How to Make Your Stuff in China
designtheatre.net
designtheatre.net
This works well if you are making a product in the thousands but would probably not be the right solution for tens or hundreds of thousands.
China is very cost effective for people time, like making a mould tool, but power and raw materials does not vary as much. A building full of machines making plastic parts has a similar cost wherever it is in the world. I think that as people become more concious of the environmental impact of the products they are buying companies will begin to move to a model where they manufacture the product much closer to the consumer and save on shipping it around the world.
What you say echoes my understanding of creating a product 'in China'. Often there are loads of steps where it makes sense to use local talent instead.
This means a lot of the rhetoric of 'jobs going overseas' can be empty.
I think in future that local firms will have a chinese manufacturing partner and list this fact to clients as a 'we save you money this way'. Local expertise with approved baseline manufacturing cost.
Sometimes it just makes sense to be in the US, and we take full advantage of that.
I personally think that make the mold is the most important part, so if anything that is the part I would not want to give up control on.
We tent to work with local injection moulding firms that have all the facilities on-site to make modifications to the tools and would check the designs of the tools by the Chinese before they start cutting metal.
There obviously is a risk in going to china that you will have to go out there to solve a problem but we are much happier with that being during the six weeks that they are making the tool and not the 5 years that it is being used.
Here are some tool numbers that I have: US cost = $30k, 8-10 weeks. China cost = $5k, 6 weeks. That is for a tool I quoted last week.
I slightly differ on where to manufacture the parts. Because in my industry pennies matter due to several mark-ups in the chain, we manufacture in China. But as samwillis said, it may not be needed in your business.
samwillis is right when s(he) says that parts and power costs don't change much, but labor does. Labor in the US is $25 / hr burdened, and in China less than $4 / hr. If your parts are labor intensive, it makes sense to be there in China.
Part III: http://designtheatre.net/2010/05/01/going-it-alone-part-iii-...
The author was also on a panel at TC Dirupt NY called 'getting it built' - which you can find here:
http://disrupt.techcrunch.com/2010-nyc/agenda/#built
Liam Casey was also on that panel - he is a good guy and a great contact to have in Shenzen (if any HN'ers are looking to build hardware - email him)
Typically we buy electronics, custom PCB, and custom plastic assemblies. That is the bread and butter, with other components as needed.
Ask away for the next 20 minutes. It is 2:40am here, and I will probably go to bed around 3:00am. I will be able to answer as many other questions as are asked, but probably not until Tuesday evening.
Throwaway account because I would prefer to keep my identities separate, mainly because our customers don't want it known that they don't design and manufacture their own products.
Oh yeah, I wouldn't do it the way the author suggested. Maybe I was lucky when I started out and had ways to get contacts in China, but I would definitely try that before just heading over with a half-drawn model.
That being said, we are starting to file for China patents now that they are actually enforcing rights. Before it wouldn't have mattered, so we didn't waste time and money.
Oh wow. Just remembered a story. Last year we sent a plastic part out for quote in China. The price to make it came back less than the spot prices on the resin needed to make the part. Of course that means they were going to knockoff the product and sell it elsewhere, and they didn't even attempt to hide it.
The market you are trying to enter will be next to impossible to penetrate without contacts. A big distributor of light switches won't buy from you because 1) they don't want to pay anyone but themselves, 2) will only do business with big companies, 3) and so on. The same goes for the light switch manufacturers.
The only way they will buy from you is if you can show them a completed product that looks exactly like it will on the shelf, in the exact packaging that they will sell it at. Even with all that, chances are less than slim.
Friends often ask me ways to get into home automation, which is a similar field to what you want to do. My suggestions is always this: Get in with a local builder. Supply your switches to him to put into his new homes. Develop relationships with growing amounts of builders, hit the shows, etc. Once you start affecting the market with your sales, then the big companies will talk to you. Until then, status quo is serving them pretty well.
Regarding provisional patents, I am not an attorney, so you will need to talk with someone knowledgeable in the legal field for that one. Be conscious of first sale doctrine and other things that will invalidate later patent claims.
