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Expert Consulting for Product Entrepreneurs

Four Tips For Checking Supplier References

This article originally appeared on our Forbes blog

Checking references is an important (and free!) part of the supplier vetting process. I’m surprised by how many makers either don’t request them or don’t follow through once they secure names. Further, it’s not enough to ask easy questions such as, “Do you recommend Company X?” as the goal of each conversation is to go beyond surface level information. When done properly, speaking with references should paint a fuller picture of what it would actually be like to work with a given supplier.

Here are four tips to optimize your reference checks and make more informed decisions as you source new partners.

1) Ask For More Than One Reference

Reputable suppliers should have multiple happy customers willing to endorse them. When requesting references, be clear that you’d like a few options, and let the supplier know that both past and present clients are okay. This may give them more range, as some clients in their roster will be off limits due to privacy clauses.

If a supplier refuses to provide references or will only send a single point of contact, this is usually a sign to proceed with caution.

2) Stick To Your Product Category

Speaking with references who have made products similar to yours is key. For example, if you on the hunt for a factory that specializes in structured outerwear, but the references you receive can only vouch for the supplier’s ability to produce casual knits, the intel is only so helpful. Seek confirmation that a partner is good at what you are making.

3) Create A Vetting Checklist

It always pays to be organized and methodical when vetting, especially when you’re in contact with multiple potential partners and need to collect and evaluate lots of data. Before setting up discussions with references, make a list of the questions you want each one to answer. You’ll also need somewhere to compile all of the information you receive, such as in a spreadsheet dedicated to your vetting efforts.

Here are some suggested points of inquiry:

  • Is the supplier responsive? How long do they typically take to reply to messages?
  • How long has the reference worked with the supplier?
  • Has pricing increased over time? If so, why?
  • Are deadlines usually met? If not, why?
  • If there has even been a quality issue with the factory, how was it remedied?
  • You’ll receive an extra layer of feedback if you ask questions by questions by phone since it’s possible to pick up on more nuanced forms of communication such as tone, hesitation, sarcasm, etc.

    4) Remember That No Supplier Is Perfect

    A factory doesn’t need to score 100% on price, quality, speed, responsiveness and everything else you’re looking for in order to be a worthy choice. As with any relationship, partnering with supplier requires compromises. The important thing is that you are clear-eyed about the potential trade-offs of working with one vendor over another.

    For example, if you hear repeatedly that a factory has great quality but needs to be nudged a bit to finish orders on time, you can enter the partnership knowing you’ll need to build in delivery buffers. Preparation can help eliminate unwanted surprises and offset a vendor’s weak spots. This is not to say you should ignore negative feedback, but rather a reminder that no business is perfect.

    References are likely to say positive things about a supplier, or else they wouldn’t have been chosen in the first place. By starting each conversation with the reminder that you aren’t seeking perfection but rather a solid, reliable partner, you’re more likely to receive authentic feedback.

Paying An Overseas Supplier? Read This First

This article originally appeared on our Forbes blog

Paying an overseas supplier for the first time (or second, or third!) can be a nerve-wracking endeavor. Are they trustworthy? Will they deliver what they’ve promised? Are they even a real company?! Unfortunately – and I wish this weren’t true – some of the nervousness is warranted. After helping countless entrepreneurs untangle manufacturing problems with factories, I’ve seen my share of bad apples.

The good news however is that when things go wrong, it’s almost always the result of an easily avoidable mistake. A review of an overseas transactions that has gone awry usually uncovers one of the following errors.

Mistake #1: Not Requesting a Sample

Requiring that a supplier send you a sample of whatever you’re buying before paying them may seem like common sense, but it’s a step many people skip. They do so for one of two common reasons. The first is that suppliers may make a compelling argument for why samples are not needed. For example, “Don’t worry, we produce for many big companies!” or “Sending a sample will just be extra time and money. Our quality is great so there’s no need.” While this logic is flawed (big companies still require samples and the cost of securing them is nominal compared to risks of not doing so), new entrepreneurs who lack experience are more likely to be swayed.

