An entrepreneur is only as successful as the quality of what they sell, whether that be a tangible product, service or an idea.
As such, if you’re seeking financial freedom through dropshipping or considering a Filled By Amazon (FBA) business, you need to know how to find manufacturers that produce quality yet affordable products.
But, how do you find trustworthy manufacturers? What type of manufacturer should you be looking for? Should you source a manufacturer domestically, in the USA, or look overseas at Chinese manufacturers? I answer these questions and more, in this article.
FBA and dropshipping are both potentially life-changing businesses. Combine the proper guidance and mindset, which I discuss in my free upcoming webinar, and the knowledge you learn in this how-to find manufacturers article, and you’ll be well on your way to a life you never believed possible.
In this article, you’ll learn:
- How to find manufacturers
- Why working with a quality, reliable manufacturer is essential to your business
- How big you need to be to consider working with a manufacturer
- The difference between manufacturers in the USA and manufacturers in China
- The difference between wholesale manufacturers, trading companies, sourcing agents and factories
- Where to look online for manufacturers
- How to discuss and negotiate terms of agreement once you’ve found the right manufacturer
Table of Contents
- Why Should I Work With a Reliable Manufacturer?
- How Big Does My Company Need to Be to Work With a Manufacturer Directly?
- Should I Use a Manufacturer in the USA or a Chinese Manufacturer?
- What Are the Different Types of Manufacturers?
- How Can I Find Manufacturers Online?
- How Do I Reach Out and Start Negotiations With a Manufacturer?
Why Should I Find Reliable Manufacturers to Make My Product?
This should be a rhetorical question — but I can’t believe how often I see entrepreneurs trying to cut costs on their supply chains, and then wondering why their business fails and why they aren’t making $300 USD a day (at a minimum!).
Working with a reliable manufacturer is everything to your company. Your manufacturer determines:
- The quality of your product
- Your margins
- Your reputation
Essentially, your manufacturer defines your business through the dependability and quality of your supply chain.
Everything starts with your manufacturer. If they are late or produce low-quality products, then the rest of your supply chain suffers.
Reliable manufacturers consistently produce products to the agreed-upon standard, for the agreed-upon price and on the agreed-upon deadlines.
Without these three supply chain elements in place, you cannot hope to run a profitable dropshipping of FBA business — because your customers will simply find another seller who has a reliable supply chain and use them instead.
How Big Does My Company Need to Be to Work With a Manufacturer Directly?
The simple answer to this question is: it depends on your manufacturer.
If you can find a manufacturer that will fill your order, it doesn’t matter how big or small your order is.
All that matters is making sure your margins are worthwhile and that you receive consistent quality from your manufacturer.
Bigger Is Generally Better
Unfortunately, the reality of manufacturing is that factories and other manufacturers will sometimes accept a small order, but will deprioritize it. Meaning, if they get bigger orders, they will fill them first.
This means smaller shipments can often be delayed, and your customers will be kept waiting — in turn harming the reputation of your business and losing you clients.
Another consideration is that smaller orders end up being far more expensive per piece than larger orders. So, you need to calculate how much capital you need to pay upfront for your shipment, assess the risk of that financial outlay, then determine how long it will take to earn that investment back.
So, in practice, the bigger the shipment, the better it is for your margins and timeline. Forking out tens of thousands of dollars for a large shipment can be a risky move, though, especially if your product is unproven.
If Small, Think Small
If your product is yet to be proven, then consider managing your costs and reputation before going full ham on your marketing.
If you need to order a small shipment, then match your marketing efforts with small stock.
Order a small sample batch first, sell those products, gather feedback and conduct your market research. If the product sold well and there is a demand, then it might be time to invest in a larger shipment and ramp up your marketing efforts.
If you don’t want to order a larger shipment, then you can consider working with a trading company instead of a factory directly. We’ll discuss this later.
Should I Use a Manufacturer in the USA or a Chinese Manufacturer?
Where your manufacturer is based has many implications on the working relationship you have with them, when it comes to how to find manufacturers online. There are benefits and drawbacks to working with both U.S. and Chinese manufacturers, in particular costs, guarantees, communication barriers, and logistics.
How to Find Manufacturers in USA
Working with manufacturers in the USA brings many advantages:
- Higher quality and guarantee standards
- Easier communication
- Positive market perception of being made in the USA
- Less hassle to screen reliable manufacturers
- Shorter shipping times
- Intellectual property rights protection
- Safer payments and legal recourse for you as the customer
The drawbacks to working with US manufacturers lie in a limited product selection and much higher manufacturing costs.
