If you're seeking to lower expenses and enhance production efficiency in your business, outsourcing production through contract manufacturing might be the answer you're searching for.
In this article, we're going to break down the first four steps that will help you find the perfect contract manufacturing partner. To complete your journey, we recommend referring to our article titled "How to Choose a Contract Manufacturer" where we cover the remaining steps to narrow down your shortlist of candidates you’ve identified through the search so far to your final candidates (better to have more than one, but we are getting ahead of ourselves).
Fig. 1: Steps to Finding a Contract Manufacturer
Steps to Finding a Contract Manufacturer
Finding the right contract manufacturer (CM) is a crucial decision that can make or break your project's success. It's important to define your project needs carefully and get organized before beginning your search to ensure the work that follows is not wasted.
To make sure you choose the best-fit CM for your needs, it's essential to follow a well-defined process step-by-step in a cautious manner.
- Define your project needs
- Gather information on potential CMs
- Sort potential candidates
- Make initial inquiries and document the process
- Evaluate potential CMs qualitatively and make a shortlist
- Send out Requests for Quotations (RFQs)
- Compare the shortlisted entities
- Negotiate the quotations received
- Make a factory visit /audit to evaluate the suppliers
- Making the final decision
1. Define Project Needs
To kick off your quest for a contract manufacturer, it's crucial to establish precisely what you're looking for in a CM. Defining your project requirements is the first step because it will guide the entire direction of your search. It’s worthwhile to spend a significant fraction of the time spent on your actual search process defining what you think you need (this might change as you speak with suppliers).
By brainstorming a list of all the capabilities and aspects you believe your project requires, you'll be better equipped to identify suitable contract manufacturers and drill down on whether they fit that profile you’ve created. To do this successfully, you'll need to prioritize and drill down on the core needs of your project and identify areas where you can compromise – and this is crucial: you will almost certainly need to compromise on some issues. The best thing is to clearly think through what is a “must have,” and what are just “nice to haves.”
Luckily, you don't need to start from scratch. Here's a handy checklist to get you started on defining your manufacturing needs. Feel free to tailor it to your company's specific needs.
Product Type & Sales Volume
- Is your product electronic or mechanical, or a mixture of both?
- For consumer electronics or complex high-tech projects, most companies will select an EMS (Electronics manufacturing services) supplier; they are companies built around their PCBA design and manufacturing services – most other components will be outsourced unless they have large scale
- For mechanical or electromechanical, it may make sense to go with a supplier who specializes in that field as they will have the mechanicals manufacturing in-house and specialize in those aspects
- Is your product high-volume, low-mix or high-mix, low-volume
- For consumer electronics or high volume products, selecting an ODM/OEM or a CM like Flex or Plexus is a valid option (bigger scale, more capabilities with high volumes can lead to low prices)
- For low to medium volumes, working with a large CM can create many issues (high cost, difficulty in receiving engineering and sales support, etc.)
Design and Engineering Needs:
- Is your product fully developed and debugged or do you need design, prototyping, or DFMA support?
- Many OEMs or ODMs will not offer robust support here and are looking for a finished design they can ramp directly
- You need to understand if this CM can offer help here with the process
- Do you need 2D or 3D CAD drawing assistance?
- If you have a fully complete drawing set, it’s relatively easy to migrate to a CM
- If your drawings are rough or incomplete, then it takes much more technical competence to work on the project
- Have you completed your BOM and done vendor selection for parts?
- If your BOM is incomplete, you may need a more capable supplier to help define the right suppliers, components and custom vs off the shelf parts for your needs
- Do you need assistance with packaging design?
- Do you have a clear product requirements document or defined functionality?
- Do you have any special process or assembly requirements, such as cleanroom manufacturing or anti-static measures?
- Are there any important processes or components in your product that your supplier should have capabilities or experience in?
Quality Control/Quality Assurance:
- Will you need help with quality control/quality assurance?
- Do you have specific part acceptance criteria?
- Are there any special quality equipment or processes that are crucial to your product?
- Do you need help with freight forwarding or third-party logistics (3PL) services?
- Do you need your CM to hold / stage inventory?
- Do you need pick and pack or repacking?
