– 15 minute read –
If you’ve been thinking about starting a business, you may have brainstormed some ideas of your own, like capitalizing on one of the many in-demand products already on the market.
However, many entrepreneurs find themselves hitting a brick wall when it comes time to actually source products. Whether you plan on manufacturing something of your own or finding suppliers to purchase from wholesale, good products aren’t always easy to find.
In this post, we’ll look at the basics of sourcing a supplier for your next project. We’ll give you ideas for some places to search, and examine how you should approach suppliers and what to ask them when developing a product for your ecommerce business.
Find the best manufacturer for your products 🚀
- What is a manufacturer?
- Domestic vs. overseas suppliers
- How to manufacture a product
- Finding your supply partners
What is a manufacturer?
A manufacturer is any business that produces finished goods from raw materials. They sell these goods to consumers, wholesalers, distributors, retailers, and other manufacturers wanting to create more complex items.
Manufacturers typically stick to one type of product. For example, you could work with a glassware manufacturer who creates glass bottles and jars. You could work with one manufacturer for boxes and another for plastic or natural products.
Retailers often work with multiple manufacturers at once to create an inventory for their store.
Is a manufacturer a supplier?
Suppliers and manufacturers are pretty much synonyms. For the purpose of this post, when we refer to suppliers, we’re referring to anyone who has the capability to provide you with products and inventory. This encompasses manufacturers, wholesalers, and distributors.
There are a ton of helpful resources online that you can find through Google. But before you begin, there are a few things you need to know and decide.
First, you should figure out what type of supplier you’re looking for. This will help determine the terminology you need to use in your research. Check out our post on ecommerce business models to help you get started. There are several supplier options, the most common being:
- A manufacturer who produces your own product idea
- A supplier (who may also be a manufacturer), wholesaler, or distributor who purchases already-existing brands and products
- A dropshipping company that supplies products and fulfills orders of already-existing brands and products
Domestic vs. overseas suppliers
If you plan to manufacture or wholesale, when looking for suppliers you’ll need to decide whether you want to source domestically or from overseas. Overseas can refer to any location abroad.
It’s a good idea to secure two manufacturers: one domestic and one overseas. Your local manufacturer can be used as a backup. So, if orders from overseas are late or incorrect, you can fall back on your local supplier. They are often more expensive, but it’s better to keep products stocked and customers happy than having them wait for overseas shipments.
It’s often cheaper to source your products overseas, especially in Asian countries, like China, India, and Taiwan because of lower labor costs. But there’s a lot more to the decision than just the upfront investment and cost per unit.
Both domestic and overseas sourcing have their advantages and disadvantages:
- Higher manufacturing quality and labor standards
- Easier communication with no language barrier
- Marketing appeal of being made in North America
- Easier to verify reputable manufacturers
- Faster shipping time
- High intellectual property right protection
- Greater payment security and recourse
- Higher manufacturing costs
- Less product choice (there are many items that just aren’t made in North America anymore)
- Lower manufacturing costs
- High number of manufacturers to choose from
- One-stop services like Alibaba have made it easy to navigate suppliers
- Lower perceived quality from customers
- (Usually) lower manufacturing and labor standards
- Little intellectual property protection
- Language, communication, and time-zone barriers can be difficult to navigate
- Difficult/costly to verify manufacturer and visit on-site
- Longer shipping time
- Cultural differences in business practices
- Product importation and customs clearance
- Less payment security and recourse
When working with overseas manufacturers and suppliers, it’s a good idea to hire a manufacturing manager. These contractors are locals who live near your manufacturers and handle negotiations, orders, and managing your partners. They can also be the in between for your business and freight companies. Think of them as the central hub for your overseas supply chain.
If there’s an issue, the manager will work directly with the manufacturer to solve it. Managers also speak the local language, which helps improve communication and make production smooth for your business.
How to manufacture a product
Finding a manufacturer for your product can be tricky but it’s necessary to bring your products to life. Follow these six steps to find the best manufacturers and suppliers for your business.
- Outreach and collect information
- Communicate your designs
- Order samples
- Place your order
Finding the right manufacturer for your product is crucial to your success. Manufacturers control your product’s cost, quality, and packaging and shipping. Here’s how you can find the perfect ones.
Alibaba connects you with manufacturers from China. It’s a common marketplace to find existing products, but you can also use Alibaba to connect with manufacturers to create custom products. Simply search for the products you’re looking for and browse through the various suppliers and manufacturers.
