From first-time shippers to seasoned veterans, choosing a supplier in China can be a daunting task. There are numerous considerations to take into account, like where the factory is located and how many goods it can produce on time. But one of the most important aspects of choosing a Chinese factory is making sure it’s reliable and reputable.
Before placing your first purchase order from a supplier, you should conduct some research to ensure you’re protected. There are countless stories of distributors wanting to buy from a certain origin supplier, paying the purchase order, and then the supplier disappearing, taking the buyer’s purchase order payment and never sending the goods. It happens more frequently than you might realize.
To help you avoid an unfortunate situation like this, we’ve put together a quick reference guide which will help keep you protected while you go through the process of choosing a factory in China.
Requirements/Guidelines for Your Products
Before you even start looking for a factory in China, you need to know what about your product is important to you. Have a list of product requirements or guidelines based on your customer’s expectations or end goals so you can look for a good factory match.
For example, is your product complex, and needing extra attention during manufacturing? Is cost a factor in your supplier decision, even if it means you will order fewer products? Having all this information ready-to-go before you choose a Chinese factory means you can check to make sure your supplier can meet those demands.
Safe Ways to Find a Factory
Getting a list of factories that produce the commodity that you are interested in is the first step in the sourcing process. While doing a basic internet search might seem to be an effective method, it is best to search manufacturers that have been vetted by a third party (see more on supplier audits and factory inspections below).
You could also source your factory information from public Customs and Border Protection (CBP) declarations documents. While many freight forwarders advise importers to withhold factory information because these CBP documents are made public, some importers still show who their factory is at origin. In this way, you have public records to figure out reliable factories other buyers have used in the past.
Common Sense Ways to Find a Factory
You can use some common sense methods of finding a Chinese supplier, as well. For example, have you searched your potential supplier plus the word scam in the internet (e.g. “supplier name + scam”)? Does the number on the supplier’s website link to the same factory? Does the email address of the supplier have the same URL as the website? Does the factory ask you to pay a non-Chinese bank?
It’s also important to pay attention to factories which seem too good to be true. Be wary of deep discounts from a new supplier. If a certain vendor is offering you prices significantly discounted from market value, this could be a red flag. A customer of ours recently placed a large order for tires with a new supplier who had quoted the product at a rate one-third less than quotes from competitors. After the money was wired to the “factory’s” bank account, the online supplier mysteriously disappeared, along with the money for the entire purchase order. A factory inspection can alleviate unfortunate situations like this.
While these more “common sense” approaches are not sure bets ensure a supplier is legitimate, it’s worth looking into the answers to these questions before completing an in-depth factory inspection with a third party.
Supplier Audits to Verify Reliability
A supplier audit is a vital component of choosing a partner in China to do business with. All too often, we hear of companies getting burned by not doing their due diligence prior to sending a costly purchase order. Quite frankly, any scam is costly in our opinion – no matter the size of the order.
A complete supplier audit should cover the following components:
- Quality control systems. Have there ever been accidents or product problems and why?
- Finances/taxes. Are there any problems with the factory’s monetary history or documents?
- Social compliance. Does the factory treat its employees, community, and the environment according to required – or higher – standards?
- Documentation/legal issues. As an example, is the factory representative actually associated with that factory?
- Supplier background. International and local reputation, origin of ownership, years in business, etc.
Factory Inspections for More Protection
Getting a full factory inspection can also help verify your intended Chinese factory is reliable. Since there are a lot of factories buyers have likely never seen, inspections are a great boon to all shippers, especially new ones.
Inspections help you determine whether or not a factory is capable of handling the quantities and/or complexity of the product you need. Hiring a third-party inspector for around $300 to vet a factory for you also saves you the cost of flying to China and inspecting a factory in person. Plus, third-party inspectors are far more likely to pick up on details and issues you may miss yourself.
You can work directly with an inspector yourself, but the danger here is that the factory could simply pay off the inspector to say the establishment is up to standards. Instead, we recommend you let your shipping agent work with a legitimate inspector to ensure the factory inspection is trustworthy.
In general, a reliable factory inspector can provide two types of evaluations:
Factory – An inspector will look over the entire establishment and provide a 10-11 page report, which includes pictures of equipment, products, workers, facility, and general output. The report will let you know about everything that doesn’t meet code requirements, and the inspector will provide a final opinion on whether or not they recommend the factory (based on a scale of good, normal, bad, and very bad).
Cargo – Once the factory has completed manufacturing your product, an inspector will look it over for up to eight hours to investigate the details. This evaluation will show you everything that’s damaged, faulty, or not up to code with your cargo.
Time of Year Concerns
While inspecting a factory is always important no matter the month, it’s especially crucial to get an inspection after the Chinese New Year because factories tend to lose workers during the holiday. Many factory employees leave for the week-long holiday and never return to work, as they stay longer to be with their families and know they can find similar jobs fairly easily. So factories hire new (and sometimes unreliable) workers following the Chinese New Year to fill the empty spots. In this way, a previously-reliable factory may suddenly be breaking codes and standards.
Picking a Chinese factory which won’t let you down or fall short on its promises can be a time-consuming process. However, being persistent and paying attention to details will reduce your chances of losing money, dealing with low-quality cargo, or even being involved in a scam. And that peace of mind is worth every minute you put into vetting.
Have you ever worked with a factory in China before? How did you pick it and how did your experience turn out? Leave a comment below!