The Factory Playbook: 5 Moves to Lower Costs and Protect Cash Flow | JK Beaton | Amazon Sellers Conference

This talk is about growing profit margins and protecting your cash flow using simple, effective factory strategies. I’ll share real stories of eCommerce businesses facing common sourcing headaches—and how we helped them solve those problems. Some of these tips you’ll be able to apply tonight, right from your hotel room. Others will change how you negotiate with suppliers, spot hidden costs, and improve your bottom line in the long run. If you’re looking for practical sourcing insights to boost your profitability and cashflow, this session is for you.

1. THE FACTORY PLAYBOOK: 5 MOVES TO LOWER COSTS AND PROTECT CASH FLOW John Kyle Beaton [email protected]

2. Started Sourcing in 2007 ABOUT ME Amazon.ca top 1000 (2019–23) Fluent in 中文 Canada + China Team 100s of D2C and University Projects

3. WHAT WE DO Your side Keep margin and sleep; skip factory wrangling. No late nights on WeChat. Our side China office for hire. Product pricing, terms, samples, compliance, inspections, freight. Shared goal Ship on time, on spec, with better margin.

4. 5 OF OUR FAVOURITE LEVERS TO LOWER COGS & IMPROVE CASH FLOW

5. WHAT’S INCLUDED IN COGS Factory Cost Packaging Shipping Import Costs Base product cost from your supplier Box, inserts, labels, polybags, etc. Freight, handling, inland transport Duties, tariffs, customs, DDP markup (if applicable)

6. SUPPLY‑CHAIN ISN’T SEXY But It’s One of the Best Margin Boosters Ads & Amazon fees feel fixed. Product landed cost is still elastic. 1 % COGS ↓ can 4‑5×↑boost net profit.

7. WHY A TINY COGS CUT EXPLODES PROFIT

8. MATH FOR $2 MILLION IN COGS CUT COGS 1 % → SAVES $20,000 NET JUMPS 2.7% (15 % NET) OR 4 % (10 % NET) FIXED COSTS DON’T BUDGE – SO SAVINGS DROP STRAIGHT TO BOTTOM LINE

9. LEVER 1 FACTORY ≠ TRADING COMPANY

10. Trading middlemen hide 20%+ mark‑up And create bad communication & quality ARE YOU REALLY BUYING FROM A FACTORY? Question: When did you last audit supplier type? LEVER 1

11. Case: –24 % unit cost after ditching trader Address Check Address Check Import Yeti Check Business License Check COST IMPACT & HOW‑TO LEVER 1 FACTORY ≠ TRADING COMPANY

12. Do an Address Check (Google or Baidu Maps) LEVER 1 FACTORY ≠ TRADING COMPANY

13. Check ImportYeti.com LEVER 1 FACTORY ≠ TRADING COMPANY

14. Are they exporting similar product types? LEVER 1 FACTORY ≠ TRADING COMPANY

15. Check their business license Ask for 营业执照 LEVER 1 FACTORY ≠ TRADING COMPANY

16. Or check on qcc.com LEVER 1 FACTORY ≠ TRADING COMPANY

17. We also offer a factory audit service LEVER 1 FACTORY ≠ TRADING COMPANY

18. QUESTIONS TO ASK “I noticed limited export shipments under your name — do you subcontract production?” → Signals you’ve done your homework. “Can you send your 营业执照 (business license)?” → Check for 生产/制造 (manufacturing) vs. 销售 (sales or consulting). LEVER 1 FACTORY ≠ TRADING COMPANY

19. QUESTIONS TO ASK “What’s your company’s exact address?” → Helps verify if it’s a factory zone or office tower. “How many full-time staff are in production vs. sales?” → Factories will give balanced numbers; traders often over-index on salespeople. “Can we visit your factory or send a third-party audit team?” → Watch how confidently they answer — hesitation = red flag. LEVER 1 FACTORY ≠ TRADING COMPANY

20. LEVER 2 PACKAGING ENGINEERING

21. LEVER 2 PACKAGING ENGINEERING Hit lower FBA tier & storage rates Freight size (CBM) down too SHRINK THE BOX, GROW THE PROFIT Question: Is your packaging costing you extra in storage, shipping, and fees?

22. LEVER 2 PACKAGING ENGINEERING BEFORE AFTER

23. LEVER 2 PACKAGING ENGINEERING CHANGE THE BOX, GROW THE PROFIT Question: What else can you change about your packaging? Rethink your packaging Reduce your product accessory cost

24. BEFORE AFTER SWAP COLOUR BOX → MINIMALIST WHITE

25. LEVER 2 PACKAGING ENGINEERING SWAP COLOUR BOX → MINIMALIST WHITE 4‑colour → white box + black ink. No lamination plates. $0.21/unit saved. 80 k units = $16.8 k/year.