- Does your CM need to adhere to specific regulations or have special industry certifications?
- For medical and automotive companies, this is particularly important
- For certain product categories (aeronautics, defense), there may also be certain export / import restrictions to be considered
- Do you need your product designed and tested for compliance with specific standards?
- Does the CM need to perform any testing, and what type of metrology or measuring capabilities does your project need?
- Do you want the CM to handle all suppliers or have more insight/involvement into that process?
- Do you need to consign materials?
- What payment terms are you looking for?
2. Searching for Contract Manufacturers
As the saying goes, preparation is key. Before you start reaching out to potential suppliers, set up a systematic format for gathering and recording information.
Create a spreadsheet to help you keep track of all your leads, contact details, and notes from each interaction. With many conversations and interactions to keep up with, this step is crucial to avoid confusion and to help you evaluate and shortlist the most suitable suppliers later.
Make columns for each specific requirement you want to compare, such as location, market size/tier, asset mix, and so on. You can then use a weighted value to evaluate how well each contract manufacturer meets your requirements and score them accordingly.
When looking for a contract manufacturer, it's best to use multiple channels to cast a wide net and increase your chances of finding a good fit. Here are a few avenues you can explore:
Tap into your network of Contacts
- Personal references from industry contacts or colleagues can offer incredibly helpful ways to streamline your search.
- Utilize your email contacts and professional networks like LinkedIn to find potential suppliers.
- If you belong to trade chambers or industry organizations, these can also be great resources to consider.
Directories and databases for import/export data to see where other companies in your industry are manufacturing their products. While some of these services have paid features, finding the right supplier will be worth the upfront cost.
- Check out supplier websites to get an initial feel for their capabilities and scale. You can often find detailed information about their in-house production processes and equipment lists.
- Look for online reviews associated with potential suppliers. Seek out those that have received positive feedback on reputable websites.
Seek out online directories that list suppliers in various industries. Many offer options to narrow down the supplier list based on certifications, company size, location, etc.
- IQS Directory's Manufacturer Directory is a great source for contract manufacturing companies.
- Better Business Bureau lists organizations in the US, Canada, and Mexico and the association with BBB should offer some comfort on their credibility.
- Europages is a European B2B marketplace.
- Kompass is a worldwide B2B portal with companies from more than 70 countries.
- MFG.com is a custom manufacturing marketplace. It makes it easy for buyers of custom parts to find manufacturers easily. Potential suppliers can efficiently respond to your active RFQs.
- ThomasNet has served North American companies as an industrial sourcing platform and a marketing powerhouse for over 120 years serving industrial buyers and sellers.
- Yellow Pages for North American companies. With Q&A’s, city pages, a rating system, reviews, and advertisements, you will be able to find suppliers near you with ease and confidence. Refer to their page on contract manufacturing suppliers.
- Yell is a business directory for UK companies and enables you to search for suppliers by post code by town or postcode.
- RosFirm business portal is a meeting place for buyers and sellers of Russian and Ukrainian products and services.
- Solostocks is an online trading portal for providers of products and services from Latin America—Brazil, Mexico, Argentina, Columbia, Chile—and Spain, France, Germany, Portugal, Italy, Poland, and Morocco.
- Made In China - A source for Chinese suppliers offering supplier discovery, product directory, and other services. Audited Suppliers feature targets pre-screened suppliers.
- Global Sources - A Hong Kong-based B2B multichannel media company providing customized sourcing solutions with a comprehensive list of Verified Wholesale Manufacturers and buyer endorsements.
- Alibaba, as the largest global manufacturing marketplace, is open to everyone.
Reach out to sourcing, manufacturing consultancy and engineering auditing companies
When you're looking for the right contract manufacturer or supplier, it can be a daunting task to sift through all the information and options available to you. That's where sourcing, manufacturing consultancy, and engineering auditing companies come in.
Finding the right partner to bring your product to life can be a complex task, but you don't have to do it alone. They can help you identify potential leads, conduct due diligence, and even connect you with a contract manufacturer for a fee.
These international firms have the expertise and resources to help you out. Don't hesitate to leverage their support and make the process easier for yourself.
