Growing up as an American overseas, my natural inclination was to go directly to Asia to manufacture my products for Sand Shack.  I was comfortable dealing with Chinese and Filipino manufacturers and the language and cultural barriers did not worry me.  Since manufacturing my first product overseas in 2006 I have had no major issues with global outsourcing.  But because of my familiarity with Asia, I have to admit, I never looked locally for manufacturers of the products I was looking to make.

Did I miss out on anything?

YES

By going directly to Asia I missed out on the opportunity to begin manufacturing smaller quantities of product to test the market with.  By going overseas, I have had to manufacturer larger quantities of products, and some products that I made a large quantity of haven’t sold as well as I had hoped.  As it is now, I’m stuck with some products that I wouldn’t have been stuck with if I had made smaller quantities with a local manufacturer. Also, by going directly overseas I have had to face the unavoidable fact that as an environmentally friendly company (Sand Shack), manufacturing products overseas and shipping them to United States is not entirely environmentally friendly. Shipping any large quantity of goods across the world leaves a larger carbon footprint than I would like to make – this may not be the concern for many businesses, but it certainly is for mine.

NO

By going directly overseas to manufacture my products for Sand Shack I have been able to grow my company at a faster rate.  I am able to create a much more competitive and superior product and offer it for a competitive price.  I have also been able to create a very lucrative wholesale program.  If I were to manufacture my products locally I would probably not be able to grow my company as I have through wholesale avenues, instead I would have probably had to stick to a retail model or had significantly higher wholesale prices.  As it is now, my wholesale prices are competitive and still profitable.  Other than saving money, manufacturing my products overseas has allowed me to have sufficient inventory and meet all demands for my product.  However, as mentioned above, manufacturing these larger quantities is a bad thing if it doesn’t sell.

In examining my experiences with overseas manufacturing, I can conclude that starting off a company by outsourcing production overseas is not always the answer for everyone.  For me, it was the right choice, as I had the overseas experience and the vision for my company and knew that I could sell the products I was making.    So before outsourcing, analyze your situation and compile the pros and cons of manufacturing your products overseas.  And although I didn’t do this when I first started Sand Shack, consider looking for local manufacturers that may be able to handle your needs.

Photo courtesy of Travel Aficionada

You now know what you want and you have accurate designs or a prototype of the product you would like to manufacture.  Now comes the most fun and difficult part in the outsourcing process; finding a manufacturer.

You don't necessarily have to visit your manufacturer. Everything can be done from your desk if you are careful.

If wiring thousands of dollars to an overseas manufacturer who you have never met is daunting to you, you are not alone.  And I will tell you bluntly: many people lose their shirt when outsourcing. From your desk it is difficult to sort through who is a legitimate manufacturer, who represents a company that will go out of business after you pay your deposit, and who is just a plain scam artist, and that is why it is so important to do your research before paying anybody anything.   Also, nobody wants to be nervous about outsourcing, and that is why it is so important to develop a relationship with your manufacturer so that you can be comfortable and trust them.   The relationships that I have developed with my manufacturers allow me to feel completely comfortable when transferring tens of thousands of dollars to them.

I’m not saying any of this to scare you or deter you from outsourcing the manufacturing of your products overseas, in fact, I would love nothing more than to hear from people who have found reliable manufacturers and had their products made and successfully delivered to their destination.

Through my years of outsourcing the manufacturing of my products for Sand Shack and a few other companies, I have found that the main ways to find a manufacturer for your products are as follows:

1.  The internet

There are a number of sites out there that provide free listings of manufacturers.  These can be great sites and you will be able to find some great manufacturers this way. However, some of these sites contain hundreds of thousands of listings and it is difficult, not to mention overwhelming, to sort through all of them and settle on someone you want to work with.

The Internet is a powerful resource and has made it easy to find manufacturers at the click of a mouse, but it has also made it easy for anyone with a computer to claim they are a factory in China that can make your product.

Do your research.

