Your Global Outsourcing Partner – Build-to-Print Assemblies

Manufacturing 101

Important Considerations Prior to any Off-shore or Domestic Manufacturing Program: Manufacturing off-shore is not ideal for every company and situation. When prospective clients ask us what the most important considerations are to begin any project, whether it be for off-shore or domestic, it is market study, competition, funding of course, solid design, proof of concept by prototype, timing, and realistic anticipated production volume and future growth potential. These points are the essence of a business and marketing plan and should be well documented before beginning any such endeavor.

  • Market study: Be sure to understand your market, competitors and viability of your desired product. Just having an “idea” is not sufficient. Do your due diligence and understand what you want to do and why. How and where do you plan to sell your product? Retail, online, distributors, trade shows? What are your marketing strategies?
  • Funding strategy – How do you plan to fund your program? Are you self-funded? Do you need investors, partners, are you looking to sell your idea?
  • Solid design: Under no circumstance should corners be cut when it comes to the design. Hire the appropriate engineers to formally draft your product. Yes this can be costly but can and will save you time and money. Proceeding without careful design considerations (from part to packaging) can result in having to retool, redesign, additional shipping costs, and loss of market potential. Design parameters should include material study and environmental considerations as well. Well integrated manufacturing companies can help with the design phase of your product, this is usually evaluated on a case-by-case basis and is dependent upon the nature of your project and application. Having a “solid design” however does not necessarily mean there will not be adjustments or improvements along the way.
  • Proof-of-Concept by Prototype: Creating a physical model is the best way to know if you really have something with strong market potential. Prototypes can be with or without a formal design, depending upon the nature of the items and your skill level to build it. Again this step is important as you may realize certain design parameters or original concept changes that would affect the overall function or market viability. Build and carefully test your prototypes. Many manufacturer can quote prototypes as well, again this is evaluated on a case-be case basis and is dependent upon the nature of your project.
  • Realistic Production Volume – basically how many units do you want to build? Savings off-shore really depends upon volume. Projects require expense during processing: shipping samples back and forth for approval, customs, duty, tooling. Building a low volume run in Asia may not be realistic for every project and product type, the logistical expenses will negate any savings you may realize by producing off-shore. There are resources available to help you determine your fit for manufacturing in Asia. In general you should be thinking in terms of thousands or tens to hundreds of thousands of units. If it’s more like “tens” or “hundreds” it’s likely the project is not a good fit for off-shore production.

General Production Process:

The following assumes you’ve completed your due diligence as outlined above and are ready to seriously look at mass producing your product. The term “mass” may make some people nervous as it can imply you need to commit to tens of thousands of units immediately. Actually it is common to begin with smaller lots, even off-shore. All companies in China understand that a new product will take some time, so don’t be afraid of approaching companies if you will need only 1000 units to support your product trials and marketing efforts. Remember however that consistently producing and shipping small runs from China will eat into your profits, realistically you should have plans as outlined for growth, but if you need to do a few smaller runs for internal reasons it shouldn’t be a problem. Additionally you should have the confidence level in your product and market to justify any set-up or tooling costs, which can be considerable if you need a production mould. Again if you’ve gone through the above considerations this should not be a problem, if it is please evaluate your position again before proceeding.

Organize your documentation:

This is extremely important if you want the initial process to go smoothly. Arrange your files, CAD, BOM, Gerber, 2D and any other 3D layouts within a master file and sub file hierarchy. When you send them out for quote there will be less confusion. First create a master file, “Product Widget”, for example. Within this file add subfolders for BOMs, CAD, PDFs, packaging (which can also be broken down as well), and any other appropriate designations. Finally zip or rar the master file for easy submission. “Rar” files are similar to zips, many companies are now using these in addition to zips, standard compression software such as “winzip”can negotiate both types. It is also suggested, depending upon the size of the compressed file, to use an internet upload site for transmission. Surprisingly many cloud services such as Google, Cloud Drive, and Drop Box do not work if you try to send the link to China. Instead try “www.wetransfer.com” for easy transmission overseas.

Selecting Manufacturing Companies for Quotations:

Selecting the appropriate vendor for any project is no easy task, there is a considerable amount of time and effort that must go into ensuring your manufacturer will be able to perform and deliver quality products consistently. First establish an NDA template for your consistent use by either finding a free template online or through a service such as LegalZoom. If you’re working with a business law firm you could obtain one that way that is more specific to your business, however this will be a more expensive option.

There are important consideration here depending upon the type of product, assembly, or sub-assembly. Let’s say for example that you have a small PCB assembly that fit’s into a plastic housing. Of course by now you’ve assembled your CAD and 2D drawings for the plastics, have clear direction on the material, and have also organized your Gerber files and BOM for your PCBA. Either using a trade directory, or general internet search, look for companies that specialize in the type of product you have, by using key words “PCBA factory” and so forth. If you looking at having the complete assembly built and packaged, a contract manufacturing company or electronic manufacturing company could put the whole device together for you. Once you’ve identified two to three different companies you should address them first by email. Normally an introductory email, such as “we’re interested in discussing a new project, please contact us” is the best approach. Once you have a dialogue you should submit the NDA for signature, this is optional but recommended. If the company is domestic you could begin by a phone call and/or request a meeting face-to-face.

