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About to visit a new supplier in China? In this article, Renaud Anjoran of Sofeast Ltd and CMC Consultants in Shenzhen, explains what every importer must know about factory visits.
Keep reading, and learn the following:
a. The top reasons why supplier visits are important
b. The ‘right time’ to visit your supplier
c. How to plan your trip to China
d. What to look for in the factory, and what questions to ask
I’ll assume you visit a certain factory for the first time. There is a lot of information you can gather during a factory visit, and it is also the best way to motivate the supplier to do a good job. Let me list the key benefits below.
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Also, look at their assembly lines – how many pieces, roughly, can they make in a week?
Look at the other customers they work for. You might see customer logos on export cartons, on the product labeling, on certifications hung on walls, on folders left on a table, etc. this is much more credible than the list of reference customers they show on their website.
Meet with managers and get the name cards of several English-speaking people if possible. If you have a doubt (for example the sales person sends you an invoice with a different bank account), you will be able to confirm that an employee still works with them.
Get a feel for key people. Do you want to work with them? Can they speak intelligently about the regulatory standards applicable in your country? Do they have engineers who know their products and their processes?
Are they pursuing an automation strategy, are they thinking of moving to Vietnam, or are they still competitive enough?
At the same time, the same thing is happening in reverse.
You have to give the impression that you are serious, you already know the game (otherwise they might try to push you around down the road), you have a process (what contracts to sign, what steps they have to follow, when inspections will take place…), you are easy to talk to (not overly directive), and you have high ambitions (don’t over-promise, but show that you have a plan to increase volumes quickly).
Look at their samples in the showroom. Be careful, many of the samples might have been made in another facility. But you can take this opportunity to “test” the people you are about to do business with.
If you see some special designs that were probably prepared by an overseas buyer, inquire about it. Ask who they sold it to. Ask for a price.
If they are willing to sell it to you, it is a sign that they will also be happy to sell your own product (in case you develop custom designs) to other companies… maybe to your competitors or your customers! Make it clear that it is not acceptable and you’ll ask them to sign a contract that addresses this issue.
However, a factory visit is not everything.
Before deciding to go to a factory, you should at a minimum ask a few questions and run a few searches on the internet.
Many potential suppliers can be eliminated this way.
I am not sure there are solid rules here.
If you purchase 300 caps in a one-shot order, it is probably not worth the time and money to go to the factory yourself.
Don’t negotiate the price too hard, keep the initial deposit to a minimum, validate production samples, and send an inspector at the end if your budget allows for it.
If you are about to place a sizable order, and you are planning to have a continued relationship with that supplier, I would say a factory visit is an obligatory step in the due diligence process. It would usually be in the following sequence:
1. Identification of a potential supplier (if it is at a trade show, don’t miss your chance to interact with key people)
2. Basic request for quotation
3. Background check (with Google searches, asking a few questions, cross-checking of information, review of the business license…)
4. Purchase order
5. Sample preparation
6. Factory visit/audit
7. Final pre-production sample approval
8. Down payment of 20-30%
9. Order of raw materials, components, sub-assemblies, accessories…
Note that the factory visit/audit might come earlier in the process if the design is proprietary, or if the manufacturing process absolutely has to comply with certain standards.
The basic travel preparations would include:
1. Confirming a date with the potential supplier
2. Getting their full contact information, including address in Chinese and mobile phone number. If you have the Wechat app on your phone, get your contact to share the factory location with you in advance. Double-confirm whether you will meet them at the place that will manufacture your order, rather than an office or another factory.
3. Booking the flight and hotel – if you want to do other things, for example visit other suppliers, don’t let the first supplier arrange or suggest all this (or they might make sure you are always busy with them).
4. Getting your business visa (ask a potential supplier for a letter of invitation)
5. Watching a few videos of similar factories on Youtube (if you are not familiar with their processes)
6. If applicable, ask them to prepare a sample that you’ll review with them.
Whenever you can take a fast train and it takes less than 4 hours, do it. The fast train network (gaotie) is pretty good.
