For you to enter a successful relationship with China contract manufacturing companies, there are three key factors: a good supplier, a good contract and good IP protection. You need to pay close attention to all these three factors or else you will have a terrible experience.
The rules to follow in the process of looking for contract manufacturers are:
- Come up with a list of all the potential suppliers who will supply the products that you need. Consider factors such as pricing, the geographical location, technological advancement, and the quantity that you need.
- Register your copyrights, trademarks, and patents in China
- Draft an exhaustive non-disclosure agreement. For it to be helpful, it has to be stamped and signed using the company’s official details.
- When you set out on conducting a search for a potential supplier, there are 6 things that you should start with; the “six D’s”- Due Diligence, Due Diligence, and Due Diligence. Conduct background checks on all the companies you had made in step 1. Narrow down to about 10 prospects and focus thoroughly on them. Make sure that they are who they say they are and that they can do what they say they can.
- Narrow down to about 5 prospects. Visit these companies personally or if you can’t do it, hire a good manufacturing consultancy to do it for you. The physical visits are intended to conduct inspections, interview the superiors, and see samples.
- After you have finally decided who you’re going to work with, sign an OEM contract. This contains all the vital details on information such as the terms of payment and penalties for non-compliance. It’s recommended that you get an international law firm to draft the agreement for you.
- Draft comprehensive purchase orders that give details about the raw materials, their quantities, production, time of delivery, quality expected, defect allowance and expectations of the final product.
- Follow up the entire production process. Have your people at the site to conduct quality control checks.
- Always monitor quality.
- As you continue to work together, help the manufacturing company improve its operations and practices. This will lead to a long working relationship.
Tips to guide you when entering in an agreement with contract manufacturers:
After you have already decided on which manufacturing company that you would like to work with, there are different ways in which you can cement the relationship so that it’s mutually beneficial. A good contact should contain information about the business requirements of the buyer and the manufacturer. It also states the legal recourse that the buyer has against the manufacturer in the event of a breach.
As we saw above, entering into an agreement demands that you have a comprehensive purchase order. This will ensure that whenever you need it, you will get all the protection that you need.
5 tips to help you address all the critical issues with contract manufacturers:
- Endure that you enter into the contract with the right party
- Craft a detailed list of materials that are used in manufacturing the final product. Include a detailed pricing provision
- Clearly spell out the quality requirements
- Be clear about the ownership of mold/tooling
- Protect your intellectual property. Registering your patents and copyrights prevents your competitors from registering the same intellectual property
