How To Find a Manufacturer For Your ECommerce Business
February 20, 2023
The world of eCommerce is booming. It’s as good a time as ever to enter the market, which is set to grow by 10.4% in 2023 according to an eMarketer study from last year. Still, launching an online store is tough. You will have to deal with several matters, such as deciding upon a platform, gaining traction in the market, and attracting customers. But if you don’t figure out how to manufacture your product reliably, your business won’t get off the ground to begin with.
Research is the key here. Finding a manufacturer may appear straightforward, but there are many elements that need to be understood properly. At the end of the day, the manufacturer will be the foundation of your supply chain, upon which your business will depend for its long-term success. In this article, we will discuss what type of manufacturer or supplier fits what needs, how to find them, and other crucial things to keep in mind.
This article will discuss:
- What Is a Manufacturer or Supplier?
- Types of Manufacturers and Suppliers
- How to Find a Manufacturer or Supplier
- What to Consider When Choosing a Manufacturer or Supplier
- Domestic or International?
What Is a Manufacturer or Supplier?
Manufacturers are companies that build or assemble products for their clients in bulk. They aren’t involved in the commercial process and focus on fulfilling the inventory demands of sellers. This means sourcing materials, following designs, manufacturing goods, and shipping inventory to clients.
Suppliers, while often grouped in with manufacturers, are different in the way that they usually do not make anything themselves. They provide online shops with the products they sell, buying them from a manufacturer themselves. For example, if you are ordering inventory that has already been produced and packaged, and is ready for sale, chances are you are ordering from a supplier.
Manufacturers and suppliers can be separate entities or one and the same. Sometimes manufacturers will sell their products directly to a business. And if not, they sell them to a supplier who acts as a middleman to facilitate B2B (business-to-business) sales. Either way, these two entities are crucial parts of the eCommerce supply chain.
Types of Manufacturers and Suppliers
Manufacturers and suppliers vary immensely. The essential difference between them is that going with the latter means an eCommerce store is limited to pre-produced goods. Alternatively, businesses with their own product design need a manufacturing company that is able to turn their idea into a finished product. This may require you to utilize both manufacturers and suppliers logistically and coordinate the supply of materials to the manufacturer. Understanding what types of manufacturers and suppliers there are may help you mitigate any hiccups in production.
Factory/building – Factories and building facilities range from giant corporate warehouses with long conveyor belts and immense machinery to someone freelance building custom projects in their garage. For example, millions of spring air coils used for radios and broadcasting equipment are produced by freelance builders from the comfort of their own living rooms.
On the other hand, if your product design requires space or more heavy-duty equipment, like manufacturing an electric scooter, you may need to seek a facility that can accommodate your needs. Depending on the size, intricacy, and quantity you require, contracting a large factory might be the most economical choice.
There are three main subtypes of factory/building manufacturers:
Make-to-Order (MTO) – MTO manufacturers wait until your customer places an order and you send in a request, before beginning production of the product. These are commonly used for customized products, but you can also enlist MTO manufacturers for your general needs and factor their production period into your lead times.
Make-to-Assemble (MTA) – MTA manufacturers will produce components for a product so that when the order arrives they are ready to begin assembly–cutting down your production time.
Make-to-Stock (MTS) – MTS manufacturers are common for retailers and wholesalers that want inventory ready to go. They produce all the components and assemble them ahead of customer orders so they can be purchased by the retailer and sold immediately.
Wholesalers – A wholesaler purchases made-to-stock supplies from manufacturers in bulk and then distributes them to retail companies. They are a common supplier for startups and small businesses since they provide inventory at a discounted rate. Wholesalers can also be distributors of raw materials, should you require them for your product assembly.
Dropshipping – Dropshipping involves an eCommerce seller not holding any stock of their product themselves, and simply overseeing that goods are shipped directly from the supplier to the customer when an order goes through. This eliminates the need for wholesalers, warehouses, or distribution centers from your supply chain. Any saved costs are offset, however, by the fact that retailers only earn the difference between a product’s wholesale and retail prices.
How to Find a Manufacturer or Supplier
Figuring out what you need from a manufacturer or supplier is relatively straightforward. Finding the manufacturer or supplier that fits those needs is trickier. However, this process can be easier than it might appear at first. One option is to look up providers of products that are similar to yours and ask them if they can produce what you need. This process should always involve a lot of research and sifting through the many options available to find a good match. You want to give yourself plenty of room to compare and contrast each supplier’s benefits and downsides carefully. Here are our top 3 tips for finding a supplier that fits your needs.
Manufacturer or industrial directories are a great starting point when looking for a supplier to deliver your product. Usually, they allow you to sort your search by category, so you can tailor it to your company’s needs, such as pricing, freight volume, and location. Here are a few manufacturer directories to get you started:
ThomasNet – One of the largest industrial catalogs, which goes back all the way back to the 1800s. It offers a large and diverse database of suppliers and product-sourcing companies across the US and Canada.
Alibaba – This site is great as it allows you to connect with manufacturers in China to source your products. It offers great options for finding a partner to produce custom items.
Mfg.com – You don’t necessarily have to pay for every service. MFG offers free product sourcing. Sign up for a yearly membership for quotes and access to additional bonuses.
