After understanding the product, we can then break down the components of the product. Take an electric toothbrush as an example. It consists of a rechargeable dry battery, a micro DC motor, a battery box, a toothbrush head, a solution motherboard, a shell, plastic parts and a metal guard plate. We should understand and collect the upstream supply chain of the product and compare the scale and quality of each supply chain. If the product sold by the seller is not independently designed and developed, it is necessary to summarize the design, structure, cost and problems of each product provided by the supplier, and compare and analyze them, and then select the most suitable supply chain based on the various indicators of the supplier, which takes 30 to 60 days.
Finding a supply chain is an important part of product development, which determines the final quality of the selected product. First, I would like to propose a concept – “industrial cluster”. Simply put, a cluster is a phenomenon in which companies in the same industry gather together. Industrial clusters have five characteristics: obvious professional characteristics, a certain scale, a complete supporting system, a complete industrial chain, and standardized government services. China now has more than 100 industrial clusters, of which about 80% are located in coastal areas. Most industrial clusters are distributed in Zhejiang, Jiangsu, Guangdong and Shandong provinces. Each region has its own advantages, such as raw materials, parts, cheap labor, professional labor or logistics advantages. If the buyer purchases from suppliers located in the corresponding industrial cluster, these advantages will become the buyer’s competitive advantage.
What are the advantages of cooperating with suppliers in the industrial cluster?
First, the labor force in the industrial cluster is relatively abundant, and the factory can save a lot of labor costs. Skilled and cheap labor is easy to find in the industrial cluster, so the production cost of the product is low, the workers in this field are good at producing specific products, and the quality of the product can be guaranteed.
Second, there are many manufacturers in the same industry in the same region, and there will be price competition among them. They can provide low-cost and attractive quotations, and sellers have more choices.
Third, there are many upstream supply chains in the region that provide parts for the factory’s final products, forming a good product infrastructure. This helps the factory to adjust the production cycle more flexibly and usually speeds up production.
Fourth, due to fierce competition, the region where suppliers gather has relatively advanced machinery and equipment, which can better meet the product style and process requirements.
If you understand the distribution of industrial belts, you can find two or three industrial clusters of products, and you can make analytical comparisons of products, such as distinguishing quality levels. For example, in terms of safety shoes, China has three industrial clusters: Guangdong (high quality), Wenzhou (medium quality) and Shandong (low quality).
It may be difficult for sellers to know the specific production areas of each product, but they can start from the province and city, and then visit the production cities of the products, which has exceeded 80% of the competitors.
Sellers can start by getting familiar with the industrial belt and gradually build up the accumulation of the supply chain. The sorting and analysis of the supply chain is the core link of decision-making product production management, especially when new sellers are exposed to new categories and don’t know where to start. First of all, new sellers need to visit the factories of category products as much as possible. First, find out the factory address through the website, and choose a factory that is closer to visit on the spot. Due to business needs, the factory welcomes new customers to inspect. Sellers can get the overall supply chain of category products through repeated communication with multiple factories, such as the OEM factories of big brands, factory scale and establishment time, annual sales volume, characteristics of factory managers, factory environment and other information, and classify them into A, B, and C. Grade A is the best quality factory, Grade B is the factory to be improved but can be considered for cooperation, and Grade C is the factory that is not considered for cooperation, but can be continuously observed.
The advantage of cooperating with A-level factories is that they have better quality control, because factories that cooperate with big brands, especially those that cooperate with internationally renowned brands, have relatively complete supply chain control processes and will definitely carry out relevant qualification certification. However, these factories generally receive large orders, so sellers need to learn about industry information from many aspects of the factory and become professional as soon as possible, otherwise the factory will not pay attention to a seller who is neither professional nor has a small order volume. Through specific analysis, sellers can choose suitable factories to cooperate with according to their own characteristics and category characteristics.