How to Find a Perfect Factory Size Manufacturer Partner in a Foreign Country?
Having a reliable overseas partner is one of the most critical factors for successfully manufacturing products. A common question arises:
What is the ideal factory size for my project?
This fundamental question doesn’t have a simple, straightforward answer. Many factors determine whether a manufacturer is a good fit for your project, and one important yet often overlooked aspect is the impact of your order on the manufacturer and the size of their factory.
Table of Contents
What is an Ideal Factory Size?
Many small and medium-sized businesses (SMEs) want to partner with industry-leading manufacturers, believing that large factories like Geoby or Foxconn in the electronics industry must produce the highest-quality products.
While this logic makes sense, it may not always be the best option for every business. Your ideal manufacturer depends on your business model, the complexity of your product, and the volume you plan to produce.
Most importantly, you need a manufacturer who is the best fit for your company, and factory size plays a crucial role in that decision.
Large vs. Small Factories: Which is Better?
On one hand, large manufacturers may have the necessary workforce, machinery, and facilities to handle bigger orders in the future while maintaining quality and delivery time.
However, large factories might not prioritize your orders since your volume might be small compared to their other clients.
On the other hand, working with smaller factories may mean your order receives more attention, but they might lack the resources to rapidly scale up production.
The sweet spot is when your order represents between 2% to 15% of the manufacturer’s annual sales, ensuring your order is taken seriously while leaving room for future growth.
What is the Optimal Factory Size and Minimum Viable Factory Size?
Unfortunately, there is no one-size-fits-all answer. The optimal factory size depends on a complex interplay of several factors, such as:
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Production Volume:
- Optimal factory size is directly related to your expected production volume. A factory that is too large may have high overhead costs and idle resources, while a factory that is too small may struggle to meet demand, leading to frequent expansions and production interruptions.
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Product Complexity:
- Simple products: Factories producing simple products can often operate efficiently at a smaller scale.
- Complex products: Factories manufacturing complex products with numerous components typically require larger facilities with specialized equipment and skilled labor, increasing the minimum viable factory size.
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Level of Automation:
- Highly automated factories: Can operate with fewer laborers, reducing the minimum viable factory size. However, the initial investment in automation is substantial.
- Labor-intensive factories: Require more space and personnel, driving up factory size.
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Location and Operating Costs:
- Labor costs: In regions with lower labor costs, you may rely more on manual labor, allowing for a smaller factory size.
- Land and building costs: In high-cost areas, smaller, more efficient factory layouts are preferred, especially when space is limited.
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Market Demand and Growth Potential:
- Stable demand: If your product has stable, predictable demand, you can plan a factory size that meets current demand with room for modest growth.
- High-growth markets: If the market is expected to grow rapidly, you may need to choose a larger factory from the start or select a location with room for expansion.
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Factory Size and Physical Space
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- Understanding the factory size is critical. The average factory size (in square meters) can vary significantly depending on the industry. For example, the average size of electronics factories tends to be larger than textile factories due to the complexity of electronics and the need for specialized machinery.
How to Choose a Manufacturer with the Right Factory Size?
When looking for a manufacturer, there’s no foolproof way to avoid issues, but setting the right criteria can help increase your chances of success. Here are the key points to consider:
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Focus on your product category:
Choose a factory that specializes in manufacturing your type of product. For example, if you are producing electric bikes, find a manufacturer that focuses on electric bikes rather than a skateboard manufacturer that happens to make electric bikes.
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Experience with similar specs:
If your product has specific features, such as built-in front and rear lights for an electric bike, choose a factory that has successfully produced similar features before.
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Capacity to handle your order:
Ensure that the factory has the workforce, machines, and facilities to complete your project. It’s crucial to know if the manufacturer will need to purchase extra equipment or hire more workers to finish your order. Verifying these capabilities through an on-site inspection or hiring a third-party audit is important.
How to Calculate Your Order’s Impact on a Supplier?
When comparing manufacturers, evaluating the impact of your order on their annual revenue is crucial. Here’s an example:
- Manufacturer X has annual sales of $66 million. Your $50,000 order accounts for only 0.078% of their revenue.
- Manufacturer Z has annual sales of $1.1 million. Your $50,000 order represents 4.55% of their revenue.
A smaller factory like Manufacturer Z is more likely to prioritize your order because it has a significant impact on their revenue, while a larger manufacturer may not treat your order with the same urgency.
Factors That Decide Factory Size
The factors influencing the size of a manufacturing facility include:
- Product complexity and level of automation: More complex products or highly automated processes often require larger factories.
- Labor needs: Factories in low-wage regions may rely more on manual labor, requiring more space to accommodate workers.
- Future scalability: Consider whether the factory has room to expand as your business grows.
Other key factors include land costs, availability of raw materials, and logistics infrastructure, all of which directly affect factory demand.
Factory Size Selection Case Study
Let’s look at a case study of a New York bike company planning to manufacture 500 electric bikes in China. After evaluating three suppliers, all with similar quotes, the deciding factor was the factory size:
- Manufacturer X (largest) accounted for 0.078% of their annual sales.
- Manufacturer Y (smallest) depended heavily on your order, which made up 25% of their annual revenue.
- Manufacturer Z (medium) was the best balance, with your order representing 4.55% of their annual revenue. This ensured your order would be prioritized, while leaving room for expansion if needed.
When selecting the best manufacturer, multiple factors influence the decision. Each supplier has its pros and cons, so it’s essential to weigh all considerations.
Where Do I Start if Looking for Small-scale Production in China?
Right now it’s quite easy to find a factory in China, you can visit B2B platform like Alibaba, globalsource and Made-in China, view their profile, check the certificates, talk with sales.
But not easy to find a good small factory as information are too complicated and mixed. You need time to verify.
Here is some tips:
- Check their website and certificates, the founded year, and products series need to be singular which means they focus on the products for a long time. If a company’s products are too mixed, will be not professional.
- Check their factory video, products video, and product pictures, if those information are organized, which means the factory is good organized, and invest in the product promotion.
- Talk with sales, professional sales person can give you good solutions for products, and can help solve related problems like logistic, payment, import or export.
- Take samples, check the product quality, and verify if can do long term relationship.
