When it comes to manufacturing products overseas, finding the right factory size manufacturer partner can make or break the success of the project. However, with so many different factors to consider, it can be difficult to determine which manufacturer is suitable for the job. One factor that is often overlooked is the impact of the order on the manufacturer and the size of the factory.
In this article, we will explore the ideal factory size, how to select an ideal factory size manufacturer, and how to calculate the impact of your order on suppliers. We will also provide a case study on factory size selection to help readers gain a better understanding of the process. By the end of this article, readers will have a clear understanding of how to find the perfect factory size manufacturer partner for their overseas manufacturing needs.
Key Takeaways
- The ideal factory size is an important factor to consider when selecting a manufacturer partner for overseas manufacturing.
- To select an ideal factory size manufacturer, it is important to consider factors such as production capacity, quality control, and communication.
- Calculating the impact of your order on suppliers can help ensure a successful manufacturing project.
What is the Ideal Factory Size?
Finding the right manufacturer for your business is crucial for success. While working with a larger and high-volume manufacturer may seem like the best choice, it is not always the case. The factory size plays a vital role in determining the best manufacturer for your company.
On the one hand, you need a supplier who has adaptable capacity.
Having a supplier with adaptable capacity means that they have the necessary resources to handle larger orders in the future while maintaining quality, lead-times, and service levels. A supplier that is too dependent on your company may discharge resources during temporary decreases in volume, making it difficult to scale up again when regular demand is restored.
To ensure that the manufacturer has adaptable capacity, it is important to consider their workforce, machinery, and facilities. This will help to ensure that they can handle your orders in the future while maintaining quality and service levels.
On the other hand, you also want to work with a supplier that makes your order priority.
It is important to work with a supplier that makes your order a priority. This means that they will make exceptional efforts to complete your order on time, especially when problems arise during production. This is particularly important for complex products that require special assistance.
Typically, a supplier will give more attention and importance to your project when your order makes up 2% – 15% of its annual sales. This means that your order will generate enough capacity to scale production, and the supplier will take your project seriously.
In conclusion, finding the ideal factory size is crucial for the success of your business. It is important to consider a supplier with adaptable capacity and one that makes your order a priority. By doing so, you will be able to find a manufacturer that is the best fit for your company.
| Pros | Cons |
|---|---|
| Adaptable capacity | Too dependent on your company |
| Makes your order priority | May not allocate extra resources for complex products |
| Maintains quality and service levels | – |
How to Select an Ideal Factory Size Manufacturer?
Select a Right Size Manufacturing Takeaway
Selecting the right manufacturer is crucial for the success of your business. To ensure that you find the right factory size manufacturer, you need to consider the following factors:
- Core Competence
It is important to find a factory that specializes in producing your product category. This ensures that the manufacturer has the necessary skills and expertise to deliver high-quality products. For instance, if you are looking for a factory to manufacture electric bikes, you should look for a factory that specializes in manufacturing electric bikes. This will increase your chances of getting the desired results.
- Experience in Making Products with Similar Specifications
You need to find a manufacturer that has experience in making products with similar specifications to yours. This ensures that the manufacturer is familiar with your requirements and can deliver the product you desire. For example, if your bikes have built-in rear and front lights, you should look for a factory that has manufactured e-bikes with these specifications before.
- Enough Capacity for Your Project
It is important to ensure that the manufacturer has enough capacity to handle your project. This includes resources such as manpower, equipment, and facilities. You need to find out how the manufacturer plans to utilize these resources on your project. Are they currently available? Does the manufacturer need to buy more machines to fulfill your order or to hire more labor? Does the supplier need to finish the ongoing project to start manufacturing your electric bikes? To prevent bad experiences later, it is crucial to inspect the factory during a visit, or you can hire a third party to do an audit on your behalf. This is important because every factory will claim that they can do your required job.
To summarize, selecting a manufacturer with the above characteristics will increase your chances of success. It is suggested to make an on-site visit to ensure that the factory you have chosen has the necessary skills, experience, and capacity to handle your project. If you cannot visit the factory, you can hire an inspection agent to do an audit on your behalf.
How to Calculate the Impact of Your Order on Suppliers
When evaluating proposals from different suppliers, it is important to calculate the impact of your order on each supplier. This will help you understand how crucial your order is for the supplier and whether it will be a top priority for them. The order impact is evaluated as the percentage of annual sales that your order represents.
Calculate the Order Impact Takeaway
To calculate the order impact, you need to use the equation shown in the image above. Let’s take the example of three e-bike manufacturers who have quoted the same price of USD 50,000 to complete an order of manufacturing 500 electric bikes.
The first manufacturer, represented by Manufacturer X, has an estimated sales output of USD 66 million per year and is one of the biggest suppliers of e-bikes in the world. The second manufacturer, represented by Manufacturer Y, is a small family-owned e-bike factory. The third manufacturer, represented by Manufacturer Z, has an annual revenue of USD 1,100,000.
Using the equation, we can calculate the relative impact of the order on each manufacturer. For Manufacturer Z, the USD 50,000 order is very crucial because it makes 25% of their total sales. On the other hand, Manufacturer X is a bigger manufacturer, so the impact of the order is quite small for them because it makes only 0.078% of their annual sales.
By calculating the order impact, you can get an idea of how important your order is for each supplier. This information can help you negotiate better terms and ensure that your order is given the priority it deserves.
Factory Size Selection Case Study
A New York-based bicycle company is planning to produce 500 e-bikes and is looking for an ideal manufacturer in China. After evaluating different suppliers, the company shortlisted three suitable manufacturers. All three manufacturers have experience producing e-bikes with similar specifications, specialize in manufacturing e-bikes, and have enough capacity to complete the order with devotion. They all have good references and quoted nearly the same price, i.e., USD 50,000 for completing the order.
The only difference between these three shortlisted manufacturers is their factory size. The most suitable manufacturer would be ‘Manufacturer Z’. The order of $50,000 has a contribution up to 4.55% to its annual sales, which makes it significant to the supplier while leaving enough capacity to scale production in the future.
By selecting the most suitable manufacturer based on factory size, the New York-based bicycle company can ensure that the supplier has enough capacity to fulfill the order with devotion and has the potential to scale production in the future. This decision ensures that the supplier is not overburdened with the order, which could affect the quality of the final product.
It is essential to consider the manufacturer’s size when selecting a supplier for your next order. Other factors to consider include the supplier’s experience, references, and price. However, the factory size should be a crucial factor in the decision-making process.
In conclusion, the factory size selection case study shows that selecting the most suitable manufacturer based on factory size can ensure that the supplier has enough capacity to fulfill the order with devotion and has the potential to scale production in the future.