Screening Suppliers:

It’s a good practice to ask a lot of questions and be strict, find out how they’re organized, are they a trading company, do they make the products in-house, do they use sub-contractors, length in business, quality certifications, and whatever else may pertain to your application. Once you’ve successfully identified a potential supplier, signed the NDA, and have determined by conversation that they can manufacturer the type of product you’re looking for, it’s time to submit the files. If you’re working with a Chinese company remember that they are about fifteen hours ahead, so staying flexible by working at night may give you an advantage. There will undoubtedly be questions pertaining to the design, components, and/or material that you will need to address to move forward. Don’t panic, this is normal. Often you can leverage talent off-shore by having some of the engineering and revisions done in China. Normally within one to two weeks is normal to have a quote returned. If you’re just making a simple plastic part or bare PCB, then 24-48 is about all you should have to wait. If you’re not getting service, if emails aren’t being answered promptly, then you may consider looking elsewhere. Your quotation should have all the required details pertaining to your project, including all the payment and incoterms specified. You can negotiate the terms of every contract so speak up if you’re not comfortable with something.

If you’ve been successful thus far it’s time to visit the factory. Fly all the way to China you ask (about 24 hours door to door)? Yes sorry, if you want to do it correctly and be sure of who you’re working with, you must do your due diligence (see our disclosures page for additional information). Investigate them closely, how long in business, principals involved, sub-contractors, quality/ISO ratings, existing markets, main customers, annual sales, cleanliness of the facility, and all in-house capabilities for your product. What will be done there and what will be done elsewhere, insist on seeing all the sub-contractors. There are other travel issues and preparations that are out of the scope of this article, however getting a Chinese Visa, making reservations, hotels, travel plans, pick-ups at hotels, airports, electrical compatibility issues, are among the things that need to be addressed. Watch also for the off-shore holidays that seem to occur every month.

Initiating the Project:

Once you’re satisfied you can arrange the deposit and submit your purchase order. Ideally offering a 50% deposit for tooling is the best approach. Balance of the tooling and usually about 30% of production costs would be required when samples are approved. Do not allow a manufacturer to request the majority of the production costs prior to mass production, some may try to ask to protect themselves. The following step is to ask your manufacturer for counter-drawings. These are a complete return set of drawings to demonstrate comprehension of the design and assembly. Questions and issues will almost always come up that need improvement, clarification, or revision. These should be signed off one-by-one upon your satisfaction. Tooling will usually take four to six weeks, following which you should receive first articles for approval. There may be intermediate steps depending upon what you’re building, such as material samples, or maybe you will want samples of the housing first to test fit, or samples of the PCBA first for testing in-house. It’s impossible to cover every possibility here but at this point you should have a good idea of how to proceed. With first article samples may come the realization that certain features may need to be revised, this is also normal to some extent. The better prepared you are, the less likely extensive revisions will be necessary. Note that changes can get expensive if we’re talking about revising production moulds, which is why the preliminary stages are so important. Not to mention shipping samples back and forth from China or anywhere else can also get expensive. If the tooling stage and sample fabrication has gone successfully you can consider releasing your project into mass production. Your manufacturer will quote the appropriate time-frame for your project. You may also need to address other things such as packaging designs, visit our disclosures page for a detailed list of things to consider. Once you receive your production samples you may need to apply additional deposits, at which your should feel comfortable in doing so if everything else is in order. When production is finished, and there is evidence of completion by either your return visit (recommended), third party inspections, pictures, and/or a certificate of conformity, then the balance of the order should be paid in full. Once you have established yourself with an overseas vendor you may approach them for extended payment terms, however this has become more and more difficult to obtain. Usually you will need a solid production plan in place with clear annual production schedules, do not expect payment terms for trial orders or low volumes without any signification commitments. There are other ways to secure payments, such as an LC, insurance, and so forth.

Shipping:

Obviously you must get the product delivered once production is completed and the financial aspect has been satisifed. This is usually coordinated by a forwarding company, a search for “overseas shipping companies” should produce results you can evaluate. The procedure is as follows: communicate with the forwarder, sign a POA for them to clear your goods on your behalf, give the factory name and contact information to your forwarder. Normally an introductory email, copying both the forwarder and vendor is an effective way to make this introduction. Your forwarder should be able to obtain all the required information from the vendor, including the factory address, whether the factory is quoting EXW (vendor pays from factory point) or FOB (vendor pays to have product sent to shipping point), packing list (which shows the volume and weight of the shipment), and commercial invoice (which will be the value your duty will be based upon). For Duty calculations this is based on the HTS code (harmonized tariff schedule). This is a designation for the class and type of product you are importing, of which can be researched at http://www.usitc.gov/tata/hts/. It will provide a percentage of the commercial value which you pay as a tax for importing the goods. There are also other accessory charges that your forwarder should cover with you as well. You will also need to decide the method of transit, by air or sea. This depends on a few things, such as your timing, budget, and the size and weight of the shipment. You can discuss the options, including FCL (full container) and LCL (loose cargo), with your forwarder. You should receive a quotation direct from your forwarder, terms vary from payment upfront to Net 30. By sea will take about four to five weeks, by air about two weeks door to door, sometimes less.

This has just been a general outline for reference only, but should get you started. If we can help in any way please contact us immediately. Thank you.

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