Product Sourcing Tips

Excitement abounds; there is demand for your new product.  Now comes the really hard part, the product needs to be made. Be aware, you will be entering perhaps the most challenging and risky part of developing and growing your business.  Product sourcing (the first steps in the supply chain management) is getting your new product produced, packaged and market-ready. You will be investing your money in advance for finished products to be delivered on time to your specifications, working with an entity with which you may have no experience.
 
Product Sourcing is the practice of developing and buying your products from either domestic or international producers.

Unless you’re prepared to produce your new products in-house, you must find a manufacturing “partner” capable of producing your product or product:

  • at a desired quality level

  • to your specifications/on time

  • packaged and packed to your specifications,

  • meeting legal, safety and industry quality standards

  • able and willing to communicate daily 

  • willing to assume responsibility should they not live up to the terms of a contract

  • competitive priced

Ideally, you or a trusted colleague’s skill set includes extensive experience in almost all facets of supply chain management, including product development, production and importing (if you’re sourcing internationally), preferably in your product category or industry.
 
Should you lack this skill and experience, the next viable alternative is to hire an employee or contract a buying agent whom you can trust implicitly for both expertise and integrity. To act otherwise, including hiring an independent buying agent, will be putting yourself in harm’s way. One mistake in the process, and all of your work may go for naught, and worse, may put you out of business.
 
The steps outlined below, are the product of hard-won experience and should be meticulously supervised and coordinated. Your first task is developing a time and action calendar that must be rigorously followed and enforced. Then you or your associate must:

  1. Find a Factory that meets quality and required legal and safety standards and also has a record of on-time delivery, accepts responsibility for their mistakes and is easy to communicate with. Be sure to check references thoroughly.  

  2. Source the Components, including materials, fabrics, packaging, hang tags and labels. The ideal scenario is to have the factory handle all these tasks, even if you pay a premium. Proprietary interest should be negotiated with the factory for all components. (If they’re sourced separately, you will have the additional responsibility for supervising and approving the production for all the components, as well as for the logistics of shipping them to the factory.)

  3. Develop a Quality Assurance Process and Schedule where you must sign off on all components for quality, color and any other features.

  4. Develop a Sampling Process and Schedule where you approve proto-samples, pre-production and production samples.

  5. Once production is completed, Contract a professional lab (e.g. www.consumertesting.com, www.sgs.com, www.bureauveritas.com ) to lab test final production. Then, schedule transportation to your warehouse. If production is overseas, you or you employee/agent must understand how to move your order from port of export, arrange for transport to a U.S. port of entry, arrange for customs clearance and arrange to move the order to a designated warehouse. (These post-production steps may call for another set of import-export skills.)

The importance of attention to detail and due diligence in handling these various processes is underscored by two recent examples: one caused significant financial and brand-equity loss, as well as the job of the Chief Product Officer; the other resulted in the loss of the business. In both cases, the near-disasters could have been avoided by tighter quality controls. Both companies survived, although one division did not. A newer company may not have been so fortunate.

  • In March, 2013, Lululemon Athletica Inc., a yoga-wear maker, recalled one SKU that represented about 17% of their sales. Their black Luon (nylon and Lycra fibers) pant was too sheer. Simply, the fabric was either improperly approved or no standards were in place to ensure product quality.
  • Locker Brands, Inc. based in Las Vegas, Nevada, produced and distributed a patented item, the RX Locker, a patented medicine bottle storage container. Customers included such national chains as Walgreens and Bed Bath & Beyond. In March, 2012, 59,600 units were recalled due to product failure which allowed unauthorized access to its medicine containers. The container could be opened by simply applying pressure to the latch. The item has been discontinued.

Developing and selling a new product is not the end of the process. It is only the beginning. Your ability to properly manage the sourcing process may determine whether your business will thrive, survive or die.

Burt Wallerstein
<p> Burt is a a volunteer counselor with the New York City chapter of SCORE, is also a principal and founder of a global sourcing, marketing, and consulting agency. He has also written commentaries on improving higher education for the Washington Examiner and the John William Pope Center.<br /> <a href="http://newyorkcity.score.org/" target="_blank">NewYorkCity.score.org</a> | <a href="https://www.facebook.com/SCORENYC" target="_blank">Facebook</a> | <a href="https://twitter.com/scorenyc" target="_blank">@scorenyc</a> | <a href="/author/burt-wallerstein/all-posts" target="_blank">More from Burt</a></p>

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
CAPTCHA
This question ensures you are a human visitor to prevent automated spam submissions.
Image CAPTCHA
Enter the characters shown in the image.