How to Manufacture a Custom Product in China

How to manufacture a product in China is one of the most critical components of being successful in e-commerce.  Developing and manufacturing custom products is the best way to differentiate yourself against other competitors.

A differentiated product can help you sell your product for a higher price and larger gross margin over your competitors.  We’ve written our best practices below to give you advice on how to work with your supplier to manufacture a custom product.

There are a few FACTORS that influence the interest of a factory to manufacture your custom product

:

1. Customers willingness to pay for development costs
   If you have a budget for the development costs of a product then a manufacturer will be much more interested in discussing custom products since they know that they will be paid fairly for their product development work.  In order to develop a custom product a factory usually needs to spend money on engineering support, production manager time, mold/tooling costs, and product reject waste when they set up production for a new product.  This all costs time and money.  If the buyer cannot help with the cost then the factory will likely not be interested in developing this product.
2. How much the customer plans to order
   Low order quantities will make factories less willing to develop a product. If a factory is going to spend a lot of time and energy to develop a new product (even if the development is paid by the customer) they want to make sure that the customer will purchase a reasonable amount of this product in the future.  If the customer does not purchase enough quantity, then the custom product development may not provide a good enough ROI on the factories time.  If the ROI is not in the factories favor then they may refuse the project since development costs charged by the factory to the client is usually done close to cost.
3. Order size
   Larger factories are usually less willing to take on projects that are too small.  If you go to a large factory and ask for several hundred pieces twice a year, then they will probably not be willing to develop a custom product for you.  It is just not enough quantity for the factory to keep their production lines moving.  If you have very low order quantities then you will have to find a smaller factory that is willing to take smaller orders.  You should try to match your order size and factory size as close as possible.
4. Certification Requirements
   In some cases products require certain certifications that the supplier is not willing to get.  If you are their only customer that requires this certification and it costs thousands of dollars per year to maintain, but you only buy a few hundred units a year, then it can become unprofitable for a factory to manufacture your goods.  In addition to just monetary cost there sometimes can be a large time cost for the factory to prepare the proper materials to pass a certification.
5. Audit Requirements
   Some customers require strict audit requirements on the actual factory building that the factory may be unable to change. There are many factories that rent a space in a big building from a landlord.  They are often unable to modify the building to meet the audit requirements since they don’t own the building, and there are other tenants in the building.

 

Tips for finding a factory that will customize a product:

1. Look for a factory that matches the size of your company.
   If you are a small company then don’t look for the biggest factory in the industry.  Choose a factory that matches the size of your company.
2. Offer a guaranteed number of purchases for the year.
   If you have an established business with steady annual demand, then you can guarantee a minimum order that you will purchase every year from the supplier.  If the quantity is big enough then sometimes the supplier can amortize the development cost of a custom product into the piece price so that you don’t have to pay development costs.  You can also pay for the tooling upfront and negotiate with the supplier to return the tooling cost after you have purchased a set number of total units.
3. Find where your competitor’s manufacture.
   If you can find where your competitors manufacture, and the factory owns the tooling, then you can use the factories tooling to make your products with little or no development cost.  If your competitor owns their own tooling, then the factory won’t let you use that competitors tooling.  However this factory already makes similar products for your competitor and can most likely develop your product for a low cost since they are experts in this specific product manufacturing. Many companies use import record database tools to find their competitors sources.  One of the most popular tools is Import Genius.
4. Use your suppliers existing molds and make simple modifications:
   If you can use the existing molds and just make small adjustments or tweaks to the product to customize it then you can save money and time on manufacturing your own molds.  Depending on the product type many factories are able to adjust or modify the molds to allow customization of their customers products.
5. Find the manufacturer directly:
   If your speaking to a trading company (some trading companies say they are manufacturing companies) then sometimes the customization for your product is not worth a trading companies time.  It will take them too long to get the product customized for the margin they will be able to add on top of the product.  Sometimes when trading companies want to avoid the trouble of developing a custom product they will tell the customer that the customization is not possible.  If you talk directly with a manufacturer then they will usually work to meet your final product goals.  For more information about distinguishing a trader from a factory you can read this post ways to verify Chinese factories are factories, not trading companies. 

 

Any Questions? Click here to set up a FREE China logistics discovery call.