26. LEVER 2 PACKAGING ENGINEERING QUESTIONS TO ASK Can you give me the costing on colour, white and plain cardboard packaging? Can you give me the costing on different bag options: poly bag, shrink wrap, zip close bag, etc. (ask for range of options) Can we adjust the product size or shape slightly to allow for more efficient packaging?

27. LEVER 3 SAVE 2%+ ON COGS A FACTORY RETURNS TIP

28. LEVER 3 SAVE 2% ON COGS - FACTORY RETURNS TIP MAKE FACTORIES OWN DEFECTS Question: What is your returns %? What did returns cost you last year? Add PO clause: credit any manufacturing defects. Expect units back, not $ back Amazon refunds buyer → factory refunds you.

29. LEVER 3 DEFECT MATH & TEMPLATE Factory orders: $400 k; 2 % defect = $8k in units back. Added benefit of factories improving quality - continued conversation Better quality = better Amazon metrics= More sales (Flywheel goes brrrr)

30. Get our request template here Doc Template LEVER 3 SAVE 2% ON COGS - FACTORY RETURNS TIP ACTIONS TO TAKE Build an internal process to track returns, log info and photos/videos (where possible), order numbers Do pre PO check ins with factories

31. LEVER 4 TAKE OVER THE ENTIRE PRODUCT SOURCING PROCESS

32. LEVER 4 TAKE OVER THE ENTIRE PRODUCT SOURCING PROCESS Your supplier adds margin at every turn TAKE BACK YOUR PROFIT FROM YOUR SUPPLIERS

33. LEVER 4 TAKE OVER THE ENTIRE PRODUCT SOURCING PROCESS HIDDEN EXTRAS FACTORIES COMMONLY PAD: PACKAGING colour box printed via sister company → + $0.08–$0.15/unit INSERTS / MANUALS outsourced digital print, factory adds 30 % margin → + $0.04/unit ACCESSORIES (screws, straps, cables) “convenience sourcing” at retail price → + $0.12– $0.30/unit FOB UPLIFT inland haul + export docs charged $450/FEU; real cost $280 CURRENCY BUFFER quotes in USD padded 2–3 % vs straight RMB rate

34. LEVER 4 TAKE OVER THE ENTIRE PRODUCT SOURCING PROCESS Discovered factory adding $0.10 per colour box (ordered from cousin’s plant) Switched to direct Kraft print at ¥0.45 = $0.06, saving $0.04/unit. 50 k units annual run → $2,000 margin lift. CASE & PAYBACK

35. LEVER 4 TAKE OVER THE ENTIRE PRODUCT SOURCING PROCESS QUESTIONS TO ASK Can you separate your quote into: core product, packaging, accessories, freight? We may supply some components ourselves. Send us FOB and EXW quote to compare. Then get freight forwarder quotes to finish the math. 1 2

36. LEVER 4 TAKE OVER THE ENTIRE PRODUCT SOURCING PROCESS QUESTIONS TO ASK Risk tip: Keep QC responsibility with factory even if you supply parts—add clause “factory liable for assembly defects regardless of component origin. Aggregator playbook: Thrasio–style groups negotiate inserts centrally: one print house in Dongguan prints 10 brands’ manuals, 22 % cheaper than each factory’s printer. (Also what we do) 3 4

37. LEVER 5 PAYMENT‑TERM ENGINEERING

38. LEVER 5 BUY TIME, NOT JUST GOODS Move the payment terms gradually: ( 75/25 → 50/50 → 30/60/10 → Net 30 ) Pay in RMB – scrape hidden 2‑3 % FX padding Use multi‑currency platforms. (Wise, WorldFirst) for near‑spot rates

39. LEVER 5 PAYMENT‑TERM ENGINEERING CASH IMPACT & TOOLS MOVE EXAMPLE ON $2M ANNUAL COGS CASH FREED / MARGIN GAIN Shift 20% to 60 days 30/70 → 30/60/10 $80k working‑capital float (assumes 40‑day shipping) Avoid surprise +2% cost if USD weakens + $60k margin USD $10.00 → ¥70 (@7.1) = $9.72 Secure 7.25 rate for Q3 Quote in RMB ( ‑3% ) FX Forward lock

40. LEVER 5 PAYMENT‑TERM ENGINEERING QUESTIONS TO ASK If we increase orders 20 %, can we move to 30/60/10 terms? Can you price the quote in RMB as well as USD so we can compare?

41. ACTION ZONE 1 Factory vs Trader 2 Packaging Tweak 3 Returns Credit 4 Own the BOM 5 Payment Terms

42. 90‑DAY CHALLENGE YOUR FIRST MOVE Choose one lever. Write one action you will do this week. Share it with the person next to you.

43. COME SAY HI I’ve got more to share WHAT YOU’LL GET: Today’s slides 2 more proven COGS cuts Supplier agreement template

44. We are commission free. You get factory direct pricing. Learn how our business model fits your brand. Reach out to learn more.

45. LET’S STAY IN TOUCH Email: [email protected] Linkedin: inkedin.com/in/jkbeaton/ Website: https://chinaproductpros.com