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transcript

How We Helped a Customer Create a Product in 4 Steps

- A Case Study

A Webinar Presented by Chinaimportal.com

The product? A Wristwatch.

Presentation Overview

Step 1: Prepare Product Spec Sheet

Step 2: Supplier Sourcing

Step 3: Sample Development

Step 4: Production, Payment & Quality Control

✔ What you will learn in today’s Webinar can be applied to essentially any product category

✔ The methods apply to both private label products and custom designed (OEM) products

✔ This process can be applied when importing from Vietnam, India, and other countries in Asia

✔ This webinar will take around 1 hour (but save you weeks of work)

About this Case Study- Client: Lanna Watches AB

- Target market: European Union

- Product: Custom Designed (OEM) Stainless Steel Watches

- Time frame: Q3 2016 to Q1 2017

- Note: The names of companies and individuals, mentioned in this case study, have been altered (as required by our privacy policy)

- The customer used our Starter Package to go through this process (but, alternative solutions will be presented).

Presenter: Fredrik Gronkvist

● Co-founder of Chinaimportal.com

● Currently based in Hong Kong

● Previously in Ho Chi Minh City (Vietnam) and Shanghai (Mainland China)

● Expert in product development and manufacturing in Asia

● Previously contributed to Global Sources and Alibaba.com

About ChinaImportal.com● Articles, interviews, webinars and other media reaching more than 100,000 monthly readers and viewers

worldwide

● We offer services for entry-level importers and established buyers manufacturing in China, Vietnam, India and other countries in Asia.

● Our office is located in in Sheung Wan, Hong Kong S.A.R

Chinaimportal.com has been quoted or mentioned in

We offer an affordable platform for Importers

+ Lifetime Access

+ 0% Order Commission

+ Manage imports from China, Vietnam, Thailand & India

+ No monthly charge or hidden fees

Got questions?Use the contact form!

(We reply to all questions within 24 hours)

Okay, let’s get started!

1. Create your product specificationYour product must be defined before it can be manufactured. This holds true for both custom designed (OEM) and private label product. In this first part, you will learn how to create a product specification file.

As such, Lanna Watches had to create a product specification before they could contact suppliers.

Estimated time: 1 to 2 weeksImage: Product specification template

1.1 What is a product specification?

A product specification sheet can be a simple Spreadsheet or PDF file defining the products design, functionality and quality. If you want to manufacture a watch, you’d need to include the following information:

+ Materials (e.g. stainless steel)+ Components (e.g. movement)+ Dimensions+ Colors, plating and coating+ Technical standards (e.g. 5 ATM)

In addition, you must prepare the following:

+ Design drawings or product photos+ Logo files+ Packaging design

Q: Why do I need a product specification?

Q: Do I need a specification even if it’s a private label product?

Q: Do I need a product specification even if it’s a “simple product”?

Lanna Watches used Template 1A: Watch Product Specifications

1.2 How do I create a product specification?

Step 1: Research material and quality options

Step 2: Create a bill of materials (e.g. Excel file)

Step 3: Create design drawings (or, find a design freelancer)

Step 4: Research applicable product regulations

Step 5: Create label files

Tip: Find a design freelancer on Upwork.com if you don’t have design expertise

1.3 Product safety standards & labeling requirements

Planning to import to the United States, Europe or Australia? Then you need to ensure compliance with mandatory product safety standards and labeling requirements. Keep in mind that you are responsible for all products you place on the market.

Tip: Confirm the following requirements for your product

+ Chemicals and heavy metals restrictions+ Product safety standards+ Labeling requirements (e.g. ‘Made in China’ or CE mark)+ Certification Requirements+ Lab testing requirements

Warning: Importing non-compliant products (e.g. containing excessive amounts of heavy metals or incorrect labels) is illegal and can result in a forced recall or heavy fines.

Q: Where can I find information about product regulations?

● Starter Package: Product Safety Databank● Government Websites● Service providers (ProductIP.com)

This is how we can help you

✓ 1A: Product Specification Template

✓ Help you fill out the product specification

✓ Find a suitable design freelancer (Optional)

✓ Product Safety Databank: USA, EU and Australia

2. Finding Qualified SuppliersOnce you have a spec sheet and design drawings, it’s time to find a suitable manufacturer for your product. Not all suppliers are equal, so you need to follow the process in this part to identify the most qualified factories.

At this stage, we helped Lanna Watches identified potential watch manufacturers in based in Shenzhen, China.

