Evaluating Suppliers

On of the things that I've learned, the hard way, about doing business in China is that as a (foreign) buyer when there are problems, even if they're not my fault, I'm going to be asked to pay for them.

Most new buyers coming to China want just one thing: to find one or two good manufacturers that they count on. They think “if I were a manufacturer, I would try to find a few stable customers and make their lives easy, and everybody would win”. Unfortunately, they do not understand their suppliers’ point of view.

By Mike Bellamy

Among the biggest risks of outsourcing is ensuring that your supplier delivers according to your requirements. Overseas trading companies can disappear overnight or, after signing a contract with one factory, your goods may end up being produced at an unknown subcontractor. Fortunately, supplier audits can help to mitigate many of these problems. This week, Smart China Sourcing spoke with Mike Bellamy from PassageMaker on the benefits of supplier audits in reducing risk in your global supply chain.

It goes without saying that not all factories are created equal. Not all factories with international experience are equal either. Certainly there is a level that you'd prefer to work with if price was constant. But this isn't a perfect world so we need to talk about with whom you actually choose to work.

The time that a buyer spends at a plant is crucially important. The main goal of taking a plant tour is to observe and judge the plant.

By Leanne in 'The China Sourcing Blog'

All international purchasing managers try to minimize import risk. As a China sourcing expert, in order to achieve this goal we will always recommend you to undertake plant visits to China before you place an order, for the following reasons:

The Financial Times just did a story, entitled 'Fears rise on China groups' payments' on how private Chinese companies are being negatively impacted by the credit crunch (h/t to 'China Economics Blog').

Before coming over

Now that we have established that plant tours are an absolute necessity, we can move on to how these tours should be undertaken.

So why are you doing this with your newly hired factories in China?

To make a fine point, visiting your Chinese factories on a regular basis is a must for all importers if you want to minimize your risks. From my first hand experiences, I know Wal*Mart's policy is for vendors to visit every one of their factories in 3 months intervals. Wal*Mart is a cost conscious company that would not require these visits if they didn't believe them necessary.

Q: For someone who is talking directly to China manufacturers for the first time, what differences should they expect compared to talking to domestic suppliers?

A: Oh boy, a lot of things. It's incredible. You have the good and bad situations that arise. When you come to a trade show you can obviously meet a lot of new contacts on the show floor, where you really don't know who is Mr. Who.

There are quite a number of good China suppliers offering new and innovative products or offering their manufacturing services. You'll increase the odds of finding good suppliers by sourcing through reputable channels like trade shows or web sites that physically visit and verify that suppliers are real (like Global Sources verified suppliers). Nevertheless, it is good practice to conduct some due diligence on the supplier, and overseas buyers are sometimes surprised to learn of the many tools available to do this.