How to Find an International Manufacturer

Say you have a product idea, and your next move is to source a manufacturer. You've decided to consider a manufacturer overseas with the anticipation of saving costs and achieving your goals of expanding your reach into new markets, gaining access to new customers, and opening up new growth opportunities.

Outsourcing can assist a business in remaining competitive on the global stage. In addition, outsourcing internationally can make it simpler to find specialized suppliers with the expertise and technical processes or machinery to produce the kinds of niche goods your business may require. Outsourcing also has the potential to improve productivity while decreasing shipping times.

But how do you find the best-fit manufacturer internationally and avoid overspending?

How can outsourcing to an international manufacturer help your business?

Let's start by looking at examples of companies that successfully use an international manufacturer:

Eat2explore supplies cooking kits that facilitate cultural education through exploring world cuisines. "Using a manufacturer in China for all our boxes, cooking tools, and flag pins definitely helps with our cost management," says president and chef Rowena Sherer. "Our custom-designed boxes, for example. We work with a company in China whose quality is excellent and at a fraction of the cost I will otherwise pay in the U.S."

Symbiotic Sciences: "Outsourcing to India,” says founder and president Aditya Malhotra, “has helped us become one of the most successful OEMs of in-vitro Mycorrhiza.” [Mycorrhiza biofertilizer is a soil conditioner, bio-remediator and bio-control agent with wide applications in agriculture, plantations, horticulture, forestry, and biofuels.] “At the initial stage, outsourcing helped us make strategic arrangements with globally renowned RND agencies. It provided technical know-how development and talent acquisition for key roles during the blueprinting business development phase. It also helped us successfully establish a partnership with the largest buyer in the business, as well as helping us have an innovation strategy in place and investment in automation and process efficiency."

Alen:  "We outsource air purifiers and air filters," says Debra Dresser, VP of global operations. "Having a thorough understanding of the supplier’s capabilities and how your two companies can grow together to build a stronger partnership over time is key to sustainable, long-term success. This has enabled us to be cost-competitive, despite numerous challenges since the pandemic."

Mac Ride manufactures a child bike seat that goes on the front of the bike between the adult rider and the bike's handlebars "The manufacturing in Taiwan," says co-founder and COO Ashley Howard, "is professional and high quality at a reasonable price. Taiwan is known for its excellence in the biking industry, and as we have a premium product, it was an easy choice. We would not have been able to secure profitability had we manufactured in North America."

The Only Bra: “Outsourcing to Vietnam,” says co-founder Maurice Reznik, "allows us to provide differentiated, best quality, best technology, best deliveries to our wholesale and direct-to-consumer customers at a fair price value."  

How to find an international manufacturer

There are many ways to find a potential foreign manufacturer or supplier. Here are a few of the strategies used by some of the companies I interviewed: 

1) Use wholesale websites to research a large number of prospective suppliers. 

"I do research on Alibaba," says Sherer, adding that she uses the site to conduct outreach to many different suppliers for quotations and samples for Eat2explore. "Once we narrowed down to the supplier we liked, there was still a lot of back and forth, and over time we established a trusting partnership. To ensure quality, we asked for their U.S. customers' references, their pricing – including shipping directly to our facility, and their Alibaba ratings. If it's food-related, we asked for their FDA documentation and licenses."

"I like using Alibaba because there are product and service protections," Sherer says. "We can also pay through ACH (TT) directly to the Chinese company’s account at Alibaba’s U.S. Bank. This saves a lot on foreign exchange fees and processing fees."

2) Look for established and certified manufacturers with experience in your industry. 

After initially establishing RND operations in the U.S. for Symbiotic Sciences, Malhotra says the company soon realized that producing high-quality and highly concentrated in-vitro Mycorrhiza at scale in the U.S. in a cost-effective way would be tough. 

"As a solution, we adopted a strategic approach through licensing agreements with local partners [in India]," Malhotra says. "For our product, we selected the best scientific product development and RND partner. The exchange of knowledge and their hands-on support in specific areas enabled us to establish a large-scale, cost-effective Class 10,000 cleanroom manufacturing unit for attaining the highest production output.

Try to look for established and certified facilities with either a strong track record or management with previous manufacturing experience. Consider spending time to understand and optimize quality control and compliance with well-defined processes to manage oversight."

