How I find factories
One of the most common questions I am asked is how to find factories. Here’s the method to my madness.
This post is the first in a series of truly “open kimono” posts about how I work my magic. I’ve never seen this stuff written or talked about in public- and this method of factory identification is the result of almost 10 years of sourcing work.
Enjoy! And as always, feel free to ask me for clarification or help in the comments. Oh, and have you signed up for my email newsletter yet?
A philosophical note
I strongly believe that the age of going to Canton Fair, getting a random idea from seeing an OEM (off-the-shelf) product, and building a business around that product- is over. Sorry!
Rather, I still think there are huge opportunities in the product space- but they are based on marketing, rather than sourcing. If you can see (and validate) a niche in the market, you can almost always move the design/engineering/sourcing resources into place behind that idea- if you can generate the demand. Let me repeat that: the key to the physical product game is generating the sales demand and building a brand- not a sourcing arbitrage.
So, if you’ve got an idea for the bestest cat furniture ever, how do you find the factory to make your dreams into reality?
Secret weapon #1
Customs databases- my favorite is Panjiva (aff link)
Every shipment that is customs cleared into the US has its packing list logged as public information. There are a number of companies that take this info, catalog it, and sell access to their database. I subscribe to Panjiva (starting at $99/mo).
When I am looking for a factory to produce commodity x, I identify the brands importing these items into the US, then I search for them on Panjiva. Sometimes the name of the brand and the name of the importer are different. For example, my company is FringeSport, but I typically import under my LLC- Hypertrophy Ventures, LLC.
A good way to suss out the corporate parent of a small to mid-size brand is to run a WHOIS search on the web domains used by the brand you are researching. Sometimes smaller importers or less sophisticated companies will import under the name of one of the principals, as well. If you are having trouble finding import records for a company, make sure you try all permutations of their name, their brand name(s), owners names, etc. before you give up.
Once you find the brand in Panjiva, look at their “shipments” info- this will list all their shipments that were customs cleared into the US, along with a brief description of the commodity imported. Once you have found a factory with this method, click on the factory’s info in Panjiva, then check out the factory’s volume, other customers, and other info.
Now google the name of the factory to get contact info. Panjiva usually lists some contact info on their site, but I prefer to go to the website of the factory directly- the info is usually up to date, and I have had a good response rate with this method.
Bonus tip for the secret weapon- you can do some limited searches on Panjiva/Datamyne/etc. without subscribing. So, if you’re not sure you want to drop $99/mo, google is your friend.
Secret weapon #2
Hustle and human intelligence
When you are working in an industry, you need to keep your ear to the ground to always be open to opportunities. Some of these opportunities are listening and finding factories and secrets when people mis-speak. And, my dad always told be to be smart enough to know when to shut up and just listen.
For example, the way I found my bumper plate factory is that I was in Taichung, visiting with a barbell supplier. I was talking with the sales rep and I mentioned that I was going to finish my trip in Qingdao before heading back to the US. He said, “Oh, you must be going to see factory xxx.” I was not, but I lied and said that I was. We then talked about his thoughts on factory xxx, e.g., that it was the best bumper plate factory.
So after I met with him, I hit google, found contact info for factory xxx (a new factory on the scene with no major customers yet in the US), and reached out. I visited the factory days later, cut a PO in a week, and now they are my best factory partner- and I am busily working on securing exclusivity in my market.
I found my current barbell factory in much the same way.
Another example of hustling is how we found a workshop in the US to manufacture wood gymnastics rings for us. We took a competitor’s wood ring to a bunch of different wood shops (found via google) and asked them to make a run for us. We were declined by everyone.
Finally, one shop said, “I can’t make that- I don’t have a cnc router”- or some such piece of heavy equipment. So we googled the tool and found a manufacturer in the US for the tool. I called them and asked if they had sold any into Austin. They gave me the phone number of their customer, who then became our supplier.
Additionally, I have a number of contacts in the industry now with whom I have a) friendship and b) informal information sharing relationships. I have shared with them information that I “should” not have shared with them (per non-”mindset of abundance” thinking.) They reciprocate. So, if I am stumped, I call one of my contacts and ask them if they know the answer.
Extremely spammy, totally non-secret weapon #3
Everybody knows about alibaba.com these days- just go online, search for your commodity, and you’ll get a wealth of factories offering to mfr for you.
