with Laurier Mandin, Andreas Schwabe and Daniel Sande on November 28, 2019
Every physical product brand owner considers manufacturing offshore at some point, weighing the benefits against risks — which are myriad but can be mitigated if you know what you’re doing. Learning through trial and error is costly and insanely stressful. That’s where people like Daniel Sande come in.
Daniel is a manufacturing sourcing consultant. He found success in people, and uses technology to communicate with manufacturers, plus he’s establishing a networks of people in China who can put eyes and hands on products as they come off the line to verify everything is according to spec, including packaging, shipping, labelling and customs.
Daniel Sande is Managing Director of HotShot Sourcing, a consultancy that helps product brands source bulk orders, packaging, and custom-branded materials.
Andreas: This is Product: Knowledge, the podcast about marketing products that improve people’s lives. I’m Andreas Schwabe, director of media services at Graphos. Manufacturing in China is different. How different is hard to describe if you’ve never seen it. It’s not that there are factories, there are cities of factories, and those cities often specialize in a particular kind of manufacturing, say, cat toys.
Andreas: Competition is extreme and cutting corners is really common. Having a good idea for a product is one thing, but you can’t exactly open the Yellow Pages and find which city of factories specializes in laser pointers, so where do you even start? Daniel Sande is a manufacturing sourcing agent. He found success in people. He uses technology to communicate with manufacturers, but he’s establishing networks of people who can put eyes and hands on products, verifying everything is according to spec, including packaging, shipping, and Customs. Graphos CEO, Laurier Mandin and I talked with Daniel Sande in the Graphos Studio. I started by asking about his background and how he became a sourcing agent.
Daniel: It came really out of the blue. I’ve got no formal education, been in the entrepreneurial world for about five years. 14 months ago or sorry, 16 months ago I should say, I started a company called Phi by Nature. Our name of the game was basically to rebrand eco-friendly products, ship them over from China directly from the manufacturer, and start developing a brand. Kind of bit the bullet, didn’t know enough about the backend of the sourcing and the logistics, all that kind of stuff, and saw enough pain points in that, lost enough money that were like, “Hey, there’s probably no business to be made out of this,” and so there you have it. We stepped into the sourcing world and started working with a lot more clients on the import/export.
Laurier: I know absolutely that you’re onto something because the pain points you saw there are something that so many of our clients have been through, and have experienced, and struggled with. Can you tell us about how it is that you help inventors and product brands to find a reliable manufacturer overseas?
Daniel: Yeah. So there’s a little bit of a process to it, but it’s quite a clever one. I’m not sure if you’ve ever seen the show How It’s Made, but that’s kind of how I feel what we work with. So I have a very wide knowledge of factories, and how they all put together, and how they all work. So it’s pretty much taking, let’s say, like a pet product, for example, a company that wants to source a pet product. We take that, and there’s hundreds of different factories that will produce pet products. But then, you go into it, and you’re basically checking boxes to see who’s fitting proper certification, maybe an eco-friendly aspect to it if that’s the qualification.
Daniel: A big thing for us is ensuring that none of the products that we’re directly responsible for finding are made through not very worldly work ethics or sourcing out child labor and stuff like that. So when we check off the boxes, we might have a list of a hundred, and then we break it down to a list of 10, and then specify it off that.
Laurier: Well, and you work directly with sourcing agents, right? Like you have boots on the ground in China, I believe, that… people who can go and check out factories?
Daniel: Yeah. So that’s a big thing because I can’t personally be there, having trusted individuals over there that we have standing contracts with or longterm relationships even. So, I mean, some of the guys that I work with personally, we’ve had relationships with for three to five years, even before this business even had an idea of it. Right? So when a request comes up that we either need a video tutorial of the manufacturer or we want to see the product before it ships off, boom, I have somebody there in 12 hours. They do a walk-through, they Skype me in, and we can have a direct conversation there, so.
Laurier: Yeah, so you can have somebody on the line, right when the product is coming off?
Laurier: So you can see what’s happening and look at those first products coming off the production line?
Laurier: If there’s a problem, you don’t have 100,000 of them. You can see it on item number 23?
