I recently read an article in Inc Magazine about a toy inventor that decided to manufacture their toy in China. In terms of timing, they were selecting one just as all the lead-paint in toy reports were coming out in the press. I thought it was a great story because it confronted many of the challenges a first-time inventor will face when manufacturing overseas, and especially put it in context for recent issues.

To start off, the inventor and his business partners put forward about $75,000 for design, prototypes, and a manufacturing run of 12,000 units. After getting some excellent designs, they contacted local entrepreneurs about where to manufacture in China. They went with one factory that had been recommended by several of their contacts. However, when they initially wrote up the contract, it was too biased in favor of the company, and put too many constraints on the manufacturer. So the manufacturer did not even respond to the offer! They lessened some of the requirements and finally got a response from the manufacturer.

After negotiating quality control issues, they agreed to a rough contract and began manufacturing in early fall, soon enough that they might be able to make the 2007 Christmas season (they weren’t for sure at the time). In the end, they BARELY made their shipment date and had to do a lot more of the customs legwork than intended. But their products made it to store shelves, and thus in the hands of customers on time. Here are their overall recommendations when looking at Chinese manufacturers:

• Meet your maker: go to the factory, meet management, tour facilities
• Drive a hard bargain, especially when it comes to quality control. Institute product testing, ethics agreements. Set contractor and subcontractor rules. Reward for compliance.
• Communicate industry compliance standards, tell them that if they don’t follow them, the factory will be hurt as well. Put critical documents and contracts in Chinese.
• Diversify if possible: have two primary suppliers to reduce supply interruptions. If too expensive, spend more on testing one factory.
• Expect delays: product recalls have thrown China into a tizzy. Testing labs are backed up. Recalls affect logistics and shipping schedules.

So for those of you far enough along that you’re looking into China, make sure you take into account these issues. Read the full article.