After countless hours of hemming and hawing, you have finally decided to start your own E-Commerce business. Maybe you finally thought of a breakthrough product or decided you want to take advantage of existing wholesale inventory. Either way, this is where the process gets tricky. Many entrepreneurs turn away from their ideas because they do not know how to actually source the products or find a manufacturer.
Sourcing a product or finding a manufacturer is not always a quick and easy process, especially in today’s global economy. However, taking the time to find the right person for the job will always be worth it in the end. In this post, we will discuss exactly how to source a supplier and what to do once you have found one.
Know What You're Looking For
The first step to finding a manufacturer is knowing exactly what you are looking for. When someone else is responsible for producing your product they will need a clear understanding of your vision before being able to sign onto the project. This will involve everything from design to functionality to the material.
If you do not have a clear idea of what you are looking for you will end up spending money on products that do not fit your goals. If you are looking to source products that already exist you should have a list of qualifications that you expect out of your supplier. These qualities could include location, size of the supplier, their response rate, or even if you feel a connection with the company. Having a set standard before starting your search will make the process more efficient.
Supplier vs. Manufacturer?
It is important to understand the difference between a supplier and a manufacturer before beginning your process. A manufacturer is any business that produces goods out of raw materials. Manufacturers then sell their goods to wholesalers, consumers, retailers, distributors, or other manufacturers.
A supplier is simply a person or entity that is a source for goods or services. In the case of E-Commerce stores, your supplier will be sourcing the products that will become your inventory.
Domestic vs. Overseas Suppliers
Whether you decide to manufacture your own products or source them you will have to consider if you want to source domestically or overseas. Typically, shipping from overseas can be less expensive but then there is the worry that products will take too long to arrive. Another common problem with working with suppliers in another country is difficulty reaching them quickly.
One way to combat these common issues is to have a backup supplier that you work with locally. This supplier might not produce as much of your inventory but they are closer and easier to contact. If there comes a time when you need a product quickly, they would be a great help.
Both domestic and overseas suppliers have advantages and disadvantages:
- Easier Communication
- Higher Quality
- Faster/Cheaper Shipping
- Marketing as “Locally Sourced/Manufactured”
- More Secure Payment Options
- Onsite Visits
- Fewer Options Locally
- Higher Pricing
- Significantly less expensive to Manufacture
- More Variety of Products to Source
- Copious Suppliers to Choose From
- Language Barriers/ Time Zone Differences
- Lower Quality/Lower Perceived Quality
- Lower Labor Standards
- Less Secure Forms of Payment
How to Manufacture a Product
Manufacturing a product is a process that most people do not know a lot about. However, it can be broken down into a few simple steps to help you get started. To begin, you will want to do research to understand what you are looking for and the area you are hoping to have your product manufactured. Next, you will communicate your needs, order samples of the product, negotiate any changes, and then place your order.
As far as the researching step goes, you will not want to overlook certain resources such as online directories. These directories are a central place that contains profiles of thousands of manufacturers, suppliers, and wholesalers. Some resources include Aliexpress, Sourcify, National Association of Manufacturers, and Maker’s Row. Another great place to look for suppliers and manufacturers is Google. You will just want to keep in mind that manufacturers are not known for having top-quality websites or search optimization, so do not be afraid to look through a few pages of the Google search responses.
Referrals and learning about your options through word of mouth are also helpful. Contact companies that have been successful in your field or use your existing professional network to ask for recommendations. Today, there are professional social networking sites such as LinkedIn and even specialized pages on sites like Facebook that are a great way to connect with other professionals in the industry. If you do not have an existing network, start messaging people today and you will come to realize how helpful professional networking can be!
Once you find a manufacturer or supplier that you are interested in working with you will want to ask them some key questions before committing to anything. Learning the basics is the first step; ask what their lead times are, shipping costs, minimum order quantities, cost per unit, and if there are any initial setup fees. You may also have more specific concerns such as if they will customize individual orders, how sustainable their manufacturing processes are, and if they will share your product designs or grant you exclusivity. Once these basic questions have been addressed you will then want to move onto communicating designs and placing sample orders.
Negotiation Terms and Payment
Manufacturers and suppliers will typically require hundreds to thousands of orders as a minimum they are willing to ship. While you need to understand why they would not want to waste money on shipping an extremely small quantity of items, you can still negotiate terms that are tailored to your needs. You may want to start by asking why they employ their Minimum Order Quantity (MOQ). If it is because your product is difficult to manufacture you may have to be more lenient, if it is expensive to ship you can consider a local supplier. Having an understanding of their reasoning will give you an idea if you should be negotiating with them or looking for another option.
As for payment, E-Commerce sellers should be aware that most manufacturers and suppliers will ask for payment upfront and in full. If this will not work for your needs it would be beneficial to discuss payment plans before choosing a supplier. The best way to negotiate payment plans is to be as informed as possible so you can be straightforward and ask for a reasonable pricing plan.
Designs and Samples
After choosing your potential manufacturers you will then want to see some models and product prototypes. Models can be made by the manufacturer through 3D modeling or you can send in sketches, referral photos, etc. If you do not have a way to design the product you can find a freelancer to design it for you. After you have your design finalized you will want to ask for samples to keep on hand for quality control of future production.
Finally, you can place your order! Make sure to do a quality check on every product you receive and consider how you have enjoyed working with this supplier or manufacturer up until this point. If everything is meeting your expectations and standards you have found the right partner to supply inventory.
How LOCAD Can Help
Once you've sorted out where your inventory is coming from, where you're going to store it, how you're going to keep track of it, and how you'll fulfill your orders becomes incredibly important. Managing an E-Commerce store is a juggling act, so while you're managing things upfront, let LOCAD take care of the rest. LOCAD offers a flexible supply chain as a service platform for multi-channel fulfillment, on-demand warehousing, and distribution. Our product is a holistic and simple technology platform to manage the backend infrastructure of your E-Commerce.
We've got years of experience, working with shop platforms, E-Commerce entrepreneurs, and Enterprise level clients. We have dynamic and scalable technology solutions to work with you and your suppliers to put your product into the hands of your customers as easily and as quickly as possible.
Our powerful solution enables you to:
- Integrate all of your sales channels- website, marketplaces and shop platforms such as Lazada, Woo and Shopify into one seamless supply chain.
- Sell across multiple channels from one consolidated inventory pool, via our free software, with real-time visibility between your sales channels and supply chain.
- Contracted rates with courier companies to save you shipping costs.
- With LOCAD’s Control Tower dashboard you are always up to date about your inventory, stock movements, analytics, and KPIs so you can easily filter products that need reordering or do not move.
- Ensure that your orders have a high fulfillment rate and are sent out on time, helping your seller quality score on your marketplaces and facilitating future sales.
- Run a distributed fulfillment network to bring your stock closer to customers. By shortening the last mile we can provide you with a lower shipping cost and faster delivery.
- Make it easier to expand your business with on-demand fulfillment capacity and easy international expansion.
Contact us to learn more about how we can help put your hard work into your customer's hands.