However, I mainly use alibaba for 2 things:
- Getting reference pricing- so I can get an idea of where my pricing “should” be from my preferred or current factory partner
- Figuring out where the manufacturing clusters for a specific commodity are- so I can visit those areas (and also help figure out who is a trader vs. who is a factory)
You can use alibaba- it’s cheap (free!) and easy. But it’s overrun with trading companies masquerading as factories.
Generally, you do not want to be dealing with a trading company- they insert a layer of (mis)communication between you and the factory, and often they don’t add value- they are just middlemen.
Since alibaba is so easy, I do make it a part of any factory search- just to see if some factory shows up on alibaba, but not through my #1 and #2 methods.
A fourth great way- but no silver bullet
Canton Fair is the largest export commodity show in the world. It takes place in Guangzhou twice a year- spring and fall- and each fair has three phases. In each of the phases, different factories come from around China (and increasingly, the world) to open a booth and show their wares.
As I mentioned above, there are three phases. When you go to Canton Fair, you must be sure to go to the correct phase for your commodity. For example, I used to deal in appliances. Appliances are Phase 1, which occurs in April and October. I now deal in sporting goods, which are Phase 3- May and late October.
If you have an idea for a product, Canton Fair is a great place to go. You can walk the aisles of the Canton Fair and see many different factories in a morning or a few days. You can make contacts, get reference pricing, see some “golden samples” in the booth, and schedule factory visits for after the Fair.
Canton Fair is most valuable if you do your homework before and after the show.
Before the show, you should find out some of the factories that you would like to have meetings with, reach out to them, and schedule meetings. In this way, you won’t be seeing the sales reps cold- they’ll know a little about you.
Conversely, after the show, you must take the burden of following up with factories. The sales reps see dozens to hundreds of people over the course of the show, and unless you follow up, many times they will forget you.
Canton Fair is a great way to find factories- it gives you an immediate face to face contact with a factory, and you can have substantive discussions at the Fair. However, it is by far the most time consuming and costly way to identify factories, which is why I have listed it last. I am a strong believer in visiting your factories in person if you are serious about your business, but I advise going through methods 1-3, and then scheduling a trip to the fair.
How to vet the factories
All factories are not created equal. Pricing, quality, human rights, professionalism, lead time, ability to work on modifying OEM designs or helping to create ground-up ODM designs are all aspects upon which factories will differ.
The short version of how I vet factories is that I rely on social proof for the initial vetting process, and then I rely on our discussions or business dealings for the remainder.
You can also hire an inspection company to do a factory audit at the beginning of your business dealings to look at things like turnover, professional organization, human rights, etc.
For social proof, I have found that if a factory has large customers, the factory likely has its ducks in a row re: professionalism, human rights, and things like delivery times. I’ll expand more on this point with a later post, but this is a quick shortcut.
Additionally, you should be discussing deal points with all of your potential factories to get an idea for who will be the best to work with. You must beware of factories promising the moon, only to underdeliver- but in my experience this mostly happens when you represent a lot of business for a factory that really needs it. If you are a start-up trying to get a foot in the door, you will likely not have a ton of factories making large over-promises to get your business.
How to get the factories you want to deal with you
Sometimes this is easy- the factories are hungry for business. Sometimes this can be hard. Why? While factories in general just want sales volumes, there are fixed costs associated with customers. Look at it this way- the amount of time a sales person must dedicate to a Wal-Mart buyer may be the same or even less than the amount of time he dedicates to a new, low volume customer.
So, from the beginning you must show confidence in yourself, your idea, and your volume. Don’t lie to the factories about your projected volume, but I do often talk about “optimistic” projections of year one volume- and I often refer to my initial order (if small) as a “sample order.”
Try to also always maintain forward momentum with a factory. Factories tend to hate it if you discuss a project with them, then drop the project for a while, then come back to it. This is flaky behavior, and just as you don’t want a flaky factory- they don’t want a flaky customer.
And another secret weapon- work the social angle with factories. All over the world, business is done person to person. When you can make an emotional connection with a sales person or laoban, you can make them your friend instead of your acquaintance or adversary. This can be huge! One of my factory laobans tells me my competitors’ plans, their pricing, and everything he knows about their competitive moves. He does this because he is my friend and he wants to help my business.
When possible, visit the factories. See your sales people and the laoban (boss) in person. Try to go to dinner and potentially after dinner entertainment with the laoban. Be genuinely interested in these people’s lives and well-being. Find out if they have spouses and children, where their hometowns are, etc. If the laoban and sales person like you, you can open doors that you might not be able to otherwise.
Did I miss anything?
Let me know in the comments. Whether you are a newbie with unanswered questions, or a seasoned China hand, I love all input and feedback.