After finding somebody you think represents a legitimate manufacturer do further Internet research on the company and the person.  I for instance will search the company and find their website. Check out their website and make sure it is an actual company.  Then, use the contact provided on the website to contact the company directly.  Contacting the company directly will allow you to cross check your initial contact and make sure he or she is actually a representative of the company.  The company should have an English version of their website, and if not, it may be difficult for you to do further research on them.  Also, unless you speak their language, not having an English website may be a good indication to you that they don’t have the experience dealing with English speakers or western countries, and you should probably not do business with them.  Consider doing as much research as possible on any company before starting a business relationship with them.

After finding a manufacture online many people wonder whether or not you should travel to their country and visit them in person.  Doing this will allow you to confirm their legitimacy, review their operations, and establish a personal relationship with them; all good things.  However, it is expensive, and if you are a small company you may not have the time or money to make an international trip.  Therefore, although I know visiting them may be of benefit, it is not necessary.  I have not personally met many of the manufacturers I do business with, and nothing bad has happened because I have been careful.  Although, I do have a better relationship with the manufacturers I have personally visited, and I also feel more comfortable doing business with them.  So should you visit them? The choice is yours. If you do your research and you feel like you will be comfortable working with them without meeting them in person, don’t waste your time and money with a visit. But if you are the type of person that needs to meet them before doing business with them and will be a nervous wreck if you don’t, go ahead and visit them! If you simply let the manufacturer know you plan on visiting them they will be more than happy to be your host. Chances are they will probably take you out to dinner and drink you under the table as well (especially in China). So have fun!

2.  Competitors

Another way to find manufacturers for your products is to contact other businesses who make similar products to yours and ask them who manufacturers their products. Now wait a second you are thinking, if they make similar products to me that would make them my competitors, why would they give me that information?  Well, they are your competitors and they may not give you that information. I personally won’t disclose the exact details of who my manufacturers are (although they will be in my list, I won’t say who does what for me). Despite this, your competitors may decide to help you out. It doesn’t hurt to ask, does it?

3.  Your Network

There may be someone in your network who can help you locate a reliable manufacturer.

Everybody has a network of people they know. Consider reaching out to your friends and asking them if anybody knows anybody who can make your products. Chances are you don’t have friends who have direct connections to the manufacturer you need, but they may know somebody who can help you.  A great way to reach out to your network of friends and contacts is through social media.  If you use Facebook, Linked In, My Space, Twitter, or any other form of social networking site, it should be pretty easy for you to let people know what you are looking for and see if anybody can help. If you don’t use social media (you should be) you still have email and the good ole’ telephone.

4.  Books and Directories

Ten or more years back using a directory of manufacturers was a common way of finding a manufacturer for your product.  Although they are still available, these are all but extinct. Everything has moved online, and any directory you find in a book will be outdated by the time you read it.

Did you know that 100,000 factories closed in China in 2008?  That figure should give you a good idea as to why any list in any book is easily outdated.

5.  Purchase a List

Purchasing a list from a company who has screened and approved certain manufacturers is a good way of finding reliable companies to deal with. If you trust the company you buy the list from it is a safe, easy, and fast way to begin your outsourcing operations.

Although you must spend money to purchase a list, whereas you can find a manufacturer through any of the above-mentioned means for free, I know that purchasing a list of reliable and approved manufacturers will ultimately save many people time and money.  You will save money by minimizing the risk involved and you will save time (which is also money) because it allows you to get straight to business from the comfort of your own home or office.  Purchasing a list is one of the best way to quickly and safely begin your outsourcing operations.

By using one of the above resources you should be able to locate a number of reliable and trustworthy manufacturers. Now you have to begin communications with them.

Do you know of any other ways to find a reliable overseas manufacturer? If so, let’s here them here. Also, post any questions about finding a manufacturer in the comment section and I will be sure to address them.

Have you seen this weeks episode of The Entrepreneur Road Show yet…you should.

I am currently in the process of writing a book that will be a guide for people who want to outsource the manufacturing of their products to overseas manufacturers but have no idea how to.  I have outlined the steps in a 10 step, easy to read process.  Right now, I’m probably about half done and I will release it as an ebook sometime in March.  I’ve been outsourcing for my small business for three years now and I am able to share all my good and bad experiences in the book.  The following is a small excerpt from the book.

