A Common Scenario
Company ‘A’ finds a product manufactured in China, not necessarily a custom product, but one that’s fairly new and could be sold to a particular industry, or to current customers. They check it out, and sure enough, it’s a useful product and there’s a market for it. Therefore, Company ‘A’ begins to sell this factory standard product packaged in their own unique packaging, with a custom product sticker, and with their company name and logo on it; and maybe even with its own unique name. Even more, Company ‘A’ has the standard instructions printed with their company logo, contact information, and unique name for the product inserted on the box.
Over time, sales remain good and life is good. Furthermore, Company ‘A’ gets great markup because they’re buying the product at an extremely low price. However, what they may not realize is that the reason for this very low price is because the China factory is running very large production runs on this particular standard product. The quantity that the Chinese manufacturer produces is far greater than what Company ‘A’ could ever sell. Yet, because this product is “standard’ or “off-the-shelf”, and not a custom product, Company ‘A’ can siphon off the small quantity needed, and make a large profit. The customized packaging, sticker, and custom printed instructions are minor costs.
The issue that often arises in this scenario is when Company ‘A’ has a need to differentiate their product from other companies that are also selling this product for less. Because this product is ‘in essence’ a commodity, the greater the number of companies that buy and sell this product, the lower the sell price tends to be.
Why Industries Change
Another scenario arises when the industry that Company ‘A’ is selling into changes- to the point where the product lacks a feature that would keep it current and desirable. As a result, Company ‘A’ contacts the China factory and asks for modifications to that standard product. Company ‘A’ doesn’t understand why the China factory “doesn’t understand the modification” being requested, or why they “do not respond” to their requests. Soon, Company ‘A’ begins to realize the difference between a “factory standard” product and a custom product.
There are a great many scenarios as to why a China factory may not be responsive to a company’s request for modification. The most common and likely reason is a China factory manufacturing a standard product knows how to manufacture that product very well, and they aren’t willing to change. They are not interested in re-training their workers, modifying their manufacturing procedures, or changing their suppliers. Another related reason may be that the factory is accustomed to running very large quantities of products (“mass production”) for various companies, and it wouldn’t be feasible to do smaller production runs for any one particular customer.
A third and real-world issue is that some US companies have no (or limited) engineering and/or prototyping expertise, or have no contacts that can provide those services. Therefore, they are dependent on the China factory for any changes, modifications, and enhancements to that product.
Company ‘B’ sees an opportunity to sell a particular product to an industry. They do their research and learn they have what they think is a winner. They document engineering drawings, BOM, and other necessary details, and make a prototype. Company ‘B’ also tests it and perfects it. Then they contract with a full-service offshore contact manufacturer like ITI Manufacturing, to have it produced by a reliable China factory uniquely qualified to manufacture that custom product to their exacting specification.
With ITI Manufacturing’s “no manufacturing defects” guarantee, Company ‘B’ is assured every shipment will match their approval sample. They can also rest assured that when the time comes to change/improve the product to keep it viable in the marketplace, their ideas and documented modifications will be faithfully communicated, sampled, and produced with the same no manufacturing defects guarantee as the ordinal product.
Custom product testing and inspection, seamless integration with freight forwarding companies, and international supply chain management services, are all part of what ITI Manufacturing brings to the table for our customers – with competitive landed pricing. We’ve been in this business for 43 years, and we know how to successfully do this for you!
Contact ITI Manufacturing
When it comes to custom manufacturing, it’s not as scary as some may presume. Learn how ITI Manufacturing can help you. When choosing a manufacturing partner, it’s important to work with a provider that can change to meet your company’s requirements, rather than a manufacturer that expects you to change your requirements to meet an already established standard. Working through our professional team at ITI Manufacturing, you partner with Chinese manufacturers that produces to your specifications, not theirs. Connect ITI Manufacturing today. Call (281) 242-7030.