The second reason is that people believe photos are a sufficient form of approval. A factory might email a picture of a material sample or finished product that looks great, but when the actual order arrives the specifications deviate in a way that was not apparent on a screen. Even worse is when the “sample” in the photo is completely different than the item ultimately shipped.

Mistake #2: Paying 100% upfront

It’s always best to structure supplier agreements using a deposit/balance schedule. As with many other industries, you pay a deposit to start a production order (typically between 30-60% of the total purchase order value) and then issue the balance payment prior to their release of the finished goods. There are a few instances where it is industry standard to require full payment up front, such as when a supplier is creating custom molds for a metal or plastic component of your product. While paying in advance for certain fees is unavoidable, deposits are the norm in most production scenarios.

When you pay a supplier in full at the start of a project, you lose your most compelling negotiating tool – a refusal to send more money until the company corrects unsatisfactory work. You also increase your financial exposure should they fail to deliver entirely. While it’s terrible to completely lose a 30% deposit payment if a supplier disappears, it’s even worse to lose it all!

Mistake #3: Sending Money to a Fake Account

While most supplier disputes are the result of a miscommunication or mismatched expectations, a small number are due to outright deceit. An increasingly common type of fraud occurs when rogue individuals imitate legitimate factories, convincing foreign buyers to send deposit payments for various goods and services that they have no intention of rendering.

To avoid this type of transaction, check that the ‘Pay To’ account information on the invoice is the same as the company name who you are supposedly doing business with. For example, if you are buying buttons from XYZ Button Co. but the payment instructions on the invoice ask you to send a wire transfer to QRZ Inc., consider it a red flag. The same is true if you are asked to pay large sums of money via paypal or issue a bank transfer to an individual’s personal account. In short, make sure the names on all invoices, bank accounts, and shipping documents match the name of the actual factory.

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Setting up trustworthy supplier partnerships involve more than just payment practices, but being aware of these classic mistakes is an important part of protecting your investment!

Payal Singhal and The Desai Foundation Share 3 Steps For Making Products That ‘Give Back’

This article originally appeared on our Forbes blog

When leading Indian fashion designer Payal Singhal and New York-based nonprofit president Megha Desai connected at a Mumbai fashion event last year, a conversation around women’s empowerment spurred an idea: could they create beautifully designed products that would delight clients and improve the livelihoods of the women responsible for making them? The answer, it turns out, is yes.

Social entrepreneurship is a growing field that all business leaders can explore. Here we breakdown how Singhal and Desai combined forces to produce “bags for good” and how their success is giving socially-conscious product entrepreneurs (and entrepreneurial nonprofit leaders!) an inspiration to follow in the process.

Step 1: Start With A Great Idea

The Desai Foundation’s mission is to empower women and children in India and the US through various community initiatives, while the Payal Singhal brand is known for its fashion-forward dresses, sarees, and other special occasion attire. In preliminary discussions about their partnership, Singhal and Desai decided the foundation’s vocational sewing program would naturally be the focal point. Training sewers to produce produce certain Payal Singhal products would provide the women with skill-based work while adding a philanthropic component to the brand’s supply chain.

The final result is the PS x Desai Foundation collection, which includes lenghas, scarves, and tote and makeup bags in a stylish lotus print reminiscent of the nonprofit’s logo. The proceeds from the bags go directly to the Foundation (along with a portion of revenue from the rest of the line), and the sewers making them receive fair wage compensation, in fair working conditions, as well as flexible hours to meet the needs of village life.

Step 2: Build A Solid Team

To set up the supply chain, the pair traveled to one of the Desai Foundation’s sewing centers in Valsad, Gujarat with Monica Dogra, the face of the partnership. Once there, they hosted a communal event to introduce the sewers to the leadership team, brief them on the purpose and scope of the project, and explain the specific benefits they would receive by participating. “We wanted to ensure that they felt like they were a part of the process, so we had a great launch day which got the whole community excited,” said Desai.