The Best Way to Get the Lowest Rate – The First Time You Ask

A recent purchase order I sent out for the production of 10,000 Sand Shack belts (sorry I blurred the prices!)

One of the best ways to get a competitive rate without much negotiation is let them know that you are actively comparing their prices to those of their competitors.  By now, you have probably been exchanging emails with a manufacturer for a few weeks and have a sample product in your possession.  Although you have most likely paid for the sample, they have invested a considerable amount of time and energy to help you develop it and make it right.  They want you as a customer; they really really want you.  So, when asking for a quote, use the following outline to insure you receive a quote that is more than fair.

“Can you please give me the price for product XYZ? Please show me where and how much the price breaks will be for quantity W, X, Y and Z (ie. 500, 1000, 1500, 2000).

Also, we will be sending the sample product and project details to other manufacturers we have been in contact with to cross-check your quotes against, therefore, please make sure your quotes are as low as possible”

I have successfully used this outline to get great deals on everything I make overseas.  When they read this you seem prfessional, knowledgable, and that you have plenty of other options other than them to choose from.  They won’t risk giving you an overly inflated quote and losing you as a customer.

What do you think? What other bargaining techniques could you use to get a good price?

Also, feel free to check out a recent guest post I wrote for Myfirstpaycheck.com, a leading resource for teenage job seekers.

Removing the background from product photos is an important but tedious job. Solution? Outsource!

As I prepare Sand Shack’s product line for 2009 I am faced with the tedious job of taking high quality pictures of every product followed by the brain numbingly tedious job of using Photoshop to remove the backgrounds from every photo.

I have always been the one to do this job, but this time I am on an extremely tight schedule as I have a tradeshow approaching in three days, and therefore, I have much better things I should spend my time on.   A month or so ago I used a site called guru.com to find a freelance web designer to make some updates on sandshack.com.  For that project I ended up finding somebody to make the needed changes for $65, a job that I would usually have to pay $800 for here in Philadelphia.  Albeit, the freelancer I found was still located in the United States, the site allowed me to post a job and have people from all around the world bid on the project.

Yesterday I turned to guru.com again for another project. I titled the project “Product Photo Editing/Background Removal”, and within the same day I had over 20 bids on it.  The highest bid I received was from some guy in Uruguay who wanted $2,000 to remove the background from 200 photos (somehow I don’t think he understood the project, or he wanted to use the money to fly to Philadelphia to do the job!) and the lowest bid was from a man named Suman in Kolkata, India who wanted $100 for the same job.  After a couple emails back and forth we agreed on $0.35 per photo with a project deadline of 36 hours after sending him the photos.  However, before I gave him my business I had him edit three photos I gave him, which he edited just as well as I would have (if not better).  Just like that I outsourced a tedious, time-consuming job and got it out of my hair so I could work on more important matters.

Sites like guru.com allow small businesses to outsource jobs such as photo editing to experts who can do it quicker and cheaper than you can do yourself.  Remember, time is money, and as an entrepreneur you need to spend your time wisely to grow your company.

In summary, don’t be afraid to outsource.  It is cheaper to outsource many jobs than to do them yourself or hire a fulltime employee. If you do your research and go on sites like guru.com, you will be amazed at what type of jobs you can outsource.

Be cautious, do your research, and weigh the pros and cons of outsourcing a particular job.  But in the end, when you make the decision to outsource and carry through with it, chances are you will find the immense value it has to offer.

Outsourcing is an essential part of conducting global business in a global economy.

Whenever I tell people that I outsource production of all my products for Sand Shack to Asia I always feel like I have to defend my actions.

After all, outsourcing is evil.

So why is outsourcing evil and what should we do to make it right?

First, let’s look at the word ‘outsource’ itself.  The word ‘outsource’ is made of two words; ‘out’ and ‘source’.  What comes to your mind when you think of ‘out’?

For me, the following come to mind:
Out of a job
Put the dog out
Outsider
Get out!

My conclusion?

‘Out’ is a negative word.

