Wondering how to stay ahead in today’s factory direct to consumer business trend? We bring with us an electronics design engineer and China business expert on the show – Christopher Oliva. He has been in Shenzhen for a decade and has plenty of knowledge from electronics engineering (he has a degree from France on it) as well as China manufacturing.
We dive deep on this one, Christopher shared a wealth of knowledge and I am certain this will be a top podcast, so please have notebooks out as there is so much value in this one. We had to make it 2 parts – so this is the first of a two part series, enjoy!
Topics Covered in this Episode
Can you introduce you , your company and your activities ?
How do you see the supply chain has been changing ?
supply chain has been compressed: before long time ago -> factory, trading/agent, importer, distributor, retailer; consumer before -> factory, trading/agent, importer, retailer, consumer; now -> factory, importer, retailer, consumer; tomorrow -> factory, consumer
How importers and buyer can still remain competitive and survive whereas factories go direct to consumer
innovate and product differentiation, Ip protection
What do you think about private labelling that more and more importers do to sell on Amazon?
1) Establishing a brand is good to value your product but there is a difference between building a brand and an identity vs putting a logo on a product. 2) I think simple private labelling is a short term strategy of surviving on very thin margins because having the same product than a factory who can afford to make only 10% margin on product BOM to live make the private labeller to be pressurized by cost. To remain competitive they have to push cost down which usually lead the manufacturer to push product quality down. 3) Today, I think we can see the most successful companies run on decent margin and have strong brand recognition. Apple make 50% margin on each iphone. Xiaomi only 10%….I don’t hear so much about Xiaomi anymore…. How to be able to keep product price high is only if your product is really desirable and differentiated from the other players. 4) I believe more in differentiation than on just taking a on the shelf product and putting a logo on it. But I admit that it is the most cost effective and the easiest way to do because it doesn’t require a lot of R&D fees and is quite straight forward, it just require cash flow…
What is the common mistake of start up doing when they arrive in china with new product to develop and manufacture
1) They believe a manufacturer is capable to do product development => actually manufacturer are not capable to do this, and don’t want to do this -> what they want is to manufacturer in high quantity with decent margin, not waste their time in product development. They listen a manufacturer who say they can do something without really evaluating their capability of doing it. 2) Quite often they don’t assess properly the engineering skills of their partners. They don’t assess them well because they don’t have themselves the skills, so obviously they have limited objectivity to evaluate those skills. Still a few simple technical questions usually allow to evaluate engineering capability. 3) manufacturer quite often will subcontract the dev to some product development company behind them, start up usually doesn’t know it. 3.a) design is going everywhere in an uncontrolled way => given to competitor sometimes. 3.b) lack of control on the supply chain , as local chinese engineering company have different business model => they don’t sell design services but product, so they supply pcbs for example but don’t tell where the components are coming from. 3.c) manufacturer will get tired of endless change and tweaking. 4) Startup believe that because a factory have many workers, their product development and manufacturing will be fast and reliable. Actually there are no relationship between both. What count for product development to be fast and reliable are the skills and experience of engineers and designers. 5) They develop product with an unoptimized bill of material (western components), so they are not competitive enough. 6) They give their full idea to chinese manufacturer who then become their competitor sometimes
How do you evaluate properly product development capability of a supplier
1) First I verify if they own the sources files of the product they manufacture. This include PCB design files, BOM, CAD files. If they tell you, “the files are with our engineers and he is not here so we can not show you », it already smell bad. 2) Verify they can make modification quickly on those files. Sometimes they have the files for production but they don’t have the skills to modify them. It means they didn’t design and engineer the product themselves and have limited control on it. 3) I usually challenge them on very deep technical question. I usually never talk with the sales, I would talk with the so called engineer. 4) I know it can be difficult for a start up who have not too much experience on this because if you don’t know yourself how to design a PCB or a mechanical part, then how can you control what the so called engineer tell you is true or not….
How do you work usually with startup who want to develop new products in China
1) I usually first look the project with an investor eyes because after all we have limited time and resources and product development phase is quite complicated, have some risks of failure. Failure can come from many parameters: design, technology availability, price point, market size, competition, lack of marketing. So when someone submit to me a project for product development, I assess the potential success of the project the same way a funding investor would do. 2) PHASE 0: Then I usually check if they have done a feasibility study (technical and economic). If they didn’t and if the product has risk of failure, then I would propose them to make one with us. It usually allow to quickly spot bottlenecks, risks and limitation and we know where we are going in terms of budget. 3) PHASE 1: Product Development phase: Product development phase start with product design, then engineering, then prototyping, then pre certification . This is the most complex part and this is where you really need to have some skills and experienced people: Engineers of course who really know their topic and are good at it, but also a proper PM or CTO who has experience on project management, has engineering skills , but who also understand designers, manufacturer constraints and legal constraints. This phase is the most complicated because it has many parameters to manage simultaneously. If the whole team is not well coordinated or if someone miss the skills to perform well his tasks then the whole product development phase success is at risk. 4) PHASE 2: Pre mass production phase: Typically, here we prepare the procurement phase and the manufacturing phase: This can be tooling establishment, manufacturing procedure via a quality manual, quality assurance. This help to frame tightly the mass production and manufacturing activity and limit the volatility or variance of product quality. The ideal candidate to manage this is someone who know well and is clear about manufacturing process and tooling manufacturing. 5) PHASE 3: Mass production: Procurement,IQC, Assembly, Final QC, Packaging. For me this is the most easy phase because once a product development is stabilized and a reference sample is established, then mass production is only about duplicating. Duplicating with proper quality and speed outcome rely on organization and process, so if you know them and are clear about it, then your production will go smooth. However, I usually insist that you should not only rely on your manufacturer to make all this framing work. Here the ideal candidate to manage this is someone who have experience in troubleshooting manufacturing and quality issue. Someone who had experience in fixing production and quality issue.
X rules for successful manufacturing in china
- understand process of manufacturing your product
- perform deep due diligence and audit on manufacturer skills and process
- anticipate problem by performing risk analysis and bottlenecks on mass production
- always perform quality control before shipment
- keep hand on supply chain procurement if you can
- divide and conquer if you can
X rules for successful product development in china
- have someone who is really technical to manage the product development, someone who is hands on and passionate about engineering and design
- anticipate manufacturing and certification issue very early in the design
- sources engineering skills (brains), not workers skills (hands)
- be clear about what you want from the beginning to be very directive on the product development
- keep hand on product development sources files (the 4 keystones)
- register your IP if you can, it is not that expensive
People / Companies / Resources Mentioned in this Episode
He Has 2 companies:
√ PAG-electronics.com (agency)
√ Asia Quality Control (board member)
√ Christopher Oliva
√ GFA Apprentice Program
√ GFA Local chapters – thanks for work on this Andrew
√ GFA’s new e-commerce series podcast (same GFA channel!)
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Episode Length 44:17
Next week – check out part 2 of this series – it is such an amazing show we had to make it a 2 part I didn’t’ want to stop him during the interview! Next week we will dive into overseeing your product manufacturing – specifically for a newly designed and engineered electronic product.
This series is pure gold and I can’t wait to see how people use it in their product based businesses!
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