Outsourcing production can have both advantages and disadvantages for new startups. The unique circumstances of hardware startups, such as fluctuating cash flow, frequent production changes and ongoing customer development, mean that choosing the right manufacturer can often be a make it or break it decision in the early days of your company.

At last week’s Entrepreneurship 101 session, Lance Laking, investment director of the MaRS Investment Accelerator Fund, led a new panel on contract manufacturing, a process commonly used by startups to outsource the manufacturing of part or all of their product to a third party.

The panellists included entrepreneurs Gimmy Chu, co-founder and CEO of Nanoleaf, and Mark Borins, founder and chief technical officer of MMB Networks, as well as manufacturers Shawn Blakney, senior director of global technology and innovation at Celestica, and Lahav Gil, CEO of Kangaroo Group.

According to Lahav, creating a list of product requirements before you begin researching manufacturers will often dictate whether you take your product offshore or stay local, or opt for a combination—forecasting whether you’ll need to outsource or not. For Gimmy, whose company makes energy-efficient light bulbs, choosing Shenzhen, China, as his manufacturing base made sense due to his products’ highly specialized needs.

“During the new product introduction process, you have to be there on a weekly basis. In Shenzhen, all of our suppliers are one hour away from each other,” explained Gimmy, adding that finding a manufacturer that aligns with your company’s values is crucial.

Does outsourcing make sense for your company? Watch the lecture video to learn more.

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Jelena Djurkic

Jelena Djurkic was the Senior Associate, Content Marketing at MaRS. Follow her on Twitter @jdjurkic. See more…