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The famous last words in the careers of many once-successful production managers begin with the phrase, “I know a guy in China …”. We're all familiar with the potential rewards and pitfalls in store for manufacturers tempted by the promise of lower production costs “offshore”.
Offshoring. Not exactly the most descriptive of words. If used in casual conversation several years ago, it would conjure images of an oil platform or something that a marine biologist would be involved in. Times have changed however, and offshoring is now a word that can strike fear deep into the heart of many otherwise talented managers. It is a process that all too often leads to those famous last words.
Outsourcing manufacturing operations or sourcing products directly from manufacturers in China is not an adventure to be embarked on by the faint-hearted or inexperienced - but there are steps you can take to help ensure that those famous last words do not become your own.
This guide while by no means exhaustive, should provide a quick overview of how to avoid some of the most common pitfalls experienced when sourcing product from overseas, or offshoring your manufacturing.
1. Is offshoring suitable for your circumstances?
While the business decision regarding whether or not to send your manufacturing off-shore is beyond the scope of this article, it would be remiss to leave it out entirely. While reduced cost of production is usually the main driver in the decision to send manufacturing overseas, there are many other issues that need to be taken into consideration, such as:

  • Available technology and manufacturing processes
  • Intellectual property concerns
  • Time to market considerations
  • Flexibility in response to local demand
  • Control over manufacturing processes
2. Choosing the right supplier
There are probably many manufacturers with the ability to competently manufacture some or all of your products. The problem is that there are also many other manufacturers who will say whatever you need to hear, in order for them to get the contract. For those inexperienced in sourcing from China , this can be a treacherous minefield. To jump into this minefield unprepared is to invite disaster. It is not enough to go to trade fairs, meet people, exchange business cards and pleasantries, compare prices and place an order. Hence those famous last words.
The “trade fairs, pleasantries and prices” stage is of course an important first step, but is only the first of many.
Once you have a short-list of suppliers and obtained some samples of their products, it's time to really put them to the test. The ideal situation is to have engineers on the ground in China , conducting thorough evaluations of your short-listed factories. Unless you have a full-time, Chinese-speaking engineering capability in China , it is best to leave this task to local experts. These experts of which I speak are commonly known as 3 rd Party QA Inspectors.
These 3 rd Party QA Inspection companies employ engineers whose primary role is to visit factories on your behalf, conducting capability evaluations and company background checks. You will also be using them to conduct QA inspections of product prior to shipping (more on this later).
Ideally you should have all short-listed factories thoroughly inspected. You will now have, at your disposal, all of the information you need to make your final decision.
3. Communicating effectively with your supplier
While this must seem a no-brainer, many companies get complacent when it comes to communication. We are not talking about language issues here – if you have chosen the right supplier, language should not be a major problem (this was one of your criteria for supplier selection wasn't it?).
If you do not have one already, you should set up a document control system to ensure unambiguous communication of (at minimum):
  • Specification of products
  • Design modifications (including a revision management procedure)
  • Testing methods and requirements
  • QA requirements
  • Corrective actions
If you set up procedures and spell out your expectations from the very beginning, then you should be able to virtually eliminate ambiguity, helping ensure that no unpleasant surprises arrive at your warehouse door.
4. Samples and more samples
One of the first steps in assessing the capabilities of a supplier is of course to obtain samples of their existing product. If your intention is simply to purchase from the supplier without having any input in the design, then these samples should be enough. You should keep a reference sample of each product for quality control purposes, to be referred to whenever a new shipment arrives. You should also have a sample available for your 3 rd Party QA Inspectors.
If the products have any element of your own design (even if only the packaging is your design), it is important that you initiate a sample approval process. Despite the effort you put into specifying your product, it is rare in the design of new products, for the first sample to be perfect. It may take a two or three (or more) attempts for the manufacturer to produce a sample that is exactly to your liking. Ensure that your supplier sends you two samples for each iteration of the sample approval process. Once you have received samples that you are satisfied with, label them, photograph them and send one back to the manufacturer, stating that this is to be their reference sample, sometimes known as the Golden Sample, for obvious reasons. The remaining sample is your own reference sample.
5. A pilot production run
Before the first production run of any product, you should order a small production run, commonly known as a pilot run. It is quite common that issues related to the manufacturability of a product become clear only after the production line is set up and production commences. Depending on the nature of the problem, this can be quite disruptive to the production process, resulting in delays and quality issues. It also gives you (and your 3 rd Party QA Inspectors) a chance to evaluate the results of a real production run. If you are pleased with the results of the pilot run, then you can be quite confident of the consistency of the quality of your product from day one. Of course if the pilot run is a disaster, you've saved yourself a lot of money and grey hairs. In this case, a 2nd pilot run would be prudent. Products manufactured during the pilot run should be 100% checked by your QA Inspectors, rather than sample tested.
If you negotiate the requirement of a pilot run into your contract with the manufacturer from the outset, then it shouldn't add too much to the total production costs of your first run. Although it will cause a little inconvenience for your manufacturer, most manufacturers do not have a problem with this requirement.
6. The first production run
Now it's time to take a deep breath, and authorise your manufacturer to push that little green button labelled ‘Start'. By now, hopefully, you have:
  • Chosen the right supplier;
  • Specified unambiguously your requirements;
  • Verified your requirements through the sample approval process; and
  • Proven during the pilot run that production should flow like clockwork.
It is a good idea to have your 3 rd Party QA Inspector present for at least a day during the first production run to assess and monitor the factory's manufacturing and quality control processes in action. The inspectors are experienced production engineers, and may be able to offer advice to the manufacturer regarding the manufacturing of your product, or convey to you any concerns they may have.
Prior to shipping, a full QA inspection must be performed by your inspectors. Make sure that the factory and your inspectors are in communication with each other (and with you!) regarding production, inspection and shipping dates.
Most importantly, ensure that your supplier is aware that no product is to leave the factory until a QA inspection has been performed by your inspectors. Getting this point across to your manufacturer is vital – it's too late if you start arranging inspections only to find that your containers of finished goods are on the truck and on their way to the shipping port.
7. Subsequent production runs
Hopefully by now your products have been tested in the marketplace and all is well. If so, all you should need to do is ensure that arranging QA inspections remains an integral part of your ordering process.
Remember: nothing leaves the factory unless you've authorised it, and nothing is authorised until you've read a favourable QA report from your inspectors. Make sure your supplier knows this too, or else they may conveniently forget.
8. And finally, don't lose control!
Managing the on-going quality of your products is, and will always be, your responsibility. The buck stops with you – not with the factory, and not your 3 rd Party QA Inspectors. Ensure that you maintain your own in-house Incoming Quality Control (IQC) program.
Anyone who has outsourced manufacturing, particularly to offshore environments will tell you that usually, problems will only start occurring once you're comfortable. Comfort can breed complacency, and it's important that you maintain the rule that nothing leaves the factory until it has been checked by your inspectors. It's a small price to pay when you consider what is really at stake.