To ensure technical expertise, the sewing team completed a 3-month preparatory program, during which an American seamstress was flown in to teach high-end cutting, sewing, and finishing techniques that would satisfy the brand’s international audience. While quality control on the products is of the utmost importance, the Desai Foundation is equally committed to ensuring a high quality of life for each worker. Maintaining open channels of communication with the women to ensure their financial, emotional and physical needs are being met is essential to their production process.

That said, the logistics of any production operation can present challenges. For example, shipping to and from the center, which is located in a rural village, can take a long time. Setting up a successful joint venture requires communicating about these potential pain points up front and ensuring both parties are on the same page. Doing so will help nurture a collaborative attitude towards challenges should they arise.

Step 3: Make It Sustainable

“Great partnerships happen when both parties have shared values and shared goals,” says Desai. The lasting power of such a partnership comes when those principles and aims are part of a self-sustaining system, which the PS x Desai collaboration executes perfectly.

By joining forces, Singhal has access to a transparent, ethical production solution (a challenge for many apparel brands) and can offer her clientele beautifully-crafted products while simultaneously making a philanthropic contribution.

The Desai Foundation’s mission is equally supported, as the union creates exactly the type of jobs women in their program need. And since the foundation receives a percentage of all PS X Desai Foundation sales, this built-in revenue stream sustains and grows the initiative.

This is social entrepreneurship at its best: a great idea, a sustainable business model, and clear benefits for all parties involved.

Three Ways To Lower Your Manufacturing Costs

This article originally appeared on our Forbes blog

When you factor in the cost of labor, raw materials, packaging, shipping and quality control, manufacturing a physical product is often more expensive than anticipated. Especially if you’re producing domestically or in small quantities, as many new makers do. While the quickest and easiest way to reduce per unit costs is usually to increase production volumes, not everyone has the budget to scale up. Here we discuss three ways to trim expenses without having to up your order quantities.

Tweak Your Design

It’s natural to get attached to your original product design (they’re called “idea babies” for a reason!), but the design decisions you make while initially developing your product are not necessarily the best in the long-term. For example, you may have chosen a material without fully understanding the cost implications, or opted for a customization during manufacturing that requires higher minimums than you can regularly afford to meet. By selecting different raw materials and components, changing the way your product is constructed, or even eliminating a few bells and whistles, you can reduce costs and increase profit margins.

The best sources of advice on making a product more cost-efficient are your supply partners. Reach out to your main assembly factory and ask them to explain the most labor-intensive aspects of your design. Find out if any of your material sources could be replaced by something less expensive without compromising the item’s integrity. Put their knowledge to use!

Take, for example, my client who has a line of pet clothing. After seeking advice from her factory, she reduced her costs by 5%. All she had to do was choose a less slippery fabric! It seemed her originally selected material was proving difficult to manage on the shop’s cutting machines, requiring more time and oversight, and a higher than average defect rate (meaning, perfectly good fabric was getting thrown away). Until she reached out to the factory, the designer was completely unaware of this issue. You may wonder why a factory partner wouldn’t offer up this useful information to begin with. Though some certainly will, others assume you’ve done your due diligence and research and want them to adhere to your exact specifications. In short, they won’t interfere with design instructions unless asked.

Remove Packaging

Are you mostly selling your products online? If so, removing excess packaging is a simple way to bring down overall costs. The purpose of packaging is to inform and motivate a sale, which, in an ecommerce setting, is accomplished by the marketing copy and great photography on your sales page. Anything the customer sees after receiving their order (such as packaging) is extra!

True, nice packaging adds to the overall perceived value of your brand; however, you can communicate value in other ways. For example, some makers remove all packaging on the product itself and focus on branding their exterior mailers and boxes with a catchy tagline and brand logo. This eliminates the labor cost of affixing packaging solutions to individual SKU’s (such as hang tags, cardboard sleeves etc); boxes and mailers have to be packed regardless, so adding a logo does not increase handling fees.