The word ‘out’ conjures feelings of exclusion and separation. When people think of the word out, negative phrases and feelings, like the ones I listed above, come to mind.  So, when people hear the word ‘outsource’, negative feelings towards the process arise.

Another reason outsourcing is evil is because our politicians and media have made it evil.

Without openly affiliating myself with any particular party let me ask you to think how many times Obama and McCain have talked about outsourcing and the debates they have had over it.  This has left the American people to form the inevitable conclusion that outsourcing is a highly controversial subject, and therefore somewhat evil.

So is outsourcing really evil or is it just the word itself that is evil?

Outsourcing is an important part of doing business and staying competitive in a global economy.  Furthermore, businesses don’t just outsource to get something for a cheaper price; they outsource to receive a higher value product or service for their money.  They also outsource to acquire things they cannot get in their home country.  Without the ability or means to outsource, business would be severely hindered.

So how do we remove the negativity associated around outsourcing? I found my answer this weekend when talking to my father, who is the Chief Procurement Officer for LG Electronics and directly controls $60 Billion in buying power for the company.  LG is a South Korean company, and like the United States, South Korea is a first world country that usually outsources the production of products to cheaper Asian nations.  He said that they don’t use the word outsource at LG.  At LG they prefer to use ‘external manufacturing’ as opposed to ‘outsource’.  And my personal favorite is a phrase my father claims he coined and is trying to get more people to use at LG (however, he also claims he coined the word ‘bling bling’, so this most recent claim may be debated).  This phrase is as follows.

High Value Sourcing

High Value Sourcing is a much more accurate and friendly way to describe the process of manufacturing products or acquiring services overseas.  Companies don’t outsource simply to get cheap products, they outsource for high value products.  For instance, AT&T outsources their call centers to the Philippines.  Do you know why? For starters, call centers in the United States are expensive to operate and the quality of people that work there is low. The reason for this is that working at a call center in the United States is considered a dead end job, and therefore the turnover is very high.  Call centers in the Philippines employ enthusiastic, college educated men and women who not only are less expensive to employ, but also stay with the company longer.  A call center in the Philippines offers a company a much higher value than any call center in the United States could ever offer.  This is High Value Sourcing.

Finally, on a personal note, I source my products in Asia for a few reasons.
1. Better Quality Products
2. Better and Faster Service
3. Less Expensive Products

When I look at the above three reasons I would be dumb not to outsource my products overseas.  This is truly High Value Sourcing.

So in conclusion, yes, the word ‘outsource’ is evil but the process is essential.

For related reading click here

'fu' or 'good luck' in English. Outsourcing to Asia can save you lots of money.

I don’t believe there is any precise time when a small business should outsource the production of their products to Asia; instead, outsourcing should be done when the entrepreneur is comfortable and ready for a process that may be daunting and time consuming.  Despite this, we all know outsourcing can be very rewarding.

Why Outsource?
1. Save Money
2. Make products or obtain services not being manufactured or offered in the country your business is in

The above two reasons are really the only reasons you would outsource.  But these reasons are obvious, and because all entrepreneurs want to save money, deciding when to outsource is not a ‘why’ but a ‘when’ question.

When Outsource?
1. When you produce enough to make it cost effective
2. When you need to make a product or obtain a service not offered in the country you are in
3. When somebody joins your team that has experience with sourcing overseas
4. When you feel comfortable with the process

The first point on the above list on when to outsource is very vague and will vary from case to case.  There are two factors that influence whether or not outsourcing is cost effective. These factors are:
1. The quantity of product or service you are seeking
2. The amount it costs you to import it to your home country
There is no set quantity that makes outsourcing cost effective, and sometimes it may even be cheaper to produce a small amount of a product overseas. However, on other occasions it may only be cost effective to produce huge quantities.  The amount it costs you to import a product or service also varies.  Different products have different import taxes.  Also, different products are different sizes and weights and the shipping costs will therefore vary.

I, however, have never had a big problem with outsourcing, and even when producing small quantities it has been cost effective for me to source production overseas.

In fact, ever since I began Sand Shack I have been outsourcing the production of our products to China, Thailand, India and the Philippines.  At the beginning I was only making and importing around 50 pieces of one style of jewelry, but even then I knew I was saving money by manufacturing my products in these more favorable markets.