Kompass – A smaller directory, but big in quality. It focuses on global B2B industrial companies, helping you find manufacturers worldwide.
Utilize NAICS codes
The North American Industry Classification System (NAICS) was developed to allow the federal government to identify and classify businesses based on their industry and business type. Every business in the US and Canada has a NAICS code so reverse searching any given product by said code in online directories can help you find the manufacturer directly. However, it only offers you information about who the manufacturer is, not their reviews or whether they have been vetted sufficiently. It is important that you do your own research into these companies yourself, to ensure that you partner with a reliable and trustworthy one.
Networking and referrals
Even though the internet has birthed many alternatives, growing via word of mouth is a tried and tested way of achieving building success. The same goes for the process of finding industry professionals to build or supply your products. Networking with other business owners can be extremely helpful. They probably won’t give up their most valuable tricks, but they are likely to share useful information, like what suppliers they trust. Reviews and referrals from people in your sector are invaluable and can provide information about the manufacturer or supplier’s resources, turnaround times, and general competency.
What to Consider When Choosing a Manufacturer or Supplier
Once you have made a list of manufacturers or suppliers that sound like they could suit your business, it’s time to determine which one fits best. The first factor to pay close attention to is whether they can follow your requirements precisely. You need to make sure that the supplier or manufacturer is able to provide exactly the kind of product you need and at a scale that matches your inventory requirements. In order to ensure this is the case, you should follow these steps:
Determine your materials – What will it take to make this product? Depending on the industry of your target customers (like with B2B sales) you may need specific materials in order for your product to function properly. Perhaps your manufacturer can build it with aesthetic precision, but if the product breaks easily due to low-quality materials you will face unhappy customers. That means returns, reimbursements, and poor reviews. Sometimes it’s better to pay a bit more for quality than to invest in a whole batch of second-rate products.
Make a prototype – If you are bringing an original product design to the market, prototypes or samples of your product are key to determining the quality of materials and manufacturing. Talk to several companies and ask them to build your product as a test. Then, compare the quality of each version and weigh it against each provider’s prices and production time, giving you a better idea of whom to choose.
Determine your inventory needs – The volume of products you require will play a major part in whether or not a given manufacturer is right for you. Many companies can handle both high and low-volume clients, but there are some that require a minimum order. This is because certain supplies can be obtained more cost-effectively when purchased in bulk. The manufacturer or supplier passes such savings on to you, so if you order too few units it defeats the purpose.
Request a quote – Once you have determined the materials, quantity, and how you want the product made, your list has probably gotten narrower. At this point, it’s time to request a quote for the product and conditions you require. This will help you compare the manufacturers against one another and find out who offers the best deal for your needs. Additionally, being able to weigh multiple deals against one another gives you an advantage in negotiating. For example, you could tell a company you like their product quality but that a competitor offered better shipping conditions, so if they can match that, you’ll partner with them. Knowing you have other options might just drive them to compromise.
Domestic or International?
There are many factors that affect whether you should source your product from a local or foreign location. Both come with major benefits and downsides, which you need to understand in detail before making any decision. Here are some conditions to keep in mind:
Cost trade-off – Foreign manufacturers tend to be able to make products for a better price. This is usually due to lower overhead costs for labor and materials. However, there is a significant trade-off when you decide to cut costs on manufacturing. You will probably incur higher fees for shipping and customs handling, and freight shipments will almost certainly take longer to arrive.
Evaluate quality – It can be more difficult to consistently measure product quality when it comes to foreign manufacturers. The time gap between ordering and receiving inventory due to lengthy shipping processes means your ability to check its progress is very limited. However, many overseas industrial manufacturers can communicate through video platforms and other non-visual communication methods in English. Another alternative is to partner with someone in the manufacturer’s country that can go to their facilities and do quality control in person.
Ability to uphold your standards – Global markets are going through a tumultuous time once again. 71% of companies said that their supply chains’ biggest problem is the rising cost of materials. This means that eCommerce businesses need to keep a watchful eye on their product quality and shipment frequency being upheld. If the raw materials used by your manufacturer go up in price, they might feel the need to cut corners elsewhere. You need to consistently monitor the condition of your products so you don’t wake up to bad surprises. This is where good communication is valuable so you can uphold your standards and closely oversee any tweaks to materials or shipping conditions.
Ethics – While the international nature of supply chains has created countless opportunities for eCommerce sellers, there are also drawbacks to doing business all over the world. Ensuring that your products are made in a safe, sustainable, and ethical way isn’t just good for the planet and society, it’s good for business. More and more consumers are paying attention to these factors, which can result in serious blowback when bad practices emerge.
Verify your partner’s reputation – It is a lot more straightforward to vet domestic suppliers than it is with overseas manufacturers. Countries like the US and UK have extensive federal vetting systems to increase transparency and trust. The Better Business Bureau and Labor Board are responsible for investigating companies in the US. Any unethical or unsafe business practices are highlighted when they publish their findings. Other countries have variations of such procedures, however, it can be more difficult to obtain their reports. In that case, falling back on reviews and word-of-mouth sentiments is a good choice.
Julian writes about the ins and outs of eCommerce at 8fig. He is passionate about exploring and covering the dynamic and fast-paced world of online retail.