Yahoo News Five things to consider when manufacturing abroad
Try to work with more than one supplier, keep an eye on your intellectual property, and consider cultural differences, say these experts.
Manufacturing in China, India and other far-flung countries can save small and medium-sized enterprises (SMEs) money, but with unknown territories come risk.
Here, business owners that manufacture abroad, and some trade body experts, give their advice on minimising that risk and handling any complications that may arise.
Work with multiple suppliers
Duncan Brock of the Chartered Institute of Procurement & Supply (CIPS), the trade body for the supply chain industry, advises SMEs to work with multiple suppliers for the same product.
“By spreading any risk among several suppliers across the world, it’s possible for a business to protect its production flow against everything from currency volatility to natural disasters and unexpected trade tariffs,” he says.
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He also thinks that it’s worth finding out who else a potential supplier works with: “Know who they're doing business with before you entrust them with your valuable goods or services, or else you may find that your suppliers are working with your direct competitors.”
Safeguard your intellectual property
When London-based computing start-up, pi-top, needed to improve its manufacturing time, spend and capabilities in 2015, its co-founder, Ryan Dunwoody, relocated to Shenzhen, China – a centre of technology design and manufacturing – to give the business a presence there.
“The sheer speed at which everything happens there is amazing," he says. "There’s nowhere on earth that offers such rapid feedback to help identify what’s possible, what price points there are, and what materials can be used."
Like many SMEs, Mr Dunwoody had initial concerns over the security of his intellectual property. “Put a non-disclosure agreement in place to communicate that your designs are not to be shared with others,”
he suggest. “Sharing design files with individual suppliers for separate ‘puzzle pieces’ of your product is generally low-risk.”
Use local services
Finding a trade service to explore international opportunities can provide protection and support to rookie businesses. Joe Revell, the co-founder of Garcon Wines, used Alibaba Group’s B2B marketplace, alibaba.com, when he needed to source bottles from China.
“Its Trade Assurance policy ensured that we had on-time shipping as well as quality protection, and its ranking of suppliers meant that we knew we were always sourcing from the best.”
Understand cultural differences
Cultural differences can create difficulties between SMEs and overseas manufacturers.
Molly Russell, founder of Pink City Prints, chose to manufacture clothing and accessories in Jaipur, India. Understanding the Indian way of life helped her move forward after reaching stumbling blocks in the process.
“One of the steepest learning curves was when I discovered [a culture of] not saying no," she says. "People don't want to be the bearer of bad tidings, so they agree to things that they can’t fulfill.
“Oversee production yourself as much as you can to minimise disasters; things can be misunderstood, lost in translation or forgotten, so it’s best if you – or a trustworthy representative – are there to supervise.”
National holidays are also worth considering. Make sure that you and the manufacturer have an agreement as to the days that it can work, because a cultural holiday without prior warning can devastate stock flow.
Do your research
Rob Lankey, chief executive of the National Association of Commercial Finance Brokers (NACFB), emphasises the importance of doing your research: “Any company eyeing up moving manufacturing abroad should seek expert help, with the Department for International Trade (formerly UKTI) an obvious place to start.”
He also recommends visiting international trade shows to keep in touch with local markets, and talking to SMEs that already operate in the target country.
"It's worth challenging your reasons for moving your operations abroad when many services and markets are available here already,” adds Mr Lankey. “Ask yourself: why not export, rather than manufacture abroad?” If in doubt, seek professional business advice from multiple sources before making any big moves.
