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Finding the right manufacturers or suppliers for your business is a key decision. It could make or break your company before you have even had the chance to launch. These are your business partners, and once you’re at the stage to find them, you have to make sure they’re the right people for the job. At this point, you have a business idea, a product in mind, and this search shouldn’t derail your dream.
What Is A Manufacturer?
A manufacturer is a company that produces products from raw materials. The manufacturer sells this product to retailers, distributors, wholesalers, and even consumers. They typically stick to one range of products. So, businesses often work with several manufacturers to round out their inventory.
Manufacturers often place minimum order quantities on products, which means bulk purchasing. Bulk purchasing requires a financial investment and space to store the stock. However, it will maximise your profit, as you can sell lower based on unit cost. Additionally, if you find the right manufacturer, they can produce your unique product.
What Is The Difference Between A Manufacturer And A Supplier?
Most people consider manufacturers and suppliers to be synonymous. However, there are some slight differences. A manufacturer produces and manufactures products. A supplier supplies those products. So, manufacturers can also be suppliers, but suppliers are not generally manufacturers. Suppliers are responsible for supply-chain management and are often a link between the end-seller or end-user and the manufacturer. A manufacturer is a producer or creator that deals with the raw materials required to produce goods.
The Importance Of Choosing The Right Manufacturer For Your Business
Partnering with a poor manufacturer can impact your sales revenue, reduce margins, impair customer relations, increase costs, and disrupt your business operation. A strong manufacturer will produce high-quality products and match them with consistent quality customer service. They will offer you consistency and reliability with well-priced products.
Customers rely on businesses to produce quality goods at affordable prices. They expect businesses to be reliable and consistent. If your manufacturer doesn’t tick these boxes, neither will your business. The wrong manufacturer could end your business before you have had the opportunity to flourish.
Types of Suppliers
Before you can determine how to find suppliers or how to find a manufacturer, you first need to know the different types of suppliers available.
In the dropshipping model, the seller transfers orders and shipping information directly to the supplier. Rather than hold physical stock, the seller facilitates the sales and the supplier ships the product(s) direct to the customer.
A seller will list their product(s) on an eCommerce platform, and when they confirm a sale, they notify the supplier. The supplier receives payment from you at wholesale price and likely a small shipping fee. It is then up to the supplier to package the order, and ship the product, according to the instructions you have provided. As the seller, you have no contact with the product or package; you are simply the middleman. You do bear responsibility for customer service, and all communication is through you.
This is a convenient option for someone interested in establishing an online business but doesn’t have the space to store products or the finances to buy stock in bulk. There is less risk involved when you opt for dropshipping. However, this option produces lower profit margins as you pay a higher wholesale cost than other buyers.
A wholesaler purchases the product(s) directly from manufacturers and resells to businesses. They generally charge a slightly higher price than they purchased the product for. But, they make their money by working in bulk. As they have buying power, they can negotiate the lowest possible price. In turn, the more product you purchase from the wholesaler, the lower the cost per item will be. You have to pay upfront for the products you purchase, and you will need plenty of storage space for your stock as it is shipped directly to your preferred address.
The wholesale model is best suited to businesses that have money to invest in bulk purchasing. Additionally, you need space to store the products you purchase. It does tend to produce higher profit margins.
Manufacturers produce products from raw materials and sell them on. They can make a specific product or a range at the request of a wholesaler or an independent retailer like you. You can source your products directly from the manufacturer and for a low price. However, it does require bulk purchasing, and there are usually minimum order quantities.
Using a manufacturer is something sellers with considerable experience opt for. As it requires upfront investment and storage space, it’s a serious undertaking that many people aren’t prepared for early in their business. The more buying power you have, the less you will pay per item and the more profit you can earn.
- Trading Companies
A trading company is a specialist covering import and export. Trading companies purchase products in one country and sell them in another. They typically work in high production volumes, such as pharmaceuticals, raw materials, and chemicals. They identify suppliers who can produce generic products in large volumes at competitive prices. The trading company then negotiates both the terms of a sale and the delivery of the products. They finance the purchase, manage the logistics, customs, and distribution.
Typically, trading companies specialise in areas of Latin America, Africa, and Asia, where there are more emerging countries. They identify competitive suppliers, negotiate the purchase price, and bring their buying power to the table. They can act as a sales agent for domestic exporters. They can serve as a buying agent for importers. Alternatively, trading companies can act as exclusive distributors or as intermediaries. The Global Trade Directory will provide you with a list of almost 4,000 international trade companies.
Importers are suppliers who export and import products manufactured by overseas companies. They purchase materials from one country and sell them to another. When you source goods or materials from an importer, high-volume orders is most beneficial. High-volume orders offset the costs of shipping and transportation. Many wholesalers and distributors source their goods and materials from importers.