It’s easy to safely buy from Alibaba. The marketplace lets you vet manufacturers upfront to get the best products at a fair price. When researching manufacturers on Alibaba, make sure they have the following qualifications:
- Gold supplier, which means they pay for their Alibaba membership.
- Verified, which means a third-party company or Alibaba has visited their factory.
- Trade assurance, a free service that protects your orders from payment to delivery.
You can continue to search by applying filters. You can sort by certifications (such as SA8000, which ensures humane working conditions) to find a manufacturer that aligns with your business values.
Another thing to consider when sourcing from Alibaba: make sure your manufacturer is not a trading company. A trading company is a middleman and won’t be able to produce your products.
Another place to research manufacturers is free online supplier directories. These directories contain profiles for hundreds or thousands of manufacturers, wholesalers, and suppliers. Below, we’ve listed a few of the most popular ones for both domestic and overseas suppliers:
Online domestic directories
Online overseas directories
In recent years, we’ve become accustomed to being able to easily search Google and find what we’re looking for in the first few search results. However, many suppliers haven’t kept pace with the internet or Google’s algorithm changes. Their websites are usually old, sparse on information, and not search-engine optimized.
So how do you find suppliers on Google? For possibly the first time ever, you’ll need to explore page two of Google search results and beyond. You’ll also want to use a variety of search terms. For example, words like “wholesale,” “wholesaler,” and “distributor” may be used interchangeably, so you should search for all of them.
It may help to make yourself familiar with Google’s search shortcuts to improve the quality of your searches and, thus, your results.
Some of the best leads can come from referrals. Don’t be afraid to ask connections in your professional networks if they have any recommendations or if they know someone who might. Look for individuals who’ve found success in an area you’d like to pursue and see if they’re willing to share their contacts.
Social networks have made it much easier to get the word out, so make sure to use these channels. Join Facebook groups and other online communities of ecommerce business owners and see if anyone there has a glowing review.
As you do start to uncover suppliers, even if they aren’t the right fit for you, be sure to ask them if they can point you in the right direction. Being in the industry means they’ll likely have great contacts and would be happy to refer you to an option that might be a better fit.
Another possible way to look for product suppliers is by searching for your products by their NAICS code.
NAICS is the North American Industry Classification System, and pretty much every single industry and product you can think of is attached to a NAICS code. Sometimes manufacturers and suppliers list products by their NAICS code, which can make manufacturers and suppliers easier to find, especially if you’re using professional directories.
The NAICS directory can be found at your local library or online.
You’ll also want to make sure you properly vet your potential manufacturer. Once you’ve narrowed it down to a few possibilities, dig deeper in your research to make sure they’re credible.
Check the Better Business Bureau (BBB) to see if there have been any complaints filed, browse the manufacturer’s Facebook page reviews, and use those Google search tricks to query the company name + reviews to see if any red flags come up.
Outreach and collection information
Once you’ve got a few manufacturers on your radar, you’ll want to get quotes. Aim to get a minimum of three quotes to compare options.
Now, the biggest question you’ll likely have for a supplier is “How much will this cost?” But before you hastily send quote requests, you’ll want answers to the following questions:
- Can they accommodate custom orders? Assess if the supplier or manufacturer can create the product you want. Do they have the skills? The resources?
- What are their leads times? How long will it take to produce and ship items? You don’t want to work with manufacturers who take three months to deliver your products. If a product goes out of stock, you don’t want to leave customers waiting months to receive their orders.
- What are shipping costs? Shipping makes up a massive portion of your business expenses. Learn a manufacturer’s shipping costs to determine how it’ll affect your bottom line.
- What are their minimum order quantities (MOQs)? Don’t lead with this question. It’ll make you look like a beginner and deter manufacturers from working with you. However, you’ll want to know the minimum amount of items you have to order before they start producing your product. This is highly negotiable.
- What is the cost per unit? While you’re negotiating MOQs, you’ll also want to negotiate cost per unit. The larger the order, the lower your cost per unit can be.
- Can they grant you exclusivity? If there’s tooling involved (i.e., you buying a tool for them to manufacture your product), make sure they aren’t allowing others to use it. You can also ask for territorial, market, or total exclusivity.
- Are there setup fees involved? Sometimes manufacturers will charge a fee to get equipment ready to produce your goods.
- What’s their defect policy? Find out who eats the cost for incorrect or defective items. Who pays for the shipping and duties?
