Offshore
Manufacturing
by Edith
Tolchin
Since I work mainly with inventors, each has a unique product. I have gained my reputation in placing inventors with Asian sources, because most inventors come to me after they have "exhausted all possibilities," including the attempt to manufacture domestically, trying to cut costs, etc. Also, my services are geared towards small production runs of 1000-2000 pcs., instead of typical quantities in the tens of thousands, for initial purchase orders. This enables the inventor to get his/her product to market, while keeping within their manufacturing budget. So, these inventors then contact me because they have heard that I can easily source their products (although I do not deal in ALL commodities, and do not source industrial nor electrical products – I handle mostly inventions of textiles, sewn-items, fashion accessories, baby items and household inventions) for anywhere between 1/8 - 1/2 of what it would cost for USA production. The drawback is that, because each product is unique, there is no real way to give even a "ballpark" estimate as to how long it will take to "source" your product. The good thing is that, after the initial phone contact with the inventor, I have already begun “the process.” Once I send out my brochures to prospective clients, I will have automatically communicated with a few potential overseas manufacturers. After the client receives my literature, I will have already determined if I am able to source their products.
Since all products for my inventors/clients are different, and since reply-times (e-mail, faxes, etc.) from the Asian sources all vary, unfortunately there is no accurate way to budget or estimate how much time will be spent handling each phase of the project. The best I can do is outline the entire PROCESS, which we can bring to Purchase Order-stage usually within 3-6 months, best-case scenario. I normally advise my clients to allow a minimum of 6 months to one year per project (from "start" to in-house delivery), in that dealing with Asian manufacturers is much different from dealing with U.S. sources. Quite often, if the factory is located in, for example, a more remote area of China, the contact my even have to look for translation assistance for technical issues, as well as to respond to my inquiries, e-mails, faxes, etc. Also (and this has happened MANY times to me personally!), the local Postal Service in the more remote areas may not have an employee who speaks English, so they also have to look for translators to properly route the parcel containing my inventors’ first samples and specifications.
Sampling takes a lot of time, back and forth, for example, in waiting for courier deliveries, International Express mail, etc. Also "translating" QC changes requires a lot of patience in that, for example, you and I will know what you are looking to achieve, but we must help the overseas sources to understand EXACTLY what you are looking for, and that sometimes takes several "shots." I always advise my first-time importers that, although the FIRST order/shipment may not be a very profitable one, it should be used as a "test" (read: R&D). There will always be stumbling blocks with any new imported product, but once those are resolved, RE-ORDERS ARE TYPICALLY A "PIECE OF CAKE," and always profitable (unless, heaven forbid, the ship sinks or there's a typhoon, monsoon, all of which I have faced over these past 29+ years in the business!)
Here is a sample of the typical sourcing process:
a) I review the samples (or sketches, photos, or whatever I am presented with) and organize them. I will then send e-mails out to the prospective sources to weed out the "undesirables" and typically come up with 2-4 contenders.
b) I send the samples, sketches, or whatever I have available, out to the prospective sources, with a presentation letter, and I normally will have been given a "target price" by my clients beforehand. I usually use Fedex, because I have an account with them, with a decent discount.
c) Within 2-3 weeks, I begin to receive questions by e-mail, fax, etc. from the sources, who typically require further info before they begin the counter-sampling process. At this point, if my client wishes to get involved in the process, it of course saves him/her money because he/she can answer the supplier directly (but I must be carbon copied at all times so I know exactly at which stage of development we stand.)
d) Within another 3-4 weeks, the counter-samples begin to be sent, typically by Fedex, DHL, or other courier, from the manufacturers. Sometimes the source will ask for a small sample fee, or will ask that you pay just for the shipping charges.
e) At or about the time the counter-samples are sent out, we begin to get the price quotes. I normally request (for small, first-time manufacturers) that the shipments be quoted "CIF Houston, TX" or "CIF NY" or wherever the port is that's closest to the client's destination. “CIF” or “FOB” indicates exactly who is arranging the shipment - the source or us, and exactly WHEN the importer takes possession of the goods. If it is "FOB China" or Taiwan, then WE would have to arrange for the ocean freight and marine insurance. Although anyone can make these (FOB) arrangements, it is typically done by regular and/or repeat importers and manufacturers, because they have greater resources for shipping. Typically, my inventor-clients are “start-ups,” or small businesses who are beginning their operations on a “shoestring budget.” I have shipped many different ways, and usually request a "CIF" quote for the first shipment, providing my client agrees, and providing the supplier can do this. CIF means “cost,” “insurance” and “freight,” arranged by the supplier.
f) Client reviews samples for quality, price, and of course my "feel" for the source. You may get, say, 3 excellent quality samples, with competitive pricing, from 3 difference sources, and I would then eliminate it by the rapport I have with the supplier, their ability to effectively communicate quality control matters, and ability to process my info, etc.
g) I draft up an extensive, very detailed Purchase Order, with many stipulations protecting the client (so the source can never say "you never asked for that!") Independent laboratory testing is decided at that point, and stipulated into the P.O. as well, if desired. Some sources can arrange for the testing, and sometimes we have to make those arrangements. P.O. is reviewed by supplier and signed by client, and counter-signed by supplier. International financial arrangements are then made, whether by wire transfer or Letter of Credit. We also stipulate the quantity of pre-production samples we require in the P.O. (as well as lab-dip details, info, etc.). Typically, a 30% down payment is given by wire transfer, at the time the P.O. is signed. Pre-production samples are reviewed and QCd; changes are made.
h) Order goes into mass production, and mass production samples are sent & reviewed. Once approved, the independent testing labs come into the picture, if desired. Best-case scenario, the product passes the tests and production is finalized. Testing labs are most often used for products with extreme liability such as baby or children's items, as well as most consumer goods.
i) Goods are ready to be shipped. Either the supplier, or we, make the shipping arrangements (again, depending on CIF or FOB), and upon presentation of a copy of the OCEAN BILL OF LADING (indicating that the goods were placed on a boat), we then effect a wire transfer for the remaining 70% of the order. Shipping documents must always be reviewed, before goods are placed on a vessel or plane, to make sure they comply with U.S. regulations, etc.
j) Wait appx. 20-30 days for delivery (by ocean – depending on delivery destination, i.e., which part of the U.S.,) customs clearance arrangements are made, import duty is paid, and arrangements are made to get the goods from the (USA) port to your destination.
THAT'S ALL FOLKS! (Not really - this is just a VERY BRIEF overview of what's involved.) As I said, first time imports can be very complicated, depending on the type of product and many other issues. To explain almost everything of what's involved, I would probably have to fly there and sit with you for maybe at least 1 day to fill in-between the lines!
I hope this article has been informative for all inventors who are contemplating offshore manufacturing. Again, there's lots more involved, but I will tell you that you are in good hands with EGT Global Trading, in that I have done this many, many times before, over the past 30+ years! Good Fortune, and Happy Importing!
©
2002-2003-2004: Edith G. Tolchin
“The
Sourcing Lady”
(SM)
EGT
Global Trading, NY, USA
EGT@warwick.net / www.hometown.aol.com/egtglobaltrading
© 1997-2005, Invention City, Inc. All rights reserved.