Estimated time: 2 - 3 weeksImage: Factory in Shenzhen, China (2016)

Lanna Watches AB ordered a Sourcing Report (PDF) from the Dashboard

Supplier Lists (PDF)We helped Lanna Watches identify qualified watch suppliers based on the following criteria:

● Product scope● Test reports● BSCI and Sedex certificate● ISO 9001 certificate● Registered capital

Next: How to source suppliers online

2.1 Finding suppliers online

Alibaba.com and Globalsources.com are the two largest B2B supplier directories today, and the only ones that truly matter. They provide extensive information about each listed suppliers that you can use to filter suppliers:

+ Main products+ Registered capital+ Product certificates+ Quality management certificates+ Social compliance certificates

Tip: Use this checklist to select minimum 10 suppliers that you contact to request quotations.

Q: Why do I need quotations from so many supplier?

Case Study: Watch Selection Criteria

● Main product: Stainless Steel Watches● Test reports: RoHS, REACH● Other: ISO 9001 and BSCI certification● Min 500,000 RMB registered capital

2.2 Request quotations

Reach out to at least 5 suppliers and request the following information

+ Unit pricing+ Minimum order quantity (MOQ) requirement+ Product sample cost+ Production time

Product Specification: Note that you must also send your product specification to the supplier. Without a specification, your supplier cannot calculate a unit price.

Tip: Follow up with the suppliers every 3 days until you’ve received product quotations. In most cases, it takes around 7 days to receive a quotation.

2.3 Select your supplier

Assuming you contact 10 suppliers, you can expect around 5 of them to reply back. It’s time to compare the quotations as soon as you’ve collected them. Compare them based on these factors:

+ Unit pricing+ Minimum order quantity (MOQ) requirement+ Product sample cost+ Production time

Tip: Don’t select the cheapest supplier by default. Whether they have product test reports and quality certificates is often more important than the unit price itself.

- It took 2 weeks to receive the quotations and several follow ups

- The customer selected Supplier A: Shenzhen Reik Watch Co., Ltd based on their

compliance track record, quality management system and competitive price (but…

not ONLY the price)

This is how it went for our client...

✓ Help you identify relevant suppliers for your product in China, Vietnam, and India

✓ Advice on the most suitable manufacturing country for your product

✓ Review suppliers you have already identified on your own

✓ Provide support throughout the RFQ process

Got questions?Use the contact form!

(We reply to all questions within 24 hours)

3. Product samplesNow that you have at least one supplier it’s time to order product samples. The purpose of this step is to test whether the supplier can actually make your product, according to your design and quality requirements. That’s not to be taken for granted.

At this stage, Lanna Watches had already decided to work with Shenzhen Reik Watch Co., Ltd. However, the real test remained.

Estimated time: 4 - 12 weeksImage: Product renderings

Q: Why do I need to order product samples?

A: To test your product and the suppliers ability to manufacture your product

3.1 Placing your sample order

You must prepare a Sample order terms sheet before you pay the supplier. This document must include the following:

+ Product specification file+ List of attachments (e.g. logos and design drawings)+ Sample production time+ Mould / tooling ownership terms+ Single payment only+ Additional sample remakes are free+ Maximum production time

Send the document to your supplier once you’ve drafted it. Request that they sign and stamp each page before you pay the sample invoice.

1. How much do sample costs?

2. How long does it take?

3. Can I send my product samples to the supplier instead?

3.2 Managing sample issues and delays

1. Don’t expect your supplier to come up with a perfect sample on their first try. Report all quality issues you identify to the supplier and request a new product sample.

2. It often takes at least one or two revisions before they manage to get the product sample right.

3. If the supplier keep failing time and after time, you should consider switching supplier. Don’t see that as a failure. After all, the purpose of this process is to test the suppliers ability to make your product.

Tip: Request the supplier to send photos and videos of your product sample before they send it via DHL or Fedex. That way you can spot quality issues early on, without the need to return the sample back to the factory.

Case Study: Watches

1. In the end, it took 2 sample revisions and more than 2 months before the customer had a sample they could approve

2. Lanna Watches supported the supplier during the process, and provided suggestions to all sample issues they found (i.e., missing logos, wrong colors)

3. Sending angry emails when a supplier fails gets you nowhere

And this was the result...

✓ 3A: Sample Order Terms Template

✓ 3B: Sample Errors/Issues Report Template

✓ We’ll help you fill out the template and provide support throughout the process

4. Placing your orderThis is when things get real, and you only have one chance to get it right. Placing an order involves far more than sending money and hoping for the best.

At this stage, Lanna Watches had pre-production samples and were ready to go ahead.

Estimated time: 4 - 8 weeksImage: Watch quality check (2017)

4.1 Prepare the Production Manual

The production manual is a document listing all product specifications, quality requirements and general order terms.

Why is this document important?