- Private Label
Private labelling is when one company manufactures and supplies a product, and another company sells it under its brand. For example, cosmetics and clothing companies like Nike often use this model. A company finds a manufacturer to produce a specific product, and as it’s a custom item, you pay additional fees. There will be a minimum order quantity, and all goods will be shipped to you. If you have a unique idea and want to establish a brand, a private label may be a good option for you. However, it does take a significant financial investment.
How To Contact Suppliers
Once you know how to find a manufacturer, you can make contact. Ensure your communication is confident, clear, and concise. The best course of action is to call a supplier on the phone. It adds weight to your legitimacy that you are a voice over the phone rather than simply words in an email. This might be a time-consuming process, but you should contact three to five separate suppliers to ensure you get the best deal. If you do prefer email, be sure to compose a detailed enquiry email.
It’s important to remember that this can be a mutually beneficial partnership so suppliers want to know you are trustworthy, reliable, and professional. There are several things you should project in your communication with potential suppliers.
First, it’s important to do your research so, when you reach out to a supplier they know you mean business. You need to know what type of services they offer, and they need to know you are business ready and committed to following through.
Be prepared and have clear questions to ask. Don’t ask vague questions, get straight to the point. Have a list ready to work through on each phone call. You can follow up by email if you have additional questions.
Suppliers want to build long-term partnerships because it provides them with predictable income. You can assure them that you are interested in the same by discussing your business plans and even providing them with links to your eCommerce store.
- Ask about their background and for references.
- Ask about the specific products you want, including warranty and availability.
- Discuss the shipping and payment options, from cost, time and tracking numbers to terms and methods of payment.
- Ask about the services they provide.
- Discuss the details surrounding placing an order, including prices, discounts, and minimum order quantities.
- Ask about their support services and how they manage returns and refunds.
- Ask about their turnaround time; how long do they need to process an order and ship it?
Requesting a quote from a supplier differs from asking a local contractor for a quote. It isn’t just the price of a product to concern yourself with, you always need to know minimum order quantities, hidden fees, payment terms and conditions, as well as potential discounts for bulk purchases. The price quote will generally be per item. However, if you opt for dropshipping, it will include the product price and the fee for shipping and packaging. Be specific about the costs you are asking for to ensure you receive an accurate response.
Supplier Scam Warning Signs
The majority of suppliers are legitimate companies, but there will always be unsavoury characters looking to take advantage of unsuspecting people. Sadly, eCommerce scams are common, but there are signs to look out for.
- Inadequate Website Information
If there is no phone number or business address listed on the company website, this is an indication the company may not be legitimate. While you can’t immediately rule someone out based on the age of their website, a brand new website could be a red flag. Follow through with other checks to determine whether they are a legitimate supplier or not. You can use the domain age checker tool to determine the age of a website.
- Payment Options
If they do not accept checks or credit cards, this is cause for concern. If they only work by wire transfer, it’s even more suspicious. While there are legitimate suppliers who work solely via wire transfer these are uncommon.
- Listed Business
If a supplier is based in Australia, you can use the Australian Competition and Consumer Commission to find out whether they are registered. If it’s a US-based company, it should be listed on the Better Business Bureau’s website.
It’s just as important that you know what isn’t a warning sign or a sign of a scam.
- Monthly Fees
Some legitimate suppliers charge a monthly administration fee. Though not a common route, it doesn’t immediately indicate that the supplier in question is a scammer. However, if this is one of many warning signs, it’s better to be safe than sorry.
- Poor Website Design
Not everyone has the skills to produce a stunning website, and if a supplier’s site is poorly designed, it doesn’t necessarily mean they’re a scammer. Suppliers might not have a marketing team or a professional web designer.
You know the warning signs of a scammer, but do you know the key signs to suggest a supplier is legitimate?
- Internet Search
Do a quick internet search with the name of the supplier and add scam or ripoff with the search term. People often take to the internet to talk about being scammed, and if your supplier comes up in these comments, you will know whether they are or aren’t legitimate.
- Supplier Contact
One of the surest ways to find out whether a company is legitimate or not is to reach out to them directly. You should be able to get through during their business hours.
- Address Verification
Use street view to get a closer look at the address listed on their website. If it’s a vacant lot or someone else’s name or logo is on the building, you can ask them about it directly. There could be a legitimate explanation, but you should always ask.
- Supplier Directory
If you use a trusted directory, you can rest assured you are working with a vetted and verified supplier. These trusted supplier directories vet and verify global suppliers to provide you with legitimate businesses.
It’s a daunting prospect, but finding the right manufacturer or supplier will help you build your business smoothly and help you grow.