- November 20, 2019
5 Product Sourcing Mistakes You Should Avoid
In step with evolution and its need for refinement, today’s market is rapidly expanding across the globe. Businesses from around the world can now connect and transact through the internet. This results in lower manufacturing costs, more affordable prices, better sales, and a wider customer base. While these advantages make the supply and demand chain work faster and smoother, it does come with a few risks, leading to potential losses.
To steer clear of flops, you can’t afford to be lax. You always have to be 10 steps ahead, particularly when it comes to product sourcing. This early phase can either make or break your business, so be sure to avoid the following 5 blunders.
1. Poor Strategy
In all business matters, it’s crucial to have a well-defined strategy. This helps you get from point A to B smoothly. When expanding operations abroad, carefully study the respective markets of your prospective overseas sites, and find which one offers a more cost-effective production rate.
To further narrow down your options, check if their output meets your standards in terms of quality, functionality, and delivery. Also on this list are selecting the right sourcing method that fits your needs and ensuring payment security.
Skipping this part results in either subpar products or inefficient processes, indicators of a poor investment. Spending a significant amount of time and finances on a failed venture is a huge loss for any company.
2. Unclear Standards
In a similar vein, you need a list of clear expectations on hand before finding a supplier. What quality benchmarks should the output meet? How long can the turnaround time be? Are you and the potential manufacturer communicating effectively? Is the price reasonable considering all the factors involved in the production?
For instance, if you partner with a supplier for a small batch of nickel-plated wires, and they come out great and on time, you might want to put in a larger order the next time. Your vendor might reject your request because they don’t have the bandwidth for that production capacity at the continued level of quality you need. This leads to delays, which may discourage your customers and cause profit loss.
Having a clear set of standards saves you from similar situations since you’re well aware of what you want and need from a provider. And, since they’ve formally agreed to satisfy those requirements, output disputes are minimal.
3. Lack of Background Information
Once you’ve got your specifications and expectations set, you can move on to looking for the right supplier. Comb through all of the possible partners that you find on both online (internet, social media) and offline (trade shows, fairs) platforms. Create a shortlist of the best ones and exercise due diligence. This means that you have to conduct an investigation on this potential investment and see if it’s really worth it.
For this step, it’s a good idea to visit the manufacturer’s physical site and webpage. Ask if they’re registered, licensed, and certified. You may also look up reviews about their company online. Not taking the time to do adequate due diligence increases your chances of signing on a partner that’s less than ideal.
4. No Payment Security
Hiring an external company to fulfill product development is a financial risk offset by the money you save on manufacturing. You can mitigate that risk by putting measures in place that will guarantee compensation or cost-reduction when specifications or timelines aren’t met. In some cases of substantial quality deficits, you might even have to sever ties completely and start from scratch with a new provider.
When vetting an overseas company, pilot production with them before signing a contract. Samples typically come at a reduced rate. Many companies even offer them for free as a means to earn your business. A screening period protects your investment and gives you a grace period to dissolve the relationship early on if it’s determined they can’t do what you need them to in the time frame they agreed on.
5. Absence of Contracts
One more measure that you have to take when sourcing offshore is to sign a clearly written contract between you and the supplier. This ensures that the partnership stays within the specified bounds. If the other party fails to hold up their side of the deal, then you’ll have legal leverage. Without this, you won’t have any protection, which leads to a significant loss for your company.
From start to finish, careful planning and consideration are required to get everything in motion and evade major setbacks and heavy losses with offshore manufacturing. Aside from avoiding the mistakes mentioned above, you should also use assistive technologies, like product sourcing software. Call CBX Software today and get the best solutions that make starting and running a business as smooth as possible.