What my company does is make our products into reality. We see a market, target it with a new product, and then shop it to the large manufacturers and distributors. They put their name on it and everyone gets money.
The reason why we don't do it ourselves is that we make more money working with them. The people we sell to own shelf space and end caps at Walmart, Target, etc. We aren't getting in those stores without our partners. Other partners have distribution arrangements to specialty store markets. Others are large purchasers of TV ads. We work with all these people to get our products to market.
There isn't secret sauce in our products. We make new stuff, cheaper and faster than others, and that is why our products get on the shelf. But without our distribution partner relationships gained from many years in the industry, we would have no path to market and would not make that many sales.
1. Sourcing: Alibaba.com is best, Global Sources is a near shadow copy but also good
2. Money transfer: For small amounts I'd recommend Western Union.
3. Chosing a supplier.
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Ooh this step is tough.
I liked this article because Adam has pounded the pavement in Shenzhen. This is more than I've done, as the flight would blow out the costs before the market was proven (it is now).
One thing you'll notice is that almost all devices on Alibaba are duplicated by about 5 manufaturers. Some of these are re-stockers, not the actual manufacturers. I haven't worked out a foolproof method of checking who the leaf-node manufacturer really is, but do try.
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4. Interacting
Be professional. Normally there are contact details on the Alibaba page. Use this to initially get in contact. Whoever is listed will probably not be the person who responds, so scan your spam folder carefully for the next few weeks.
Remember that you may be small fry to them until you place a large order
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5. Shipping
Most things are FOB (Free on Board) which basically means you pay the shipping. Your Shenzhen company contact should be able to provide you with a quote for Fed-Exing a sample. They will arrange the shipment, you just have to pay.
Initial orders can often just be declared as a sample for customs purposes.
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6. Costs
Volume counts. It reduces the shipping and unit cost, often in big steps. Shipping too has discontinuities on volume with shipping becoming much cheaper if its worth placing on a ship.
For projecting future costs as the supplier how their price list varies with volume, and how the shipping varies too. They'll quote you.
Plug these all in a spreadsheet and work out the unit cost.
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7. Legal
Do not forget Import Duty and Sales Tax. These vary per country (I'm in UK, but I've also done this in Oz).
But you need to find out how your goods are classified on an Import Duty scale. This tends to be that goods manufactured in your own country have an import duty on similar goods. In my case I'm importing discreet LED displays, which the UK does not make, so I don't pay Import Duty. If I was importing Plasma TVs, it would have a duty.
Check your country's Import Duty website for your classification. Often there is a fine line between entries, where it could be one or could also be another. This is a judgement call which number you choose. The immigration department may disagree with you and you may have to wrangle with them.
This happened to me in Australia, but after some in-person dignified pleading (yes there is such a thing), the Import official accepted my classification. This miraculously had lower Duty than what he'd initially decreed.
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I hope this helps, good luck!
http://en.wikipedia.org/wiki/FOB_(shipping)
Free on Board means the goods are counted as delivered when they pass the rail of the ship that is going to carry them
Visit manufacturers in the US (or other developed countries) to study how they do it. Then, go to China and evaluate the factories yourself. You have to see the factory.
If you don't, many times you won't discover that the "manufacturer" you're working with is nothing more than a trading company, taking a cut.
They won't take you as seriously if you don't show up.
You should make follow-up visits afterward to monitor QC. Have rigorous QC methods and standards, and agree to them beforehand.
Also, consider countries such as South Korea, which are more sophisticated manufacturers than China currently but still offer significant cost savings. It depends on the complexity of your product but it may make sense. Labor is much more expensive in Korea though compared to China.
I can answer any other specific questions people have.
And working conditions, please. People everywhere deserve to be reasonably paid and have safe working conditions.
Labor in China is quickly rising in cost, and poor working conditions are being punished in the marketplace. It is not always easy to get more labor, and when you can get it, it's more demanding (shorter work hours, nicer atmosphere, less stressful, etc).
So while reasonable working conditions are a must from an ethical perspective, they are also necessary for purely business reasons.