In 2015, an American customer who was just starting to establish their own watch brand contacted me, hoping to help him find a "more reliable" watch manufacturer in China to produce his OEM products. However, during the initial consultation process, the client requested that before we help him find a new supplier, could we first help him deal with his "historical legacy issues" so that he could have enough budgets to invest in the screening of new suppliers in China? And the so-called "historical legacy issue" was that he had spent almost a year producing samples with a manufacturer in Shenzhen that he selected at the time, which had a huge price advantage compared to other manufacturers. When he contacted me, it was already the fourth time he had produced samples, but it seemed that the quality of the samples he received was far from what he originally expected.

Not only that, the customer also complained that in the past year, the supplier had increased sampling fees, mold fees, and product unit prices three times. Therefore, the customer decided to terminate cooperation with that supplier and demanded that the supplier return all the sampling fees they had already paid. However, the supplier showed a very uncooperative attitude and refused to refund the nearly $40000 sampling fees that the customer had already paid.

The above was the reason why the customer wanted to find a "more reliable" supplier at that time. So what was the reason that caused the customer to spend nearly a year and spend such a large amount of sample production costs that could be used in market development in the future, but still couldn’t even receive a sample that basically meets his requirements? How did we solve this problem in the end? If it were you, how could you avoid similar risks?

Before announcing the answers to the questions, I would like to ask you two questions:

1. Do you really know what kind of product you want before inquiring with the supplier?

2. Do the suppliers really have a complete understanding of what you want before replying to your inquiry?

For the first question, many people may say that I have already spent a lot of time and money and participated in the design and development of the entire product. Of course, I am very clear about what kind of product I want, which I fully agree with. Because after studying a large number of similar failure cases that I have encountered in my 13-year career, similar to the one encountered by the client at the beginning of the article, almost all clients who have had similar experiences have a very positive answer to the first question. So why did all kinds of problems, including those mentioned in the previous article, still appear later? I think that there are mainly the following factors:

1. Many customers do not develop accurate product specification sheets (especially for OEM products) before formally inquiring with suppliers, or although they already have product  specification requirements, they do not standardize the description of these specifications for the product category.

2. Due to the salespersons' lack of professionalism, they blindly quote you a lower product unit price and sample cost before carefully checking your specifications and requirements and communicating with their production department to determine whether their current production capacity can truly meet your requirements. Of course, the  purpose is to attract you to cooperate as soon as possible, but the results often backfire.

3. And often, at this time, there are also some customers who have not repeatedly confirmed with the supplier whether they can truly meet their product quality requirements. They are tempted by low prices and mistakenly prioritize prices, ignoring the importance of assessing the supplier's actual production capacity, and then quickly establish a cooperative relationship with the supplier, paying sample production fees and even a deposit for mass production. The result is often that they pay much more additional costs and bear risks later that they did not expect.

4. And it was only after you believed that the supplier was already very aware of your needs and paid the sample production fee or even the deposit for mass production that the sales personnel finally handed over your product specifications and requirements to the production department. However, due to the lack of effective communication and verification in the early stages, it is often the case that the production department suddenly finds that they are unable to meet the requirements of your specifications, quality levels, and product safety standards that you have confirmed with their sales personnel multiple times in the early stages.

Even if production is possible, the required raw material costs to meet your requirements, the additional costs required for processing technology, or the need for a new mold will be much higher than the price quoted by the original salesperson to you.

If that's the case, unfortunately, you may face similar problems as my American friend I mentioned earlier: the supplier may constantly change product unit prices and sample production quotes, and even after multiple sample production attempts, the supplier may still be unable to produce samples that meet your requirements. This will put you at risk of wasting a lot of time and energy, as well as money and market opportunities.