3) Conduct supplier due diligence and visit the site.

"Standard supplier due diligence was important, including a site visit to assess their capabilities now and for the future," says Dresser. "Request samples, quotes, and references. If the product is a finished good, test the performance and perform a teardown analysis. With these multiple data points, create a weighted matrix to narrow down the supplier options and make a final selection. Learn the culture. Be respectful. Build the relationship with in-person visits. Be an excellent host reciprocating when they visit you."

4) Find suppliers by word of mouth.

"We used a combination of Google, the Taiwan Bicycle Source and word of mouth," explains Howard. "Ultimately, word of mouth turned out to be the best source. Fit for the size of company/value match were essential."

5) Look for a supplier that fits your unique needs.

For The Only Bra, it was important to find suppliers that fit a number of important factors. Says Reznik: "We look for and are working with suppliers that provide: 1) technology in the development and manufacturing process; 2) company with a creative team who is also technical and helps us collaborate on design; 3) proven, reliable supply chain; 4) vertical manufacturing (materials are sourced locally reducing cost and lead times); 5) price and a quick turn-around time on orders; 6) responsible labor, eco-friendly factories; 7) quality;  8) country stability and available skilled/trainable labor pool."

Starting point: Where do I begin?

There are several ways to get started in your search for a reliable international manufacturer: 

• Consider consulting your industry's trade association. They can facilitate connections with dependable manufacturers who can meet your specifications.
• Try to get referrals from your business contacts and networking groups.
• Try searching online and exploring B2B platforms. 
• Consider contacting your nearest Small Business Development Center (SBDC) or SCORE office.
• Try to attend a U.S. international trade show that attracts manufacturers in foreign countries. You can look for exhibitors selling products like yours at the show and make connections. (Trade Show News Network has global trade show listings.)
• Consider visiting a trade show in the country you are considering. This can be useful for speaking directly with manufacturers and examining their products. 
• Consider several potential outsourcing countries before committing to one.
•  Try to consult local experts to get different perspectives. For example, "India has a large availability of talent, producing roughly 1.5 Million engineers a year," says Balaji Sundararajan, SVP-Global Head of Software Engineering at AGS Health. Look for manufacturers that have "port accessibility and other infrastructure needs," Sundarajan says. "Look out for similar industries that are outsourced in the region. Employ consulting firms who know the lay of the land to do the research." 

How do I narrow down my options?

Once you have a comprehensive list of the potential manufacturers you're considering, you can narrow the list down to your top three or five factories. To help you do this, consider looking for:    

• Manufacturers of similar products to yours. Try to look for specialists in your product rather than a supplier who treats it as a sideline business.       
• Manufacturers who primarily export to the United States or other Western countries. These manufacturers can generally deliver better quality products that comply with product safety, labeling and packaging regulations. They also have the experience to handle the logistics of international shipping and the accompanying red tape.    
• Customer reviews and ratings. Consider conducting web searches for reviews and online ratings to see what others are saying about the manufacturer you are considering. 
• Reputation. Reputable foreign manufacturers are usually prepared to present their business licenses, quality control system documentation, and associated certifications. 
• The real identity of the manufacturer. Are you dealing with the manufacturer directly or a middleman? If the supplier you are considering is a reseller or a trading company, the additional layer should result in higher costs. Consider asking for ownership documentation to determine if you are dealing directly with the manufacturer.  

Types of manufacturers

Knowing the types of manufacturers available can speed up your decision on which manufacturer to use for your product.

Original Equipment Manufacturer (OEM): This type of manufacturer supplies components and parts that are used in manufacturing a more complex product of another company. OEMs are often referred to as a service.

Original Design Manufacturer (ODM): Unlike an OEM, which builds products based on designs provided by customers, ODMs design the products themselves, before manufacturing them for customers.

Contract Manufacturer (CM): A CM manufactures products but is not involved in product design. CMs obtain the product specifications and manufacture the product following the given design requirements.

Trading Company (TC): Trading companies act as intermediaries or mediators between customers and manufacturers. They don't manufacture products, but they facilitate better communication than dealing directly with the manufacturer.

What questions should I ask potential manufacturers?

Before submitting an RFQ (request for quotation), consider thinking about how you can protect your confidential information. Consider learning about the types of agreements required, such as a Non-Disclosure Agreement (NDA) and a Non-Use, Non-Disclosure, Non-Circumvention (NNN) Agreement.