Daniel: Yeah, definitely. So it really helps with the quality control aspect of it because a lot of fear that people have whenever anything comes from China is there’s this widespread knowledge that it’s fragile, it’s breakable, it’s poor-produced, all this kind of stuff, and to an extent, there is. There’s a lot of really quickly-made, cheap stuff put out onto the market. We really try to go for that 20%, and so having those people on the ground to check the quality before it even gets shipped over really assists in the process and makes our clients happier at the end of the day.
Laurier: Yeah, and to people who are in other parts of the world, whether you’re in North America or Australia, it’s really hard to imagine what the factory environment is like in China or Taiwan because here we might have, you know, a factory in the city that produces a certain type of product, but in China, it’s really different. Right? Tell us how that is different in China.
Daniel: I think the biggest thing, and you’ve seen it come up, and I know that China and Japan differ, but I mean, even the Lean principles, and Lean Six Sigma, and the way that we’ve kind of developed and operated that, and our principles of manufacturing here, it’s extremely well-organized, so there’s not excess moving around. You think about trying to being as populated as it is, and the fact that they have as many factories in so many different industries that they do, well, how are they… Sometimes you think about a factory that might go into making a protein shaker bottle, for example, and you’re thinking, “Wow, this has got to be a pretty, pretty big scale factory.” No, they’re just extremely space efficient.
Daniel: So you have efficiency in every aspect of the production line that takes what you would think could be done in a 4,200 square foot warehouse or square foot shop, and it’s done in 1,500 square feet extremely efficiently, and it’s all shipped out. So it’s crazy to watch that, the way that they build up, the way that they tear it. It all comes down to the product, like the line efficiency.
Laurier: Yeah, and the competitiveness is different too, right? I’ve got a client who produces fishing lures, and he’s been to China I think about five times now to create those relationships, and to check how things are going, and to talk to the people, and meet with the people, which is something that you do for your clients to save them all at that cost and effort. But he’s told me that in the city that he goes to where he’s getting these lures created, it’s essentially a city of fishing lure manufacturers. That’s again very different from how we’d perceive something like that where you can go next door and get your lure made by those people next door.
Daniel: Mm-hmm (affirmative). Yeah. I think it’s all… So I haven’t personally been over there yet, which is something that I’m going to be doing in the next few months. So for me, the video aspect is really powerful for me, but my business partner, Kyle, he talks about it that you drive through, and you can literally tell which area of operation you’re moving into. Are you in the fishing lure city, or are you in the pet, or are you in the industrial or whatever it is because it is all grouped together.
Daniel: So it does add that extra competitive edge because instead of… Sometimes, in our market in North America, you might have a competitor, but you’re not seeing them every single day. They might pop up on your social media or something like that, but you wake up in China, and you are in a factory that’s in fishing lures. You look next door, and you see the competition right there, so you’re that much more motivated to get your product out looking better at a better price and more efficiently, so it definitely adds a bigger edge to it.
Laurier: For sure. Yeah. I know there are some really big risk factors involved with shipping overseas. Can you tell us about some of those risks and how you help your clients to mitigate those?
Daniel: Yeah. I think the biggest thing that a lot of people don’t understand is education is key. So that’s what really bit us in the beginning was we didn’t do enough research into even freight forwarding services, for example. So what happens to your product once it goes from the factory lands in the port over on the coast of Asia there, and then what happens when it’s on the boat, and what happens when it gets off? Right?
Daniel: The one thing that I remember when you spoke at the event that we had at Adventure Phi, and I mentioned like, “Get to know every chain or point of… touch point in the process. So if you’re doing this independently, you want to know the freight forwarding company. You want to know the people that are offloading and unloading your product at the warehouse. What is it going on to? Is it being put on to a train, or is it being put on to a truck once it reaches Canada? Understanding all of that gives you a better aspect of timeline because… I was just able to do a turnaround on a project in 21 days that most of the people were quoting out at 45. Right? So how is it that I’m able to do that when most people can’t?
Daniel: Well, it’s just because I understand the process. I understand where we can save 12 hours here or 18 hours here, and then that all adds up over the course of time. But the biggest thing is too many middlemen in any process inflate the rates a ridiculous amounts, and so you’ll see the margins that get put on shipping sometimes just makes me want to throw up. It’s so bad like you can have a product that will cost $2, and by the time it touches down over here, if you go through the wrong provider, you’re looking at $6.50.