Other bullet trains, a little older, might be good too, but make sure to check the departure and arrival times. You can install the Ctrip app on your phone and get that information easily.
If the train ride is really too long, go for the plane. In the morning if possible. In the afternoon and evening, you might have to suffer a delay of several hours.
Your Uber app will probably not work in mainland China, and Uber’s main competitor in China only has an app in Chinese.
The last few miles will likely NOT be convenient. From a train station or an airport, you can usually get a conventional taxi.
From the factory back to a station, you will probably need a ride from the supplier.
One thing you probably want to avoid is to have supplier A to bring you to supplier B. If they are in the same city, you might want to get supplier A to bring you to a bus or train station or to a shopping mall, and have supplier B wait for you there.
There are a few things anybody with observation skills can do. Here are three suggestions.
1. Go to the warehouse of incoming materials. Ask where their inspectors are located. Can you see them checking some materials at that precise time? If not, pick a relatively important/ expensive material in the warehouse and ask them to show you its incoming QC report. If they talk for 10 minutes among themselves, you can assume it was not controlled.
2. Go to the main workshop. Stand and observe a process step that is quite important. Does someone check quality there? (It might be the operator herself, a line leader, a dedicated inspector, or through a smart mistake-proofing device).
3. Go to the station where the products are completed, before they get packed. Ask if these products are good. Then sit down and check 20 of them. Are they up to your standard in terms of finishing?
I would suggest a buyer stays away from checking anything that can be falsified. For example, working hour records are often fabricated. Don’t go into that.
Fortunately, there are a few things you can observe:
1. Any children working? If you have a doubt, ask for their ID card. But keep in mind, some Chinese people look like they are half their age…
2. Do workers wear protective equipment? For example, are they cutting fabric without gloves? Are they grinding metal without protective glasses?
3. Any serious safety hazard? I have seen open pits in die casting factories, welding gas bottles that might fall down, poor ventilation in dusty workshops, and so on.
4. Are operators getting pretty nervous when a manager, or the boss, is around? Not a good sign.
Yes, this is something that hundreds of service providers can do in China. To help you see more clearly among your options, I would distinguish between three types of ‘factory visits’.
Typical factory audits – typically based on a standardized checklist. It tends to be based on objective facts. Why? When a large buyer needs 50 factories to be audited, the audit grades need to be comparable.
Otherwise, there is no way of knowing if a factory that got grade 65 is better than one that scored 60.
It is a one-way exercise, where the auditor collects information, gives a bit of feedback on the main issues, and walks away. If some of those issues are serious, the buyer can ask for a corrective action plan and come back for a re-audit a few months later (a common supplier development approach).
Project review – this is much more of a 2-way exercise. The buyer’s representative comes in the factory, explains what the project is about, and gauges the manufacturer’s reactions.
It is more subjective. Are they motivated? Are they confident that can handle it? Can they describe a similar project they delivered successfully? Do they share their challenges, their plan, etc.? What is bothering them?
Note that a project review may include a quick overview of the factory’s quality systems and social compliance, but also their engineering capabilities (if a customized product has to be developed), their production planning system, etc. as needed.
Pre-production inspection – if you have already issued an order, confirmed some samples, and wired the down payment, it is not too late. Sometimes we go in the factory once all the components and materials are already delivered. It helps the buyer in two ways.
First, it puts pressure on the factory to start making a few products in the production workshop. This way the order is not ‘bumped’ to a later date.
Second, the inspector can check the quality of the first finished products, or the way the processes are set up. The earlier a quality issue is detected and fixed, the better for all parties!
We offer several types of factory audits:
In addition, we perform business project reviews for certain clients, especially when they need to develop a new product.
We can help you manufacture products in China, Vietnam & India?
Co-founder of Asiaimportal (HK) Limited and based in Hong Kong. He has been quoted in and contributed to Bloomberg, SCMP, Alibaba Insights, Globalsources.com, China Chief Executive, Quartz Magazine and more.
1 Responses to “Supplier Visits in China: A How to Guide for Startups”
Great Article, helped me a lot to have an idea . Solid resources i will remember.
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