Sourcing & Vetting Suppliers on Alibaba Using Available Data

Alibaba.com is the most comprehensive database of, primarily Asian, manufacturers in the world. It’s also somewhat misunderstood.

While some expect it to be some sort of ‘one stop shop’, we prefer to see it as a comprehensive self service supplier database. In this article how to source and vet suppliers, using data available on Alibaba.com – including the Company Overview, TrustPass Profile and Third Party Supplier Assessment Reports.

Notice: This guide only explains how to make an initial supplier selection. In other words, a shortlist. Before moving forward, the suppliers must be verified. The sole purpose of the initial selection is to ensure that you don’t waste time on suppliers that are obviously not qualified.

1. Company Overview: First Step of the Supplier Vetting Process

The company overview is, unlike the TrustPass profile, not made of up verified information. However, it can tell enough to decide whether or not we should further analyze this supplier:

Product Scope: This lists the suppliers ‘main products’. For clear reasons, you want your product to be mentioned here. Suppliers listing a very diverse range of products are mostly buying agents or trading companies, as manufacturers have far more narrow product scopes.

Certificates: Suppliers listing overseas product standards and certificates (i.e., REACH, Low Voltage Directive and CPSIA) are more likely to be experience manufacturing goods in compliance with EU and US product regulations.

Quality Management System & Social Compliance: Specifies whether the supplier is certified according to a Quality Management System (i.e., ISO 9001:2015) or complies with a Social Compliance Protocol (i.e., BSCI).

As mentioned, this information shall not be taken at face value. The suppliers are free to edit their Company introduction as they wish, and compliance and QMS documents must, for obvious reasons, be verified.

2. TrustPass Profile: Verified Company Information

All Gold Suppliers on Alibaba has a TrustPass profile, listing verified information, parts of which are very valuable when vetting suppliers on Alibaba. This data is pulled directly from their business license, and can be very telling about a supplier:

Registered capital: The Registered Capital indicates the suppliers scale of operations. A supplier with a very low capital (i.e., RMB 100,000) is most likely a trading company, while a supplier with, say, RMB 20,000,000, is likely a manufacturer.

Legal Representative: The name the legal representative of the company. This is the person that should sign, and stamp, your Proforma Invoice, NDA and Sales Contract.

Registered Address: The suppliers, registered, operational address. However, these often tend to be outdated.

3. Trade Assurance: An Extra Layer of Security When Buying from Alibaba Suppliers

The Alibaba Trade Assurance is in many ways similar to a Letter of Credit, without involving the bank. The funds are released to the supplier, only after the goods pass Quality Inspection, and the Bill of Lading is issued. Just as when paying by Letter of Credit, additional terms may also be added to the sales contract, which is the document reviewed by Alibaba before the payment is settled.

Trade Assurance is not available when buying from all listed suppliers, and it says nothing about the supplier’s manufacturing, design or compliance capabilities. It is, however, a bonus, and I think this will become more standardized and sophisticated in the years to come. Click here to read more about the Alibaba Trade Assurance, and how it can help your business when buying from Chinese manufacturers.

4. Supplier Assessment Report: A Third Party ‘On Site’ Audit

The Supplier Assessment Report is, mostly, provided by TUV Rheinland and Bureau Veritas, two accredited European compliance companies, and long term partners of Alibaba. Suppliers on Alibaba.com can choose to have them audited and inspected, and in return they can publish a comprehensive Supplier Assessment report on their page.

Clearly, this attracts mostly ‘proper manufacturers’ that are confident enough to pass an on site audit. However, the report itself is of little use unless properly analyzed. This is what you should look at:

• Legal Status
• Premises Ownership
• Certifications
• Quality Management System
• Verified Main Products
• Production Flow
• Human Resources

Unlike the “Company Overview”, the Supplier Assessment report lists verified product certificates and test reports, thereby giving a hint about the supplier compliance track record (i..e, their experience and capability of manufacturing products in compliance with overseas safety standards).

That being said, for unknown reasons, suppliers tend to underestimate the value of listing such documents. As a result, this section is often left out empty. The only way to really find out is by contact the supplier, requesting and verifying their documents.

5. Main Product Lines Verification Report: A Complement to the Supplier Assessment Report

The Main Product Lines Verification Report is similar to the Supplier Assessment Report, but more technical in nature. It’s based on an audit of the manufacturers’ production lines. It tells us two things: The suppliers main products, and the supplier’s production capacity (i.e., if they are big or small).

What’s Next?

By vetting suppliers based on the information explained above, you should be able to shortlist somewhere between 15 to 20 candidate suppliers. That said, the number varies greatly between different industries. Considering that several hundreds, sometimes thousands, compete in the same product categories, that is a far more manageable number. Still, they are labelled as ‘candidate suppliers’ for a reason. Before you are ready to decide on one, or more, manufacturers – you must do the following:

• Verify Product Certificates (i.e., EMC Certificate of Compliance)
• Verify Substance Test Reports (i.e., REACH and California Proposition 65)
• Verify Quality Management System Certificates
• Verify Social Compliance Audit Reports
• Verify Bank Account Details

These documents can only be accessed by contacting the suppliers directly, as they are not available in a central database. While you’re on the phone with them, you should also get information on the following:

• Payment terms
• OEM and ODM Production Capability
• Sample Cost
• Tooling Costs
• MOQ (for your product)
• Production Time
• Packaging Options

Disclaimer

This article is provided only for informational purposes only and neither the author nor any companies and/or service providers mentioned in this text makes any representations as to the accuracy, completeness, currentness, suitability, or validity of any information in this article. This article only represents the views of the author and is not endorsed by any company and/or service provider mentioned in this text.