Laurier: That’s super important too because in manufacturing, in a product business, getting those margins down is so critical to being profitable that if you’re losing a whole bunch of unexpected money in getting the product from there to here, then you’re not profitable and you need to be able to… The sooner you can solve that, the sooner you could reach profitability, right?
Laurier: I know another thing you help with is in labeling products or in helping clients to make sure their products are labeled properly and in moving through Customs from one country to another.
Andreas: This is Product Knowledge, the podcast about marketing products that improve people’s lives.
Laurier: What are the risks when it comes to labeling and what the product, the packaging says?
Daniel: Well, I think there’s two ways to it. The first part of that conversation is making sure that a product isn’t coming out that’s already patented, making sure that there’s no patenting being broken because what… Some parts of the Customs program we’re doing right now is for companies that have big lawsuits going on overseas with manufacturers because their product has been ripped off, Customs flags them because they notice that it’s a patented product that’s being put as something else, and it hasn’t been branded with the company’s lettering on it, right?
Daniel: So it will actually get flagged at Customs for that reason, so you have to make sure that as long as… PopSockets, for example, those little stands that go on the back of your phone. They’re getting flagged at Customs because there’s so many factories overseas in China that are trying to produce these as one-offs, right? So there’s that aspect of it. You want to make sure that you’ve got a unique-to-you or a legal product that you’re working with, that it’s not breaking any patent laws.
Daniel: The second thing to that is if you don’t have the product or the place of origin on a product that you’re bringing over, if you don’t have a “Made in China,” or a “Made in Vietnam,” or something like that, it can get flagged at Customs as well, and they will not move your product until you go ahead, and go to where it’s being held, and label every single one of those products yourself, and provide the documentation to release that product seriously.
Daniel: So that that turnover that we did in 21 days, it was for bear bells, so sleigh bells for a Christmas festival out in Toronto. Last year, they brought in a similar product, and the “Made in China” stickers fell off of the first box that they opened, so they fell off in the production line and weren’t on. Some of them had them. If you’ve got a thousand boxes coming in, Customs isn’t going to open up a whole thousand boxes. They’re going to open up the first 10 and the last 10 or something like that. Right?
Daniel: But if you have missing information like that, they’ll flag the whole load, and you’re talking about 7 to 21 days of product being held, or then you start talking about even forfeiting the product because it’s not worth it because if you’ve got a dollar product, you’re not going to fly to Vancouver or fly to Toronto and go label every single one of those things. You’re just going to forfeit it and go do it again.
Laurier: Well, tell me how it works with your sourcing agents. I know that they… in finding the right factory and in identifying that that one is going to be reputable more than others, and then there’s getting samples. What are the other roles of a sourcing agent in making sure that the factory you’re choosing is going to be a good one to work with and is going to have the least likelihood of costly issues?
Daniel: Yeah. I think a big thing is we have the ability to pull up direct numbers on what factories have done. So especially with my agents overseas, there’s networks that you can go on to, and you can figure out exactly how much these manufacturers have served, what their business is, if they’re fluffing their numbers to you, if they’re actually giving you the raw facts. So being able to check that and say that in the initial conversation, you’re taking good notes, you’re making sure that you’re double-checking what’s coming out of their mouth.
Daniel: Another thing is we try to avoid a lot of the miscommunication, and what I typically like to do is if a client comes to me and has a product that’s already similar to something that’s on the market, I ship it directly over to my team overseas, and then they’ll take whatever time is necessary, if it’s a couple extra days to figure out, is there a manufacturer that produces this exact same product?
Daniel: If that’s it, like if we… We brought in rolling papers like hemp rolling papers, for example, for cannabis companies, and dispensers, and stuff like that. So when we did the cross-checking, we found the same company that produces one of the top brand rolling papers in the world, and that’s RAW Rolling Paper. So we found the exact same company that did that, so we know that the quality is there.
Daniel: We know that they’ve got good policies and procedures in place, and when we presented them with an opportunity for an NDA or a non-compete clause and stepped into the more of the paperwork and stuff, they didn’t hesitate because they had nothing to hide. Right? So working with the companies that are producing those exact products that we’re trying to go off of, it’s easier for them to modify their production line to put a different top onto a bottle or to put a different packaging around a piece of paper. Right?
Andreas: Let’s do an example. Let’s say I want to create a laser pointer brand.
Andreas: I go to you and say, “Okay. I want to create a laser pointer brand.” So what do I do next?