So, how can we effectively avoid the issues mentioned above and the risk of losses caused to you? After analyzing a large number of similar real customer cases, I have summarized the following suggestions:

Firstly, before you issue a formal inquiry to potential suppliers, you must have a very clear definition of your product specification requirements, whether you are purchasing and producing custom-designed products (OEM) or private-label products (ODM) in China. That is to say, you need to create your own product specification sheet file, which can be a simple Excel spreadsheet with very clear and accurate definitions, including details such as product design, functionality, and quality. For example, if your product is a watch, your product specification sheet should include the following information:

Secondly, your specifications must be in line with the professional description of the product category, especially when you first enter an industry and design a new product. My advice is:

1. Search online for websites that sell products similar to yours and refer to how they describe product specifications. Alternatively, enter your product name in the search bar of professional    manufacturer B2B platforms (such as alibaba.com or globalsources.com), such as "wrist watch", and a list of manufacturers or traders related to such products will be displayed. Then, go to their product categories to see how they describe the specifications of these products, which can serve as a reference for your product specification description.

2. If possible, you can create a 3D design drawing file for the product with precise specifications and parameters for each part marked on it. If you are not sure how to create your own design, There are thousands of design freelancers online, such as on Upwork.com.

3. At the same time, your specifications should be as detailed and accurate as possible, including the product specifications and materials, packaging specifications and materials, as well as their Pantone color numbers, etc. This will save you a lot of time and energy for repetitive work in the future and also reduce the risk of suppliers providing inaccurate quotes and incorrect products. If the product specifications are not accurate during the early process, it may even lead to the risk of catastrophic errors in future mass production. (I will also discuss this in future articles on procurement contracts and production quality control.)

4. Additionally, clarify your product safety standard or product regulation compliance requirements. It is worth noting that the product regulation compliance requirements in your market also have a significant impact on the quotations provided by suppliers. Due to the different requirements of product regulation compliance, there are also significant differences in the quality levels of raw materials required for producing products.

Taking my American client mentioned in this article as an example, the reason why that supplier was able to quote a much lower price than others (that supplier quoted 25 USD/set, while others quoted 48 USD or more), but including the suppliers we later helped him find that could meet the requirements of the Product Regulation Compliance in the market where his product is located, the price was not less than 40 USD/set. Why was there such a huge price difference?

After our investigation, the main reason for such a huge cost difference lied in the significant cost difference between the use of recycled PE raw materials and new environmentally friendly PE raw materials. There were also other reasons, including the fixed cost difference, testing costs, and Factors such as labor cost differences caused by differences in the quality of production personnel can sometimes result in significant differences in production costs due to different requirements of your Product Regulation Compliance Requirement.

It is very important to meet the product safety standards and regulations of the countries and markets where your products are sold. Otherwise, you may face significant risks, such as fines and even administrative penalties, due to illegal market behavior. Therefore, you should always consider it one of the necessary conditions for conducting supplier sourcing and supplier screening. (Regarding the risks related to regulation compliance, I will provide you with a detailed explanation in my future special articles.)

5. Also, clarify the specific requirements for your product packaging and outer packaging (mainly for international transportation considerations). When determining the packaging of your product, there are a few important factors to consider.

Firstly, if you are producing OEM products, it usually involves the design of product packaging. You may need to make detailed requirements for specific materials and specifications for the packaging. If your product packaging does not have very special requirements, you can ask the supplier to provide a separate quotation for your product packaging. Many manufacturers usually have their own packaging suppliers to cooperate with, which will save you a lot of time and money.

But if your product packaging has very special requirements that are different from the packaging of most similar products in your industry (many brands have their own unique packaging that represents their own brand characteristics, which is very different from other similar products), then I suggest that you inquire with the product manufacturer and also seek professional packaging manufacturers to purchase separately, 

And establish a completely independent packaging supply chain with the product, as you need to be prepared that these product manufacturers will not have the ability to meet your requirements for product packaging, as they are not professional packaging manufacturers after all.

