Choosing manufacturers for a new product is a big decision that will shape the course of your business going forward.
But with all the different suppliers out there, all headquartered in different countries, how do you choose the right ones to make your product?
How To Choose The Right Supplier For Your Business
Define your needs.
This is the first step to choosing any strategic partner, and manufacturers are no different. For any business relationship to work, you need to clearly define what you need out of it. This will also narrow down your choices and make the selection process a lot easier.
Some things you want to determine are:
● Minimum order quantity (MOQ)
● Production capacity (based on demand forecasts)
● Needed lead time
● Manufacturing locations
● Payment options and terms
● Delivery methods
● Storage requirements
Depending on your industry, there are other factors that will be crucial. Make sure to note them and use them in your decision making!
Assess macroeconomic and geopolitical risks.
When choosing a location to source from, there will always be factors outside of your control that can cause problems for your business. Political instability, trade negotiations, disruptive weather patterns, and geopolitical relationships can all impact your business: both positively and negatively.
Determine any supply chain risks and note them. Then, to the best of your ability, estimate their likelihood and their potential impact. From there, you can decide which risks are acceptable and which are not.
Determine your search processes.
From there, you need to decide how you’re going to look for suppliers. Many businesses now choose to use online marketplaces like ThomasNet and Alibaba to find manufacturers. You can also decide to use trade publications to put out a request for bids. You could use a broker to help find manufacturers for you. Or, you could contact manufacturers directly from a trade catalog.
Whichever method you choose, make sure you continue to keep your needs and potential supply chain risks in mind when choosing a supplier.
Put out a call for bids & evaluate them individually.
Once you decide how you’re going to find manufacturers, submit a Request for Proposal (RFP). Alternatively, if going the direct route, ask each manufacturer for a quote.
Assess each supplier based on your criteria. By looking at each bid and each manufacturer individually, you’ll be able to see which ones are suitable for your business. Take your time with this process: you want to make sure you do your due diligence in order to avoid problems down the road!
Ask for testimonials, references, or past projects.
This one might be difficult due to NDAs or other competitive pressures, however you need to find out what it’s actually like to work with a supplier.
Many people find suppliers because they were referred to them. This is advantageous, but you also need to do your own due diligence on them.
Ideally, you want to get the reference’s contact information so you can evaluate them directly.
Negotiate payment terms.
Although you might have certain requirements for payment terms, some manufacturers will have their own set of standard payment terms. Most manufacturers are open to negotiating payment terms, even if they have their own standard protocols. Manufacturers want your business and will be willing to make concessions to get it.
Ultimately, the negotiation process should result in a win-win deal that both parties can benefit from. Most importantly, the deal must be acceptable to your business and must fit your needs.