Daniel: Yeah, biggest thing is finding… is there something on the market that resembles something similar to you. You’re going to identify the pros and cons. You’re going to say, “Hey, there’s this laser pointer I bought at the dollar store. It’s got a lot of really simple components to it, which I enjoy, but the exchangeable tips, I don’t like too much. I don’t want the smiley face or I don’t want the little skews that they give you on top of that.” Right?
Daniel: So figure out where you want to change it, and then the next step to that is we’ll figure out who’s producing these things. Is it multiple different factories? Is it one that’s doing all multiple different products? Then, we figure out at what point in their minimum order quantity is making those types of changes acceptable because you can’t walk into a factory and say, “I want to change the tip of this laser pointer, but I only want a hundred units.” No. If it’s completely going away from what they’re already putting out, it’s not going to happen. Right? So you have to work with that.
Daniel: So the next step is figuring out how many of those do you want, what’s the price tag that you’re willing to pay, and can we kind of work and give the factory something to get excited about too because I really believe that you get treated the way that you treat other people, right? So when we walk in there and say, “Hey. Hey, guys. Here’s 500 bucks to start this project. Let’s go ahead and make some adjustments to this aspect, this aspect, or let’s make the button a little bit more firm,” and we kind of tweak that. Once they figure that out, we go through probably about two, three samples maybe back and forth until we find that golden sample. That golden sample is going to be the identical version of the product that you want to put out into the market, and then we push play and start the manufacturing process.
Andreas: Then, once manufacturing is done, how do you handle… Do you do manage the packaging and shipping as well?
Daniel: So sometimes for smaller products like that, there’s a lot of packaging companies that operate or I should say there’s a lot of packaging options that operate off the same factories that produce the product. If not, there’s manufacturers and factories that just do packaging. So sometimes there’s a couple more changes of hands. I know for a project that we have going on right now, we are doing pet products, and it’s getting produced in one factory. Then, it has to get shipped to a packaging factory. They take it all out of the bulk packaging, put it into the individual bubble wrapping and their boxes, repackage it, and then it goes to port. Right?
Daniel: So we figured out, “Is there an in-house option for that, or do we have to outsource to another packaging option of that?” It’s great if we can hit it all in one, but that’s not always the option, especially if you’re going for a unique-to-you product, so something that you’ve spent a lot of time and money engineering, for example, and going through the whole product development phase of it.
Daniel: Having somebody that can be on the ground there that if something happens legally, you have an individual that can show up in court, and can fight for you, and can speak the language, and can do the communication with that. So having that aspect covered, whether you have to go contract that out or go to a company that can offer those services, knowing that that’s an option and being able to price it out in the worst case scenario is the best thing because when factories and people overseas know that you have that backing, there’s less opportunity for them to potentially slip and try to take advantage of you because they know that you can’t retaliate or you can’t fight back if something does go wrong. So that’s a big thing. Boots on the ground is my biggest thing.
Daniel: The next thing is before you do anything, it’s to think before you jump, and the research, and everything like that. I’m not sure if it’s just me, but I’m very quick triggered, but I’ll say yes to something, and I’ll dive in on something, but I’ll also work 10 times harder to figure out what’s needed to go into it before I actually start it. So education and knowing the industry, and knowing all the elements that go into it, whether you have to go ask a dozen people or you go read 20 books and listen to a bunch of different podcasts. So jumping into that is another big thing.
Daniel: Then, the third thing is walk into any project overseas with a little bit more money than you expect. Going the extra mile financially is going to pay off so much more in the long run. Like I would rather pay 20 cents more or 30 cents more on an item and know that it’s going to come out exactly the way I want it to rather than try to shortcut it because you get exactly what you pay for.
Laurier: Yeah, and you’re cutting corners already by manufacturing overseas, right? Don’t cut corners on the corners because pretty soon, you have nothing left.
Daniel: Yeah. Yeah, absolutely.
Andreas: That’s it for this episode of Product: Knowledge and our conversation with sourcing agent Daniel Sande. Visit graphosproduct.com where you can find out more about Graphos, our services, ideas, or more podcasts, and our blog. All our podcasts are transcribed for the deaf and hard of hearing. Reach out on Twitter at Graphos Product or email us to the forum on graphosproduct.com. Thanks for listening. I’m Andreas Schwabe.