In fact, the higher domestic manufacturing costs almost always make it worthwhile looking overseas. This is because if you manage to find a reliable overseas manufacturer, your margins will undoubtedly be better than working with a domestic manufacturer.
How to Find Manufacturers in China
Going overseas for your manufacturing needs will significantly lower your costs. You’ll also have a higher number of manufacturers to choose from, with a broader variety of products that can be made.
And while product limitation and cost are often the two reasons why U.S. drop shippers and FDA businesses decide to work with Chinese manufacturers, there are several potential drawbacks that you need to consider:
- Customers often perceive Chinese products as low-quality and inferior
- Significant language, cultural and time-zone barriers complicate communication
- Your intellectual property isn’t well protected
- Challenges to visit the Alibabamanufacturing site and verify the manufacturer
- Long shipment duration with customs clearance and import taxation
- Less payment security and possibility for legal recourse
While this list of negatives seems significant, you can circumnavigate many of them by hiring a local manufacturing manager to act as your go-between. This will solve many of the issues. If you source a reliable manufacturer with a good manufacturing manager, you will enjoy high-quality products for a fraction of the price you would pay domestically.
You’d have more than one manufacturer in an ideal world — one domestic and one overseas (one in American and one in China). If your primary shipment from your Chinese manufacturer is delayed or incorrect, you can utilize your domestic manufacturer to ensure you have stock and you don’t keep your customers waiting.
What Are the Different Types of Manufacturers?
When you start looking for your manufacturer, you’ll quickly realize that plenty of middlemen are standing between you and the factories.
It’s the factory you want to be dealing with because the more middlemen there are, the higher your overheads. But, it can be helpful to know the other players. You’ll commonly encounter:
- Trading companies
- Sourcing agents
Trading companies are essentially warehouse companies that have relationships with several manufacturing factories, and then add their margin to your order.
One significant benefit of working with a trading company is that they frequently handle — and fill — smaller orders. This can make trading companies an excellent choice for new or uncertain drop shippers who are finding their feet and don’t want to commit to a large shipment — just yet.
But dealing with trading companies does bring its own set of considerations:
- Many trading companies present themselves as the manufacturer. Unfortunately, this makes it difficult to know who is creating your product.
- It’s much easier for a trading company to disappear than it is for a factory.
Do your due diligence and research any trading company before money changes hands. You can benefit here — but you can also get burned by trusting an unreliable trading company.
Wholesalers are similar to trading companies; only, they generally stock a smaller range of products but often have warehouses in the U.S. This means you’ll pay a higher amount, but sourcing and shipping times can be much less.
That said, the margin wholesalers tack onto their products can be as much as 50-60% more than what the factories do — so, if you’ve got the time and resources, I strongly suggest looking to source directly from the manufacturer and avoiding wholesalers because you’ll want that extra margin.
Sourcing agents are people who have connections and relationships with factories — they know a guy who knows a guy.
Sourcing agents act like real estate agents and show you the products from one factory compared to another. They do this, of course, either for a commission on the order or a margin that they add on.
Sourcing agents can help overcome some of the common problems with sourcing overseas manufacturers, such as cultural, linguistic and time-zone barriers (I look at this in more detail in the next section). Still, to get the best out of your manufacturing experience, you need to bypass all these middlemen and go directly to the source: the factories.
Factories are your goal.
Working with a factory to manufacture your product gives you the best profit margin and the best potential for an ongoing, fruitful working relationship.
When you find a factory that looks like they fit your bill, you need to verify that they are legitimate.
As my friends over at Sourcify suggest, the best way to do this is to ask your representative from the factory to send you their manufacturer’s business license.
These look like this:
Requesting your factory to send you a photo or copy of their manufacturing license prior to committing can help you avoid complicated scenarios, like realizing you’re not working with a factory at all, rather a trading company or a wholesaler (source).
Once you’ve got their license, you need to “cross-reference the license with the provincial records listed in the AIC (Industrial and Commercial Administration Bureau) to ensure the company is registered in the province they say they are” (Sourcify).
How to Find Manufacturers Online?
Fortunately, there are comprehensive directories for both domestic and international manufacturers.
How to Find Manufacturers Online in the USA
If you’re looking to manufacture domestically, here are several online domestic directories for you to peruse and find a U.S. manufacturer that fits your needs:
With over 500,000 commercial and industrial suppliers, there’s a good chance you’ll find a manufacturer in the USA to make your product on Thomasnet.
Maker’s Row offers you resources to start the manufacturing process and a list of in-depth factory profiles that enable you to find the perfect partner to make your product.