Sourcing Companies – There are a large number of sourcing companies that provide supplier identification services; this is generally useful for identifying small to mid-sized OEMs/ODMs in particular fields – you don’t need a sourcing company to find a Fortune 500 contract manufacturer. You may find the following lists useful.
- IAOP’s Global Outsourcing 100
- Top 10 Global Sourcing Companies – 2022 from Industry Outlook.
- Top 20 Best Sourcing Companies and Agents in China (July 2022) from Indexsy.
Sourcing companies can bring value to a supplier search process, especially if they are open and transparent about their supplier relationships and take a transparent fee for supplier identification / evaluation. If they have been operating for a long period in the target market, they may have an existing network of suppliers in the target field.
Attending tradeshows is an effective way to connect with contract manufacturing companies in China and other parts of the world. These shows take place in various manufacturing cities and regions, providing you with the opportunity to meet and compare potential contract manufacturers and check out their manufacturing facilities.
Although some tradeshows have gone virtual due to the COVID-19 pandemic, attending in-person events offers the chance to make personal connections and establish valuable relationships.
Whether online or offline, there are plenty of options available for your search. However, we recommend taking advantage of live events to network and establish relationships that cannot be fully replicated in virtual settings. By exploring all of your options and attending tradeshows whenever possible, you can maximize your chances of finding the right contract manufacturer.
Here are some ideas:
- Trade Fair Dates website opens up opportunities for tradeshows in more than 100 countries the world over.
- EventsEye trade fair lists are also pretty comprehensive. You can narrow down the choices of tradeshow by region—America, Europe, Asia-Pacific, Africa and the Middle East or further drill down to nation and city level in large manufacturing hubs.
- Country specific fair sites are also useful, especially if your decision is trending towards a particular nation.
- TradeIndia is a great source for various Indian trade fairs.
- JETRO’s Online Trade Fair Database is a good place for those seeking contacts in Japan.
- Visit 10Times for top 100 Russian events.
- Events in the UAE is another gateway to trade shows in Dubai, Abu Dhabi, Sharjah and other destinations.
- Trade fairs in China can be found in the China pages in some of the above sites, like TradeFairDates, EventsEye and even JETRO. Here’s a list of Top 7 Largest Trade Fairs in China.
No matter the country you are looking to research, a simple online search will help to provide a list of relevant trade fairs and dates.
3. Make initial inquiries and document the process
As you dive into the abundance of sources, start jotting down potential Contract Manufacturers (CMs) that catch your eye. Don't forget to keep referring back to the key criteria you listed earlier as a guide to help you evaluate and compare the different options.
This checklist will be your trusty companion throughout the entire process, aiding you to collect information and assess the CMs according to your selection criteria. Once the initial evaluation is complete, you will be narrowing down your choices to the ones that fit your requirements the most.
Keep in mind that the CMs you add to your list don't have to tick every single box in your criteria since it's a balancing act to determine which aspects matter more or less. In the end, what truly matters is finding the best overall fit for your needs. So, trust the process and go with the CM that feels right for your needs.
The first step here is to reach out to suppliers and gauge their interest – the method of contact will depend on how you found the supplier, but in most cases it might be through a contact form, or standard email, or even submitting information into a business directory.
In order to get prompt feedback, it’s best to have clear information about your request and including as much as possible without attaching detailed product specifications or classified documents (you’ll be casting your net wide at first, so you don’t want 15 different suppliers to have your full product drawing set). If you’re too vague or brief, you may simply be ignored. An example of a form email to a manufacturer:
To the sales department,
My name is [Andrew Brien], and I am a small business owner looking for a new supplier to help manufacture a [new home appliance]. I’ve looked at your site and you seem to be a good fit. I’m looking to quote for [10k units a year], but would like some information on your company first – can you share your [company profile and your factory certifications] by this Friday?
This email has:
- Clear explanation of the project and what you are making – doesn’t need to be too detailed yet, but shouldn’t be extremely vague; show that it is a good fit for them
- Clear volume / potential business size – this is what will help you gauge their interest; if you’re not sure, give a relatively conservative estimate
- Clear requirements for a next step (sending documents, setting a call, etc.)
If a really promising candidate doesn’t answer, you can try a second way to reach out – contact their employees on Linkedin, give the factory a call, try a backup email. If you still don’t receive a response, move on to the next supplier on the list.
