How to Find Reliable Manufacturers in China Part 2: How to approach and work with a factory

Nobody is “selling” to you — they quote

See Part 1 of the article here: How To Find Reliable Manufacturers In China Part 1: How To Find A Factory

The majority of employees at manufacturing companies are engineers. Most ODM/OEM companies have no products of their own, therefore the sales and marketing departments are very small. They are not selling products, but instead their services, so their “sales pitch” will be their production and engineering capabilities, scalability, quality, and compliances, etc.

A factory quotation is cost-oriented. They will calculate all costs involved and then provide a quotation:

Total Cost + Service Fee

Usually, the quote is calculated using an open cost calculation (open Bill of Material or BOM).

BOM Cost

The name, Bill of Material, is a bit misleading, since it lists not only all the parts and materials used to make a product, but some other costs as well. BoM includes:

• Raw materials (plastic, steel, paint, and glue, etc).
• Electrical and mechanical components, standard and custom made.
• Packaging materials.
• Process materials.
• Direct Labor Cost (or Assembly Cost).
• Waste and scrapping.
• NRE and Tooling cost (one time charge, it can be included in BOM or paid separately).
• Margin and Indirect labor (profit and overhead).
• Shipping (e.g. local transport and handling to free on board (FOB) point).

The majority of employees at manufacturing companies are engineers They will not “sell” to you, but “quote” to you. (Image: IT Crowd by BBC Channel 4)

What do I need to get a quote?

In order to receive a binding quote you will need a complete a Request for Quote (RFQ) package. The RFQ package provides the manufacturer with all required information to manufacture the product.

Download an exxample RFQ Package sheet here.

More about Search for Manufacturing and RFQ in The Hardware Guide.

REMEMBER: Don’t send your RFQ packages without having signed a Non-Disclosure Agreement (NDA). This is unprofessional and exposes your IP.

Instead create a sub-set of the RFQ package in form of a Project Brief that helps the factory understand your project:

• General description of the product.
• General electrical and mechanical specifications.
• Key Components.
• Project Description.
• Team, investors, partners, funding.

TIP: Keep in mind that this is a “Beauty Contest.” Most factories get many inquiries, so reviewing RFQs costs time and resources for the factory.

Whom do I contact in factory?

Finding a business developer or sales person is often surprisingly difficult. Many manufacturers are still operating in traditional, offline ways. Their websites often have very little information and no contact details. You will not find them on LinkedIn or social media either.

You can try calling a factory in Asia, but it will be difficult to get through someone who speaks English and provides a lot of opportunities for misunderstandings. In addition, following up over phone will be exhausting and costly.

You can find contacts at trade shows or ask other hardware creators to refer some contacts.

Or you could check out HWTrek

We are working on bringing Shenzhen online and making it available and accessible to all hardware creators around the world.

Communication, true clichés

The fundamental culture difference between the western and Asian communication styles is not a cliché, it is real. Here are some examples:

• In the West, people manage conflicts and in Asia people avoid conflicts.
• If a Chinese engineer says that this “will be difficult,” it can mean that this is impossible to do and they are just avoiding to say “No.”
• You may find that your project manager or contact window is slow in communicating with you and there are many set-backs and delays; they are probably avoiding to tell some bad news or expose themselves to some other conflict situation.

The best way to monitor and track the progress is to closely follow it using the Product Management tools and NPD/C-Check method. You can use the same planning tools as your manufacturer uses (their progress reports, Gantt charts, etc.) and leverage them as neutral communications tools to avoid misunderstandings.

NPD and C-Cycle

Manufacturers use the standard Check-Cycle (C-Cycle) method to manage new product development (NPD) and track the milestones of the product cycle. You may find slightly different systems or names of the milestones, but they are all very similar.

In addition to NPD you will sometimes hear about NPI . It stands for New Product Introduction and describes how the new product is introduced into the production floor.

The objectives of the New Product Development (NPD) planning using the widely adopted Check-Cycle (C-Cycle) are:

• Production Profitability.
• On-time delivery.
• Risk management.
• Quality Assurance.