Remember, it’s okay to use different packaging for your ecommerce inventory versus items that will be physically displayed on store shelves. This may require a little extra logistical configuration, such as having your factory label separate boxes of inventory (one with retail packaging, one without), but in the long-run, it will reduce costs.

Negotiate with Suppliers

Asking your factory point blank to reduce their prices is usually effective only if you have information to back up the request. Before attempting any negotiation, make sure to secure a handful of reference quotes from similar suppliers. This will tell you where your current supplier falls within the overall ‘pricing landscape’ and what type of reduction (if any) it would be realistic to request.

For example, let’s say you’re an entrepreneur making painted wooden photo frames. You would price out your exact design (at the same order quantities you produce with your existing partner) with three other factories. If two of the quotes come back 10%- 15% lower than your existing factory’s pricing, you now have a specific range to shoot for with your current partner. It’s much more powerful to enter into negotiations with a realistic target, supported by competitive research, than it is to make a weak, open-ended request.

It’s okay to share the quote numbers you receive from other suppliers to strengthen your negotiation, but for privacy’s sake, don’t share vendor names and contact info.

Planning On Preselling Your Products? Read This First

This article originally appeared on our Forbes blog

Preselling is a great way to launch or grow a new business with physical products. Because customers pay for goods upfront, before a large batch of inventory has been made, entrepreneurs can escape the pressure of funding their own manufacturing expenses. Revenue generated by presales can be used to cover the cost of materials, production, and more.

Though the presale model may sound ideal, it does come with some risks. While seasoned brands have had time to test and refine their manufacturing process, new makers are still operating on a learning curve. Beginner’s mistakes can lead to production delays, defects and quality problems, and, in a worst-case scenario, a total loss loss of inventory. The latter can be disastrous, particularly if a brand lacks the resources to re-make the product or issue refunds.

Thankfully, there are a few things you can do to minimize the likelihood of problems when preselling.

1) Complete the Sampling Process With Your Manufacturer

In my work with clients, I’m surprised at how many people don’t get fully finished samples before starting to presell. This trend is due, in part, to the ease with which designs can be presented before they are actually made. The ability to retouch imperfect samples or create life-like digital renderings means that a concept can be partially flushed out or exist solely on paper, but still make for compelling website photography!

Going through a complete sampling process with your manufacturer of choice will ensure that your design doesn’t have weak spots and that your supplier can make the product at the level of quality you desire, in a reasonable amount of time. Getting semi-finished samples–or worse–waiting to sample until production starts (after you’ve sold inventory) leaves you vulnerable to unwanted surprises, such as poorly performing materials, assembly defects, and slower than anticipated turnarounds.

2) Perform Product Testing

Whether you are sending your finished product to a testing agency or performing your own set of tests, making sure your design functions as its supposed to is an integral part of the making process. Certified agencies are great for tests such as seam strength, material toxicity, choking hazards, and other metrics that require special equipment and precise measurements. Informal tests, such as simply using a product sample for an extended period of time, or repeatedly washing a garment according to the care instructions you’ve set, are great ways to understand if design changes are needed before you produce.

With either method of testing, it’s crucial that you’re 100% confident in the way your product will perform before sinking other people’s money into making it.

3) Build in a Buffer

The age-old advice to build a cushion into any budget or timeline is especially true when manufacturing a product. Add even more so if you are a beginner! Things often take longer and cost more than anticipated, which is fine (albeit frustrating) if you are answering only to yourself. But promising finished products to customers and then either running out of money to make them, or falling significantly behind schedule, will cause extreme stress and strain.

In order to preserve your sanity, reputation, and wallet, build at least a 20% buffer into any time and cost projections. This includes the total investment you anticipate will be required to manufacture your pre sale inventory, as well as the delivery date you set for buyers.

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