Even for experienced small to medium sized businesses, the move into the IoT space presents a number of challenges that are not experienced with traditional projects. Many underestimate how hard connected products really are.
Finding the right supply chain partners, is make or break for most smart device projects.
With IoT, the supply chain is usually more complex than with traditional projects, because there is a greater level of collaboration needed from the partners involved. At HWTrek, we match IoT innovators with the right supply chain partners to build their device and actually deliver it to market.
The following is the general advice we give to companies in the IoT field that are looking to take their project to the next stage.
Finding the right partners
When looking for supply chain partners, a pretty common first choice is Alibaba. The advantages of this method is that it is pretty easy and you have instant access to thousands of manufacturing options and you are able to easily contact companies and make comparisons .The main disadvantages include that a lot of the profiles are fake and are in fact agents posing to be factories. Moreover, Alibaba is not really the place to meet the top manufacturers. That isn’t to say that it’s impossible to find good contacts on Alibaba, but you have to be cautious and also know its limits as a source.
Trade shows related to your industry are a great way to make face-to-face contact with companies who are actively searching for business. Another option is working with a sourcing agent, who should have an established network of contacts in a particular industry. Unfortunately, finding a decent sourcing agent can be a hassle. It’s pretty common that some can be generous with the truth regarding the size and scope of their network or match you with a company that is only vaguely suitable. Many sourcing agents do not come from engineering, backgrounds, despite often going as ‘Technology Consultants’ or other dubious titles.
Evaluating IoT Supply Chain Partners
After finding a few possible options, you need to strictly evaluate their suitability. Factors to consider include:
1. Related background to your project – The best fit supply chain partner will be one with a proven working history, supported by cases, that is directly relevant to the IoT device you are working. For example, some of the ODM companies who focus on wearables will be able to utilize a wealth of experience that they have in that industry and tell you what will work and what won’t. They will also have connections to the right components suppliers for that field, meaning that you can expedite production times. Remember to also ask about the quality control system that they are using. You should be looking for companies with direct IoT experience.
One way of assessing if the team is a good match for your project, is by the level of feedback that you get from their engineers after explaining your project. It’s impossible that everything will be completely right or feasible the first time. If their engineers give you a lot of feedback regarding the design, you know that they have properly evaluated your project.
2. Communication – There is a sizable chance that your project will stray from your prototype or some unforeseen problem could stall a project or even derail it completely. When evaluating supply chain partners, it is crucial to make sure that the other side completely understands your project and all of the details. This is especially true if you are manufacturing overseas, where language barriers and cultural differences can destroy projects.
3. Capacity – You need to find partners who can match the scope and size of your project, otherwise you can either be put on the back burner or find that they cannot match your requirements.
Manufacturers will talk in terms of MOQ (Minimum Order Quantities) and MO(Minimum Order Value) which are lowest represent the threshold that needs to be met for them to accept a project. In order to not waste both your and the other sides time, it is best to only approach those companies that are a suitable match. The distinction is usually made between Tier 1, Tier 2 and Tier 3 factories. Tier 1 would include huge corporations such as Foxconn and Pegatron, who require huge you to have a huge MOQ before even starting the conversation. Tier 2 companies are smaller companies that are still looking for customers who generate revenue in the millions. Tier 3 companies will be smaller still and have moderate MOQ’s. As a rule of thumb, Tier 1 & 2 are better fits for SMB’s and Tier 3 are more suitable for start-ups.
4. Company Structure – Often it is better to have a manufacturing partner that has a proper PM, rather than a dealing with someone in a PM/Sales roles. You will thank me further down the road for that advice.
5. Quotation – Cost is always a major consideration, but it should not be the only one. Everyone has a budget, but searching only for the lowest price, often ends in tears and delays.