With over 14,000 member companies in every industrial sector, the National Association of Manufacturers member list claims to be America’s most effective resource for manufacturers.
How to Find Manufacturers in China and Overseas
Alternatively, if you’re looking overseas, mainly China and South-East Asia, these directories contain some valuable resources and information:
Oberlo. Oberlo is kind of like an easy-to-use trading company (which we discussed earlier). For the right type of entrepreneur, they can make things pretty straightforward — but they do take a decent cut which will eat into your profit margins.
AliBaba. A well-known online marketplace, Alibaba has a plethora of listings and categories. It’s one of my favorite places to look for manufacturers online, but there are a few essential tips to using Alibaba to find a reliable, high-quality manufacturer.
- Check for the Gold Supplier logo on your chosen Manufacturer’s Alibaba profile. This comes from having a rapid response time, high number of transactions and a reliable on-time delivery rate.
- Look for a high number of transactions with the number of pieces you’re after. Make sure their transactions are recent and that ideally, there have been transactions from where you’re based, so you know delivery goes smoothly.
- Check for verified certifications and trademarks. While this isn’t a guarantee or quality, looking at the certificates a manufacturer has can give you an idea of how legit they are.
When all is said and done, if you’re completely green to sourcing your own manufacturers overseas (particularly in China, Vietnam, India or The Philippines, then I can’t recommend Sourcify highly enough.
Nathan Resnick, Sourcify’s CEO, is a next-level entrepreneur who has amalgamated his years of experience in working with manufacturers throughout the world into his company.
They can help you source reliable manufacturers, or they also offer in-depth training on how to become a successful product seller.
How Do I Reach Out and Start Negotiations With a Manufacturer?
After you’ve narrowed your choices down to several potential manufacturers, you can start looking for quotes.
At this point, it’s good to understand that manufacturers get hundreds of emails a week from buyers who aren’t really interested — so you might not receive a reply straight away. Follow up several times on your initial email if you’re met with silence from the beginning.
That said, you can use several best practices to maximize your chance of a reply and a productive conversation.
- Keep the first email short. Give the manufacturer the bare necessities of what you’re looking to produce, and ask them for a quote on a small delivery and a large delivery. This keeps things concise and also gives you an idea of their minimum orders and price per piece at scale.
- Request Whatsapp or Wechat. If your manufacturer is in China, set up a Wechat account and try to contact them through there. Wechat is often much simpler to communicate through.
- Once the conversation has started, ask more in-depth questions. You want to get clarity on these questions:
- Will the factory do custom orders? Can they make the exact product that you’re after? Remember, creating a product different to everything else on the market makes you stand out — so your manufacturer needs to accommodate this.
- What is their production and shipping time? How long will it take for them to make and deliver each shipment?
- How much does shipping cost? Shipping costs can make or break your profit margins, so knowing how much it will cost to send your shipment is essential to factor in.
- Do they offer exclusivity? Perhaps you need to equip the factory with a particular mold or tool — you don’t want other companies using your tool!
- What are their minimum order quantities (MOQs) and cost per unit? MOQs are highly negotiable, and the larger your order, the lower your per-unit cost.
- Do they charge a setup fee? Some charge a one-off fee to get production underway.
- What happens if products are defective? Get clarity on what happens if shipments are faulty or wrong.
- Request a sample order. If you are satisfied with the answers to all these questions, then request a sample order. Check each and every product in the sample to make sure it’s up to standard. Keep several for your records as a control sample (for future reference against ongoing shipments).
- Conduct your final negotiations. Once you reach this stage of the discussions, you’re nearly there. Don’t pay 100% upfront — that is leaving you massively exposed. Instead, settle on 50% before delivery and 50% once you’ve received the shipment.
A NOTE ON NEGOTIATING: If you drive the price down too much, you’ll get low-quality stuff. Aim to get a fair price that will make an ongoing relationship between yourself and the manufacturer beneficial for both parties.
- Place your first order. When your first order arrives, do a thorough QC. If you’re happy with the delivery, then discuss recurring shipments!
As you can see, there’s more to how to find a manufacturer than meets the eye. But, if you have a stand-out product, know how to find a manufacturer, and nail a reliable supply chain, then you’re sitting on a million-dollar business.
Hopefully, this article has given you the insight you need into why it is essential to work with a quality manufacturer, the different types of sources available to you, what to look for, and how to communicate with your manufacturer.
If you’re considering business options other than drop shipping, then my 100% free last-minute webinar on how we used a brand new “Silver Lining Method” to make $10/day, then systematically grow to $100/day, then $1,000/day and more is exactly what you’re looking for.