Product Life Cycle — 7 Stages

There are many different Product Life Cycle (PLC) models, this C-Flow model is widely adopted in electronic manufacturing. It is a system that divides the life cycle of new product development into seven different life cycle stages based on its requirements, tasks, and goals wthat helps to ensure the effectiveness of project planning, operation, and to achieve on time Mass Production.

C-Flow model

There is a clear defined gate to the next cycle stage, e.g. a certain test passed. As a hardware creator you should also track the progress of your project and the milestones through the Check-Flow.

C-Flow Product Management

Or manage your project on HWTrek

HWTrek HUB is a hardware project management system, based on C-Flow. Your whole team and manufacturers can collaborate on your project and keep everyone in-sync with ease.

HWTrek HUB: plan your production

HWTrek HUB: plan your production

While in China

When should I go to China to find a factory? What to prepare?

You should go after you have​ received​​ some initial proposals​ (usually for assembling the entire product or validating some key components)​ and need to decide with whom to work​.

What to prepare:

• Set expected outcome for the meetings. Let the manufacturers know what you want in advance.
• Prepare a questionnaire or a list of questions you want to ask and let them know in advance.​
• Prepare the Design documents (schematics, layout, mechanical drawing, and ID plot). If you do not have the design documents, choose a partner who can work with on these.

What should I see or check when I’m in China?

Ask the manufacturer to prepare a brief introduction:

• Factory information
• Product line information
• Their previous experience with Tier 1 brands and ODMs (if any)
• Introduction to their Quality Certification (QC) process (see their SOPs and standard equipment)

If possible, ask them to do a production line tour. During the tour check:

• That instruction documents at each production site are well prepared
• That operators are well trained
• That the production line DRI (directly responsible individual) is monitoring the assembly and testing
• Their production line Units per Hour (UPH)

Should I spend time in China during the production?

After the initial visit, you only need to go to China when your project is at the stage of DVT and PVT during the production. You should go there and make an audit to confirm that production meets your specifications and expectations. Check:

• EE performance
• Shape quality
• Material
• Function
• Packaging

Sometimes even very experienced manufacturer will misunderstand your specifications and communication. It’s crucial to do the audit before mass production (MP).

If you do not have enough resources and expertise to go to China and evaluate production at this step, the HWTrek Premium Program can help you manage all local supply chain activities.

Should I manage the sourcing of parts?

In most cases Creators will find it much easier to work with a turn-key manufacturing partner who will do the sourcing of all parts and materials.

• Many IC and component companies will not sell to creators directly and only supply named accounts or distributors.
• The logistics can be a nightmare, a BOM typically has hundreds of items and if just one is missing your product cannot be produced.
• Sourcing and consigning the parts will open a huge risk for quality control. Who will do the incoming control and who will be responsible for what?

Exceptions:

• Highly specialized parts that are not in the China market and e.g. have to be supplied from Europe or the US to China​.
• The most expensive parts (that cost more than 10% of your total BOM). These include components like: CPU, sensors, some optical equipment like lenses, etc.
• Consigning certain parts can be part of IP-Protection.

Many hardware startups spend a lot of time sourcing components. Sourcing relevant components, getting quotations, and circuit / PCB layout design are just some of the issues to solve when you are developing your product. At HWTrek, we want to help hardware creators to get through this process faster and more smoothly. Our partner CECport, a leading China Component Distributor, developed Program Faraday to assist hardware creators with all component sourcing related issues.

HWTrek Programs for Creators

HWTrek has partnered with leading experts to provide exclusive manufacturing and service programs customized for hardware creators worldwide.

Download presentation: How To Find Reliable Manufacturers In China Part 2: How to Approach and Work With a Factory

HWTrek is a platform that provides hardware startups with direct access to manufacturers and supply chain experts, as well as online project management tools to take a product from idea to delivery.

The global platform for hardware

Originally published at blog.hwtrek.com on March 22, 2016.