Your next step is submitting an RFQ. You may be asked to send the supplier images of your prototype with information on the materials you want to use, the product size, and any other details they need to manufacture your product.

Questions to ask manufacturers in your RFQ: 

1. Minimum order quantity (MOQ): The minimum order quantity varies by manufacturer. While it's important to take care to not buy more than you need and overspend simply to meet a manufacturer's minimum quantity, it's also important to not look for such a low minimum order quantity that you are forced to use a manufacturer that might not be the right fit. 
2. Prices for samples: Before you choose a manufacturer, consider getting them to produce a sample of your product so that you can evaluate its quality. Sample prices vary widely, from free to discounted to the regular price for manufacturing the item.
3. Production prices: Try to find out how order volume affects prices. The per-unit price drops the more units of the product you order. Consider asking for a breakdown of costs, such as the cost of the item, the shipping costs, the cost of any applicable tariffs and anything else included in the pricing.
4. Manufacturing time: What is the estimated time to complete your order? This can make or break your decision regarding which supplier to use, since you don't want to wait too long for your products.
5. Terms of payment: Try to find out when the manufacturer expects payment. As a new customer, the manufacturer may ask you to do one of two things: Pay a deposit (usually a down payment of 30% of the total cost before the start of production, with the remaining 70% due when the order is complete) or Pay your first order's total price upfront before shipping. (If you anticipate being a repeat customer, find out about extended payment terms.)
6. Methods of payment: Find out the best payment method to consider. Try to do your due diligence and consult your bank to confirm which payment options work best for your company.  

How do I verify product quality?

Once you've received the RFQ from several manufacturers, try to choose the best fit and start your process to verify quality. 

• The best way to verify quality is to get a sample of your product so that you can evaluate it carefully. Try to be prepared to go back and forth a few times to fine-tune the sample until you are satisfied.
• Consider performing a thorough background check on any company you're seriously considering. Verification can be done by a company that does background checks for international business, like GloBIS, Asia Verify, Potlogy, China Checkup or MCA, to name a few.
• Consider checking all pertinent papers, such as the manufacturer's business license and registration number, quality control system certificate, and export license.
• Try to ask for reference letters from the manufacturer's bank.
• Try to ask for references from current customers and contact them. 

Do I need to visit the factory in person?

There are different views on this. Some experts recommend visiting the factory in person. Others think visiting the factory in person is only necessary if you're placing a substantial, complicated order. "I recommend taking a trip," says Chad Savage, CEO of Daniel Savage Watches, a watch company offering a personal collection of luxury timepieces. "Nothing can replace the effect of personal relationships. Follow-up visits (at least occasionally) are always a good idea." 

Suppose you cannot visit the factory abroad in person, but want to confirm that the company is legitimate. There are professional inspectors based in these countries who check the required certificates and the quality of the production line. Manufacturers generally welcome client visits, so if a manufacturer you're in conversation with balks when you say you will conduct a factory inspection before signing the contract, it could be a sign to look elsewhere.

Summing Up: Why say yes to outsourcing to an international manufacturer? (Plus a few final tips) 

• Foreign manufacturers can substantially reduce production costs.
• ·Many international manufacturers can have efficient production processes and can deliver quality products on time.
• There are a variety of ways to find reliable international manufacturers, from consulting your industry trade association, business contacts, networking groups and B2B platforms, to attending an international trade show in the U.S. and abroad.
• Try to understand the difference between OEMs, ODMs, CMs, and Trading Companies to make the right decision.
• Consider suppliers who have experience exporting to the U.S. or other western countries.
• Try to review ratings and verify the supplier's identity is authentic.
• Consider getting a request for quote (RFQ) from multiple manufacturers, especially those who are specialists in your product.
• Try to ask questions about minimum order quantity, the price of samples, production costs, time to manufacture, payment terms, and payment methods.
• Consider verifying product quality by comparing the RFQ with your prototype and be prepared to interact with the manufacturer as often as needed.
• Consider doing background checks on potential manufacturers.
• Try to get references from some of the manufacturer's customers.
• Consider visiting the factory to inspect their production line or hiring a local inspector to do this on your behalf. 

A version of this article was originally published on February 13, 2015.

Photo: Getty Images