Ultimately, your costs will make or break your business. In this article, I explain what importers must know about costs when manufacturing products in China, Vietnam, India and elsewhere in Aisa.
This is covered:
- Product Design Costs
- Sourcing Services
- Molds and Tooling
- Product Samples
- Supplier Background Checks
- Factory Inspections
- Quality Inspections
- Lab testing
- Ocean and air freight
Product Design Costs
Asking your supplier to support your product design process rarely ends well. First, manufacturers are rarely interested in spending countless hours helping non-existing customers to create product design drawings and bill of materials.
At best, they may help existing customers to tweak design drawings and get the product specification manufacturing ready.
As such, you will either need to hire your own product designers, find a freelancer or work with an agency. Either way, you’ll need to budget for product design expenses - which can range from a few hundred dollars to several thousand - all depending on the product and its complexity.
Sourcing Services
Sourcing and procurement agencies can help you reduce the burden of finding suppliers, quote requests and follow-ups. Supplier sourcing and RFQs can be incredibly time consuming and frustrating. It often takes several follow-ups and close reviews of the quotations before you can identify a qualified supplier.
Sourcing Agent Price Models
The cost depends on the scope of the service requested. A basic supplier shortlist can be purchased for around 100 dollars, while more extensive sourcing services can cost significantly more.
- Fixed prices
- Hourly rate
- Commission
Molds and Tooling
Custom designed parts require injections molds and other types of tooling. For example, making a custom-designed wristwatch requires a number of molds and other tools:
- Watch case mold
- Crown mold
- Hands tool
- Indexing tool
- Clasp mold
- Leather strap cutting tool
Molds and other tooling is always paid for by the buyer, not the supplier. The tooling cost is multiplied by the number of tools needed to make your product.
You can reduce the tooling cost by using standard components (also called ODM or factory designed components). Sometimes it’s even unnecessary to get parts custom-molded as there are standardized alternatives available.
Tip: Some suppliers are willing to deduct the tooling cost when you place a MOQ order (or more). That said, you may only get this offer if you ask them early in the process.
Product Sample Costs
Other than material samples, manufacturers rarely offer free product samples. The cost depends on the product type and is generally 3 to 4 times the standard minimum order quantity unit price.
If tooling is involved then most suppliers also bundle the product sample together with the tooling cost.
Product samples can cost anything from a few dollars to several hundred. In addition, the air courier fee is normally around $40 to $50.
Supplier Vetting
When working with a new supplier for the first time it’s essential to assess their capabilities. Luckily there’s a variety of service providers that offer supplier document checks and on-site inspections.
Supplier Background Checks
Supplier background checks normally involve the verification of the supplier’s business license, product certificates, bank account details, and buyer references. Supplier Background Checks normally don’t involve an on-site inspection.
However, such services are often as effective when it comes to assessing the supplier’s product scope, supplier type (e.g. a manufacturer or trading company), compliance track record and fraud risk level.
Supplier Background Checks normally cost between $99 to $500, depending on the complexity and how much information you want on the supplier.
Factory Inspections
Factory inspections take place on-site. The purpose of a factory inspection is to benchmark the supplier’s internal quality management system - and verify if it’s even a factory, to begin with. It could turn out to be just a postbox company.
Factory inspections are normally priced from $200 and up.
Quality Inspections
Quality inspections are essential when importing products from Asia. Returning defective products to your supplier is not something you can count on, even when they have caused severe quality issues.
As such, you must get your products quality inspected before the shipment.
You can book quality inspections from around $200 and up, per man day. One-day inspections are normally sufficient, but larger volumes may require that you send more than one inspector to the factory - which therefore increases the cost.
Lab Testing
Verifying if your product conforms to certain safety and chemical standards can only be done through lab testing. Lab testing is generally mandatory (or strongly recommended) when importing and selling products belonging to any o the following categories:
- Toys and other children’s products
- Electronics
- Medical devices
- Kitchen appliances and other food contact materials
- Upholstered furniture
Lab testing costs range from a few hundred dollars to several thousand. The lab testing cost depends on the following factors:
- Product type
- Number of products
- Number of materials
- Number of colors
Ocean and air freight
Shipping costs depend entirely on the weight and volume of the products, origin and destination. When it comes to air freight, the cost is primarily calculated based on the cargo weight. Ocean freight is different, as the weight doesn’t really matter - it generally all about the cargo volume.
Cost examples
20’’ FCL (Ocean Freight)
- Shenzhen – New York: $2,275 – $2,515
- Shenzhen – Felixstowe (UK): $1,435 – $1,585
- Shenzhen – Hamburg: $1,440 – $1,590
- Shenzhen – Sydney: $685 – $760
- Shenzhen – Singapore: $270 – $295
- Shenzhen – Dubai: $1,445 – $1,595
Note that these figures are outdated but still relevant as they give you a cost indication.