At the same time, you need to consider the safety of your product in international transportation in the future, so the outer packaging of the product is also very important. If you are not very clear about the specific requirements for the outer packaging of the product during international transportation, you can also consult the supplier during the inquiry process and request a separate quotation for the outer packaging.

Generally, professional suppliers with rich export experience will provide you with relevant outer packaging suggestions to ensure the safety of your goods during international transportation. In addition, ODM and factory products generally have standard outer packaging. However, you also need to confirm with the supplier the details of their standard outer packaging and then consider whether further strengthening of packaging safety is necessary, such as whether palletizing is necessary to ensure the safety of your product in future international transportation.

What I want to emphasize here is that the packaging requirements for your product are mainly considered from the perspective of future international transportation safety. The packaging requirements required to ensure the safety of your product are different for different product categories during international transportation, as well as during air or sea transportation (I will provide more details in the article on transportation safety). This will also result in different costs for suppliers, and the unit price of products varies according to different packaging requirements.

Also, never trust the supplier to have a clear understanding of your needs and provide accurate prices during your first inquiry. Even if you think you have already sent them very accurate specifications and 3D design drawings, as I mentioned earlier, in order to save time and quickly capture customers, a large number of supplier sales personnel will not send your requirements and design drawings to their production department after receiving your inquiry. 

On the contrary, they will first provide you with a rough quotation based on your specifications, images, and their own experience or similar products they have made. It is important to note that, based on my experience, many key details in your product specifications are often overlooked in the initial quotation, which may become one of the key triggers for risks such as price changes that occur later on and even lead to problems in mass production in the future.

So next, after receiving the quotation from the supplier, you must not be tempted by the prices provided by some suppliers that are far lower than those of other suppliers, because based on what we mentioned earlier, it may not necessarily be an accurate final quotation. You need to contact them and remind them to carefully check your Product Specification Sheet file and confirm the accuracy of the quotation with them again. Although this cannot completely avoid risks such as price changes in the later stage, it can at least attract the attention of suppliers and try to avoid those absurd quotation errors as much as possible.

After you have repeatedly confirmed that the supplier's quotation is accurate, you can combine the online supply screening work you have done, including supplier qualification verification and risk assessment (please refer to my upcoming article on this topic), to preliminary determine the alternative suppliers. And I suggest that you choose 1–3 or more alternative suppliers to enter the sample production process.

Choosing one or more manufacturers to produce your samples at the same time depends on the complexity of your product's production process and whether the manufacturing cost is within your tolerance. You cannot guarantee that the manufacturer you choose can produce the perfect sample you need the first time, which is extremely unlikely.

Also, if you only choose one manufacturer to produce your samples, you may also face the risk that this manufacturer, after several attempts, still cannot meet your requirements. At that time, if you go to another manufacturer to produce samples, you will lose too much time and market opportunities. In addition, having multiple manufacturers produce your samples at the same time also has the advantage of allowing you to choose the best from multiple manufacturers and ultimately find the most satisfactory one to cooperate with.

In addition, sample production is also one of the key processes of supplier screening that is very important to you, and there are also many precautions that you need to pay attention to. I will explain in a special article on sample production and provide you with detailed information on potential risks you may face in the sample manufacturing process, as well as effective methods to mitigate those risks.

Now, let's return to the case of my American client at the beginning of the article. So what exactly are the reasons that he spent nearly a year and such a large amount of funds that could be used for future marketing but didn't even receive a satisfactory sample in the end? How did we solve this problem in the end?

Perhaps you have guessed some of the reasons by now! Yes, after carefully reviewing all the emails and documents previously communicated with the manufacturer forwarded by the customer, I also communicated with the manufacturer's salesperson and her supervisor and found that the real reason for the customer's loss was precisely because he was attracted by the attractive quotes they provided, which were far lower than those of other manufacturers. The client did not repeatedly confirm with them whether his requirements could be met but quickly made a decision.

