “When you are looking for your external partners and relationships because you need to make a product, or you need to manufacture something, due diligence is of the utmost importance.” Dana learned this the hard way. “When I didn't do the necessary due diligence, I missed my kick-off and my launch date for my business by over six months.”

And Brian also had cause for regret on this front. “I could have avoided getting ripped off by doing proper due diligence, I think…” He had an unpleasant surprise at a trade show in Mexico. “I spent a few months out there developing a shoe. Finally, I'm ready to start producing and decided to go to the show just to see what was out there. My factory had a booth and they had all of my products that I designed and put my heart and soul into on display, selling them to everybody else.”

The entrepreneurs

alt=“”
alt=“”

David Patrick

alt=“”
alt=“”

Dana Donofree

alt=“”
alt=“”

Brian Munoz

Winning the factory lottery

Incidents like this might make finding the right factory sound like winning a sweepstake. But in fact, it’s more akin to getting signed by a major record label. It can be very difficult to get a large factory to pay attention to a small business, as Brian can confirm: “When you're small and you don't have the resources like the other big companies, it's super easy for them to blow you off: ‘Why am I gonna spend the time of day to make 100 pairs of shoes or whatever?’"

And even once you get them on board, it’s still not plain sailing, as Tivan recalled. “The number one challenge is just getting people to care about this small little project you're working on. I remember asking my partner, why aren't they listening to us? We told them what to do and they didn't do it on time. The size of the operation really has an impact on whether or not these partners are going to do anything for you.”

This is compounded by that evergreen challenge of maintaining quality. “There are plenty of small factories with lower standards that perhaps we could have worked with. But the product would have suffered.”

 

Long-distance quality control

This highlights the need for robust quality control procedures. But it’s one thing keeping an eye on a local factory – how do you maintain it when your production site is on the other side of the planet? The simple answer is that you get on a plane.

Dana had issues with her new factory: “…when I got my goods in for my launch, they were not the goods I approved with my old facility. I had fit issues, I had quality issues and I had to manage all of that and correct the product once I received it because I didn't get on a plane. I didn't get over there and say, ‘Let's get a new sample from this new facility. Let's make sure everything is exactly as it was before.’”


“It doesn't matter where you manufacture – there is illegal labor everywhere that you go.”


That’s assuming that the product even gets made. Aside from the inevitable language barriers, there are also cultural differences that impact manufacturing. Factories in Italy and Spain will often shut down for two weeks in the summer; and in China and other countries, the run-up to the Lunar New Year factory shutdown can result in production bottlenecks.

There’s more than the product itself at stake. Dana reminds that without vetting who you work with, they can ship off schedule or send $100k of incorrect inventory – and that’s far from the worst that could happen. “It doesn't matter where you manufacture – there is illegal labor everywhere that you go. If you don't vet that partner, that partner can use illegal labor, and they could put you out of business.”

 

Home or away?

It can seem at times that working with foreign factories might be more trouble than it’s worth. But the temptation to move production back locally is often outweighed by the bottom line.

When David was approached by a major retailer, it seemed like too good an opportunity to pass up… until he looked at the figures. “I make a wheel that costs $70 for a set, they wanted a complete skateboard that sold for $39. I couldn't even make the box for it to go into at that price point! So we started going out there and trying different formulas and trying different things.”

He worked closely with his factory in China and, even though the compromise was “very hard for me to swallow”, he knew that it was not only good enough, it was still good enough for a pro to ride. It’s not something that he’d have been able to achieve with a local manufacturer.

Ultimately, with businesses needing to turn a profit in order to survive, the ability to create the best product at the most competitive price is ultimately what dictates where a company can make something.

“If I made wood furniture,” says Dana, “to make it in the US would seem ideal because we have wood, we have good carpentry and labor and the product is heavy and needs to get shipped somewhere. But the US is not good at making underwear. We don't make any of the components that go into underwear. We don't develop our own lace. We don't develop our own elastic or trims and hooks and eyes and all of these pieces that go into a bra.”

The challenges of working with foreign factories are real indeed. But whether it’s boots, bras or bikes, it’s clear that – in the eyes of both business owners and their customers – it’s worth the effort.

Listen to the episode

More episodes

alt=“”

Wham bam thank you spam:
Marketing in the age of influencers

Blog or email? Influencer or ads? Genuine or fake it 'til you make it? Our entrepreneurs discuss their favourite ways to promote their products in the 21st century.

alt=“”

Swimming with sharks:
Where to find investors

Looking for an investor to take your business to the next level? Or happy enough slogging it out as a self-funded bootstrapper? We talk over the pros and cons of handing over a piece of the pie.