- Is the manufacturer sustainable and ethical? Find out about the factory conditions, and see how they impact the environment and the workers.
Negotiating minimum order quantities
If you’re looking for a supplier for the first time, you’re going to quickly learn about minimum order quantities (MOQs). It’s not uncommon for a manufacturer to require a commitment to purchase hundreds or even thousands of units for your first order, depending on the product and manufacturer.
MOQs make it difficult when you have limited funds or want to start small and test the market before making larger purchases. The good thing is that MOQs are almost always negotiable.
Before you negotiate, understand why the supplier has imposed a minimum. Is it because there’s a lot of work upfront? Or maybe it’s because they prefer to work with larger buyers. Understanding the reasons behind the minimum will help you better understand their position and allow you to negotiate and propose the best counter offer.
Discussing payment terms
Many suppliers will require new businesses to pay for the full order upfront. This is important to know, since inventory is a major cost for ecommerce businesses. You may want to also ask if they provide payment terms on future orders.
Suppliers get bombarded with email quote requests all the time from flaky buyers who are just “kicking the tires,” so it’s not unusual for many suppliers not to reply to every request. A lack of supplier responsiveness is a common complaint from new ecommerce entrepreneurs.
So how do you ensure you don’t get ignored? There are a few things you should avoid when you reach out to suppliers for the first time:
- Long emails: Your first email to a manufacturer should be clear and concise. Avoid telling too much about your story and background. The first email should purely assess potential fit at a high level. Focus on what suppliers care about the most, like the details of what you’re trying to source.
- Asking for too much: Requests aren’t always easy for the supplier to produce. It’s important to ask about pricing for multiple quantities, but avoid asking for too much or too many quotes. Stick to what you absolutely need to know to assess fit between you and the supplier.
- Asking for too little: If you ask for a quote well below the supplier’s minimum order you risk being met with silence. If you’re unsure whether your request is too small, consider giving them a quick call or send a one-question email prior to ask what their minimum order is.
A good manufacturing supplier will be open to negotiating payment terms. They won’t ask for 100% upfront before shipping (and if they do, that’s a huge red flag). You can work out a deal with them. Ask for 50% upfront, 50% after shipment is received. This holds both parties responsible for the order and doesn’t leave too much risk on either side.
Communicating with manufacturers and suppliers
Chances are you won’t use a manufacturing manager when starting your online business. You’ll have to communicate with suppliers on your own. There are three main ways to do this:
- Skype calls
Look for companies that are responsive and eager to work together. If someone is slow out the gate with your emails and samples, do you want to trust them with your business? Probably not.
Communicate your designs
Once you talk with a potential manufacturer, ask if they can create your design. Some manufacturers have a product development process with prototyping and 3D modeling—but it can get expensive quickly.
As an alternative, communicate your ideas with them through:
- Reference photos
- Indstrustial designers
- Product designers
- CAD experts
Another option is finding a local designer. You can work with them to develop prototypes and custom molds. It’s more affordable than going through a manufacturer.
Before placing a full order, get samples to test before going into productions. Once the sample is right, date and sign the sample. Save one or two for yourself. These are called your control samples and are any type of forensic sample used to assure quality and get consistent products.
Designing a product for our studio is so much more than just coming up with the idea. It is designing and testing the hardware. It is creating prototypes and testing all of the various elements that make the fixtures come together.
For example, say a manufacturer sends you an order. You open the package and find the colors are completely wrong. You’ll likely chat with your manufacturing partner to fix the mistake. If they have any doubts about the order, you can reference the control sample. This shows that the products you received are not what was previously agreed upon.
Between the time you get a sample and when you place your order, it’s still possible to negotiate terms such as payment or MOQ. When negotiating, put yourself in the manufacturer’s shoes. The goal isn’t to exploit your manufacturing partner to get the best price. It’s to work together so both parties profit and are happy. It’s the only way to build a long-term, healthy relationship.
Place your order
Last up, place your order. Do a 100% quality control check first. Check every product they’ve sent you to make sure it meets your standards. And if you’re happy with everything, send your order and get the production process started!
Finding your supply partners
Sourcing suppliers and manufacturers is a unique process but it’s one of the costs of starting a business. Trying to locate suppliers that are a good fit is a critical decision for your new business, and they aren’t always easy to find.
It’s easy to get frustrated when you hit dead ends or brick walls, but in most cases, it just requires a little more patience and perseverance to find the perfect partner for your new venture.
Illustration by Pete Ryan