And before the customer paid for the first sample production cost, the salesperson did not send the customer's important requirements, such as product specifications and product design documents, to their product production department for confirmation, which resulted in the following key requirements of the customer being ignored from the beginning, which led to the manufacturer repeatedly raising product prices and sample production costs and ultimately failing; all of those brought a huge loss of time and money to this client. Now let me tell you what exactly happened at that time:

Firstly, due to the unique Swiss movement model that the customer originally needed, it was generally only used on some world-class, high-end brands of watches. The market supply was relatively small, and therefore the price was relatively high. When quoting, the manufacturer's sales personnel confused that movement model with another similar movement model, so the quoted unit price was much lower than that of other manufacturers.

Secondly, although the shape of the "Crown" component requested by the customer was similar to many other watches on the market, its size was different, so it needed to be molded and manufactured. The cost of a new mold was close to 20,000 US dollars, and the customer wanted a male and a female model with different sizes. Therefore, the customer needed to pay nearly 40,000 US dollars for the mold alone.

However, due to the urgent need for sales personnel to close the deal at that time, he ignored all the key information mentioned above and just took a rough look at the reference drawings of the "crown" components provided by the customer and quoted the product unit price and sample production fee based on his own experience.

Another important reason why their prices were much lower than those of other manufacturers who also quoted at the same time was that the customer had no experience at the time and ignored the requirements of Product Regulation Compliance, which was a significant risk for the customer.

At the same time, this manufacturer was committed to the processing and production of mid- to low-end watches at that time, without any experience in producing high-end watches for customers in the European and American markets, and had no awareness or experience of the Product Regulation Compliance Requirements in those markets, which meant that according to their production level at that time, they just couldn't meet both the quality and Regulation Compliance requirements of high-end watches required by customers in the US market at all, which had led to customers couldn’t get samples that meet their own requirements even after paying nearly $40000 in mold fees for a year.

Fortunately, the customer retained all communication records with the manufacturer, and after a period of extremely difficult communication with their management personnel and even some legal means, the customer finally recovered the nearly $40000 sample production fee. Also, after we helped him conduct strict supplier sourcing and screening processes, he selected one ideal manufacturer in the end.

At the same time, according to my suggestion, the customer made minor adjustments to the size of the "crown" component in his watch design, which not only optimized the appearance of the product but also saved a large amount of mold costs for the customer's future production. What's even more gratifying is that the watches of that client later became highly popular among consumers in the U.S. market due to their outstanding performance in design and quality.

I would like to remind everyone once again that an accurate specification sheet is really important for your supplier sourcing and screening. Although it may take a lot of time and effort in the early stages of preparation, please believe me, it is really worth it because a clear, accurate, and comprehensive product specification sheet before the inquiry can save you a lot of time and energy in the future. It will also avoid many risks that can be completely avoided in advance.

Of course, the preliminary preparation work is certainly a very important start, and supplier screening is a very professional and systematic work. The huge supply market in China has increased the complexity of this work. However, the preparation of the specification sheet in the early stages is the basic preparation work for supplier selection and audit. But as I mentioned earlier, no matter how attractive your product design is and how high-end its quality is, if your final product cannot pass the regulatory compliance requirements (such as CE, ROHS, REACH, etc.) of your country and market, your brand and business will suffer catastrophic consequences and even face huge economic compensation or even administrative penalties.

Also, your product regulation compliance requirement should run through the entire process, from supplier screening, sample production, mass production, and after-service. So first of all, how can we identify and avoid the risk of not meeting the regulatory compliance requirements that may arise in the future during the supplier screening process? I will share with you in the following article, based on real-life cases.

So far, I have introduced the key risk points that may exist in the product specifications during the inquiry and supply screening processes. Perhaps they are not very comprehensive, so if you have had similar experiences like that American customer or have more and better ideas and suggestions, please leave a comment below to share with us and help more people from around the world establish safer and more efficient supply chains in China. You can also send us an email with your requirements.

(This article is original, and all copyright belongs to the author.)

Author: Wesley Liu