Another key way to gather information on potential contract manufacturers is to review their websites. Check for information on their services, current products, industries served, customer references, production sites, and capabilities, Pictures and or videos of their production facilities are particularly nice to gauge their size and capabilities. Something to be aware of is that many Chinese companies may not necessarily have modern or well-designed sites, even fairly large ones, so it can’t be the only source of information.
Use your checklist of manufacturing needs as the primary yardstick for determining best fit, and find a contract manufacturer who can produce a cost-effective prototype.
- Ask for and check given referrals - you can also ask for referrals from contract manufacturers who state that they have worked with other companies/products. A contract manufacturer who is willing to promptly provide referrals is worth holding onto, especially if their clients confirm the relationship and vouch for their credibility and competence.
- Certifications – in case your product has particular requirements around factory certification, now is a good time to ask for their latest documents.
- Check Company Documents – factory profiles and introductions can be helpful and come with more detailed information than generally available on a company website. Take them with a grain of salt though.
To ensure a successful partnership, it's important to use a mix of personal conversations, online meetings, email, and other correspondence to gather all the information you require. With a well-planned and thorough process that includes quality control checks, you can find a contract manufacturer who will meet your needs and help you bring your product to market.
Make a Shortlist of Contract Manufacturers That Suit You Best
To arrive at a shortlist of potential contract manufacturers, it's important to thoroughly document all the information you obtain, including their competencies and any potential advantages, disadvantages, red flags, and issues that may arise during the evaluation process.
Fig. 2: Komaspec’s Contract Manufacturing Facility
Take note of any concerns you may have, and don't hesitate to finetune your criteria as needed to ensure you find a CM that is a perfect fit.
Here’s an example of what your evaluation worksheet might look like:
Fig 3. Contract Manufacturer Evaluation Criteria
Once you've gathered all the necessary information, it's time to narrow down your list to a few candidates that seem to meet your requirements. This step is critical as it paves the way for the next phase of evaluating your shortlisted suppliers to make your final choice. You should narrow down the list of potential suppliers to 4-5 top candidates. More than that can be difficult to engage with, as each supplier will have questions and issues pop up during the quotation process. Fewer can leave you without enough quotes for a good comparison at the end of the quotation process.
It's worth noting that, as with any business decision, there may be some potential disadvantages to working with a contract manufacturer. However, by carefully considering your options and finding the right manufacturer to produce your product, you can mitigate these risks and reap the rewards of cost savings and high-quality production.
By taking the time to carefully evaluate your shortlisted suppliers, you can be confident in your decision to partner with a manufacturer who can deliver high-quality products and meet your specific needs. With a solid understanding of the manufacturing process and a focus on finding the right manufacturer, you can achieve success in bringing your product to market.
From Shortlist to Success: Navigating the Next Phase of Supplier Selection
Once you have your shortlist, it's time to move on to the next steps of the supplier selection process:
- Sending out Requests for Quotations (RFQs)
- Comparison of the shortlisted entities
- Negotiating the quotations received
- Making the factory visit
With a clear understanding of your requirements and a solid evaluation process, you can find a contract manufacturer who can help you bring your product to market with confidence.
In our "How to Choose a Contract Manufacturer" article, we will wrap up our guide to preparing, receiving and sorting quotations, as well as evaluating your shortlisted suppliers and making your final choice.
- “ODM, OEM, CM.” Komaspec, komaspec.com/about-us/blog/odm-oem-cm-which-type-of-manufacturer-should-you-pick-for-your-project.
- “Reduce Your Cost With Contract Manufacturing - OEM China.” Komaspec, komaspec.com/about-us/blog/reduce-costs-with-contract-manufacturing.
- “How to Choose a Contract Manufacturer?” Komaspec, komaspec.com/about-us/blog/selecting-a-contract-manufacturer.
- “Strategy for Custom Manufacturing in China.” Komaspec, komaspec.com/smart-manufacturing-strategy-china.
- “Top 7 Largest Trade Fairs in China - Amags Global.” Amags Global, 23 Aug. 2022, https://amagsglobal.com/top-7-largest-trade-fairs-in-china/.