1. Communicate your product specifications and quality requirements to prevent quality issues

2. Communicate your product safety requirements to prevent compliance issues

3. Communicate how your quality assurance process works (to put pressure on your supplier to actually comply with 1 and 2)

4. Establish a framework for shipping terms, payment terms, late delivery penalties and defective products to save time and prevent confusion and misunderstandings

Validity

The order term sheet should remain valid for at least 3 years. As such, you can reorder from the same supplier without the need to reconfirm or renegotiate each new order.

Lanna Watches used Template 4A: Production Manual

+ Product specification file+ Attachments (e.g. design drawings and logos)+ List of applicable product safety standards+ MOQ requirement+ Defect rate+ Payment terms+ Late delivery terms+ Shipping terms+ Packaging terms+ Design and brand ownership clause

4.2 Deposit payment (30%)

Once the supplier Shenzhen Reik Watch Co., Ltd has signed and stamped the order term sheet, it was time to wire the deposit payment. Note that you should only pay 30% before production starts, and hold the remaining balance until these two conditions are met:

+ Condition A: Quality inspection approved

+ Condition B: Product lab test approved

IMPORTANT

1. Only pay to a bank account beneficiary whose name is matching that of the factory.

2. Never pay to offshore accounts, private accounts or those held by different companies. This will help you avoid payment scams.

The supplier started production after receiving the 30% deposit. All the customer could do at this stage was to wait.

4.3 Order follow-up

Once the supplier has received the funds, they should immediately confirm the production time. In addition, you should set the following milestones and request that they send photos:

+ Materials delivered

+ First unit assembled

+ 50% of the units assembled

Tip: Remind your supplier of the target deadline on a weekly basis. That way you show your supplier that you will not accept delays.

4.4 Book Quality Inspection

1. Quality inspections can be booked online (you don’t need to come over to Asia)

2. The inspection normally takes place once the goods are 100% completed

3. You must book at least 3 days in advance

4. Most QC companies have checklist templates, but you can also prepare your own

5. In addition, you must provide product sample images and your product specification to the QC agency

6. You will receive a QC Report (PDF) the day after the inspection takes place

Case Study: Lanna Watches

a. The quality inspection was executed after production was completed (delayed 2 weeks)

b. The QC company confirmed the quality checklist with the customer before visiting the factory

c. The QC report (PDF) was delivered 1 day after the inspection

This was checked

- Visual Inspection

- Dimensions

- Movement test

- Drop test

- Water pressure test

- Glass hardness test

- Packaging materials

Quality Inspection Result

Total Volume: 600 pcs

Inspected Quantity: 120 pcs

+ Minor defects: 4 pcs (Dust, minor marks)

+ Major defects: 1 pc (Malfunctioning movement)

+ Critical defect: 0 (None)

Result: The Customer approved the order

4.5 Book Product Lab Testing

1. Why is lab testing necessary?

2. Is lab testing mandatory?

3. What do I get after the lab test is completed?

Cost Example

+ Destination: United States+ Type: Heavy Metal Test+ # Products/Materials: 3+ Cost: $140 x 2 = $280

Case Study: Watches

a. Lanna Watches booked the compliance test via the Dashboard, 2 weeks before completion

b. The QC company collected 4 samples and submitted to the lab testing company

c. The client booked a REACH and RoHS test for the IP Rose Gold Case and REACH for 2 strap color variants

Sample Test ReportIssued by: SGS

Compliance Test Result

The compliance company requested batch samples directly from the supplier in Shenzhen. Exactly one week later, the customer received a test report with the following result:

REACH: Passed

RoHS: Passed

Hence, the customer could finally approve the batch, and wire the balance.

4.6 Balance payment

1. Lanna Watches paid the remaining 70% after both the quality control and lab test was successfully completed.

2. Due to the small size of the shipment, the customer ordered air delivery via DHL, to a fulfillment center in Europe.

✔ Project CompletedAfter 6 months, Lanna Watches successfully shipped their first product

(And you can do the same)

Order & Payment

✓ 4A: Production Manual

✓ Invoice Review (Reduce risk of payment scams)

✓ We’ll help you fill out the template and provide support throughout the process

QC & Testing

✓ Template 4B: Quality Control Checklist

✓ Book quality inspections

✓ Book lab testing

So, what did we learn here today?✔ Step 1: Create a product specification sheet

✔ Step 2: Research all mandatory product safety standards and labeling requirements

✔ Step 3: Use Alibaba.com and Globalsources.com to find the right supplier

✔ Step 4: Order product samples to “test” the supplier

✔ Step 5: Draft the order agreement before paying the supplier

✔ Step 6: Pay 30% before production starts and 70% after the quality (and compliance) is verified

✔ Step 7: Get your items quality inspected and lab tested before the balance payment

How do I take the next step?

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