However, not everybody is as comfortable as me when it comes to outsourcing products to Asia, so I don’t expect every entrepreneur to decide to outsource production after reading this.  I grew up in Japan and Singapore, and therefore, feel very comfortable outsourcing my products to that side of the world.  I have been able to leverage not only my fluency in Mandarin Chinese, but also my cultural understanding of the people who are making my products, to successfully outsource anything from hats to umbrellas.

The truth about outsourcing is that you don’t have to wait until you are generating 1 million in revenue a year, you don’t even have to wait until you are making 50k, you can outsource whenever you want as long as you are comfortable with the process and save money.

You can outsource without the help of an expert.  Although the fourth point in the above list on when to outsource is ‘outsource when somebody joins your team that has experience with sourcing overseas’, this is not imperative.  Most overseas manufacturing facilities have English speaking sales teams that will communicate with you through email about your project.  They will be able to give you ample support, which includes making a sample of your product before you commit to using them for production.  Although a future article will have to address HOW to outsource, I will say here:

“Anybody Can Outsource.”

Do you have a product you want to make overseas but have questions? Post a comment at the end of this article and I will be sure to address it? The same goes for people who have outsourced, what have been your experiences?

I just finished writing an email to a belt manufacturer I use in China.  We are having some minor difficulties with getting samples made through this particular company, which got me thinking and I decided that I would share some of the things I have learned about manufacturing sample products in Asia.

Getting sample products made before you produce any product in bulk is essential to ensure the desired product is of good quality and design. Once the sample is made you will be able to review pictures of it and point out any obvious revisions that need to be made. However, a picture of the sample is never sufficient and you should always have the sample sent to you for further review before you commit to anything.

A sample image sent to me from a manufacturer in China. After reviewing the picture always have the sample sent to you.

Also, when you manufacturer products overseas you may or may not have to pay a sample fee to your manufacturer. For instance, a few years ago when I first began sourcing products in China, I used a hat manufacturer to make sample Sand Shack hats and they didn’t charge my company a sample fee. However, this year I have paid $150 to both a belt manufacturer and a sandal manufacturer to produce samples of new products being developed for Sand Shack.

At the same time, these companies would gladly make free samples for a well-known brand, but as Sand Shack is relatively unknown, charging a sample fee shows them that I represent an authentic company that is not just having samples made for the hell of it. Also, I never have to pay for future samples from companies that I eventually end up producing products in bulk with. In other words, once the relationship between you and a manufacturer is established you should not have to pay sample fees.

But in reality, a sample fee is not really a fee because if you end up placing an order with the manufacturer the fee is refunded (applied towards later bill). So, in this case, if the manufacturer is good and you are committed to the eventual production of the desired product, don’t hesitate to pay a small sample fee. However, still be careful that you don’t pay too much for samples. I had a company ask for a $450 sample fee once (keep in mind we are making belts, flip flops, and other apparel here, nothing over the top). Following that request I set a rule for my company that we won’t pay more than $150 for samples, which I told this company and was able to pay the lesser amount. So, sample fees are negotiable.

Also, make sure you agree on how many samples they will be making for you and how many revisions they will entertain after you pay the fee.

I know the above information is unorganized and difficult to follow (this was a very spontaneous entry I decided to write) so here is a summary of this information in bullet points for you to reference.

Brianlinton.com’s 7-Points for Sample Sourcing

1. A sample fee may or may not be required
2. Sample fees are refundable – If you eventually use their company
3. Sample fees are negotiable – Don’t pay too much for samples
4. Make sure they understand what you expect from them after paying the fee, and have them agree to certain terms
5. Once you establish a relationship with a manufacturer you should not need to pay sample fees
6. You may revise samples through pictures, but never order products through images alone, always have the actual sample sent to you for a thorough review of quality and design
7. You will have to pay for the sample’s shipment to you

If you have any questions about sourcing products and getting samples made bring them up in the comment section of this entry and I will be sure to address them. Also, if you have experience sourcing products I would be very interested to hear what you have done in regards to sample production.