Expanding into international markets often involves partnering with contract manufacturers (CMs) to scale production. When done right, a reliable CM can reduce costs, boost efficiency, and help you meet global demand.
But this decision is far from straightforward. Too many companies dive into international expansion, assuming their contract manufacturer will just “figure it out.” However, poor due diligence at this stage has derailed product launches, triggered legal disputes, and permanently damaged reputations. According to a 2024 McKinsey survey, many companies attribute poor visibility into their contract manufacturers as a major cause of delays and disruptions in product delivery.
So, how do you avoid the pitfalls and find a CM that’s right for your business? In this blog, we unpack the most common mistakes and how to steer clear of them.
Mistake #1: Chasing the Cheapest Quote
If a price seems too good to be true, it probably is.
A US-based wearable tech startup learned this the hard way. Attracted by a Southeast Asian CM offering rates 30% below competitors, they ignored warning signs. Within six months, customer complaints flooded in: overheating batteries, failing devices. The startup was forced to do a full product recall, costing millions and scarring their brand reputation.
Lowball quotes often signal poor quality control, underpaid labour, or outdated equipment. According to a 2023 report by SupplyChainBrain, 61% of surveyed companies indicated that up to half of all product recalls could be traced back to supplier issues, many of which stem from inadequate oversight or cost-cutting measures by manufacturing partners.
Pro tip: Focus on value, not just price. Look at the CM’s capabilities, certifications, and long-term viability.
Mistake #2: Accepting Vague or Incomplete Quotes
An incomplete quotation is a ticking time bomb. If a CM’s quote isn’t crystal clear about what’s included, such as tooling, shipping, testing, and compliance, it’s almost guaranteed that surprise costs will show up later.
One Australian medtech company accepted an attractive quote without realising it excluded compliance testing and customs duties. Their actual costs ballooned 35% beyond budget, compromising their launch timeline.
Pro tip: Request a detailed quote with a complete cost breakdown. Ensure responsibilities are clearly defined, and never sign off until you understand every line item.
Mistake #3: Choosing a CM Without Product Fit
It’s tempting to go with a CM that boasts impressive clients and a slick sales pitch, but do they have experience manufacturing your type of product?
A consumer electronics brand selected a high-profile CM to produce a children’s wearable. Unfortunately, the CM lacked experience with child safety standards. Regulatory issues in Europe and Australia delayed multiple shipments, crippling their supply chain and jeopardising retail partnerships.
Pro tip: Choose a CM with experience in your product category and a solid track record navigating your industry’s regulatory landscape.
Mistake #4: Failing to Vet Ownership and Subcontractors
Who actually owns the factory? Are they financially stable? Do they subcontract without your knowledge?
A fitness tech brand learned the importance of these questions too late. After six months of smooth production, their China-based CM stopped replying. The factory was in the middle of an ownership dispute, and the company lost all its tooling and inventory.
Pro tip: Conduct background checks on your CM’s ownership structure and demand transparency about subcontractors. Site visits and third-party audits can be worth their weight in gold.
Mistake #5: Skimping on IP Protection
Your CM is not just a partner; they could also become a competitor.
That’s what happened to a UK electronics firm. They didn’t secure robust IP terms in their contract. Two years in, their CM was selling an identical product in emerging markets under a different label. Despite legal action, the damage was done.
Pro tip: Use contracts that clearly define IP ownership, tooling rights, and enforceable dispute resolution mechanisms in jurisdictions you can trust. Consider registering your IP in your CM’s country as well.
Mistake #6: Overlooking the Importance of NPI Communication
New Product Introduction (NPI) is where great ideas often fail in execution.
A hardware startup handed a loosely defined bill of materials to their CM and assumed things would run smoothly. But the CM sourced mismatched components, leading to system failures and a missed retail launch.
Pro tip: A good CM should ask questions, flag concerns, and collaborate closely during the onboarding and prototyping phase. If they’re passive early on, expect major issues later.
Mistake #7: Allowing Hidden Subcontracting
Who’s really making your product? If you don’t know, you could be liable.
An EV parts manufacturer found out too late that their CM had quietly outsourced production to a third-party factory with lax safety practices. A fire broke out. Lawsuits followed. Though they’d never met the subcontractor, the client was held accountable.
Pro tip: Your contract should prohibit unauthorised subcontracting. Demand visibility into the full supply chain and audit as needed.
Conclusion: Do Your Homework
Choosing the right CM isn’t just about ticking boxes; it’s about making sure your partner is aligned with your standards, communicates transparently, and shares your long-term interests.
Because when it goes wrong, it’s not just a manufacturing hiccup. It’s your brand, your revenue, and your reputation on the line. Take the time to assess thoroughly, ask the uncomfortable questions, and don’t settle for shortcuts.
