Evaluating Suppliers
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Transcript below:
Hello, I’m Mike Bellamy, author of “the essential reference guide to China sourcing” and owner of PassageMaker Sourcing Solutions.
I’ve been living in China full time now for over 12 years, and it is my pleasure to offer in this 2 minute video, some tips about how to evaluate Chinese suppliers.
In an earlier video, we talked about how to narrow down a list of potential suppliers from a few hundred down to 5 or less.
At this point, you contact the suppliers and conduct the RFQ (request for quotation). There feedback should allow you to further narrow down the list to only the top 2 or 3 based on pricing and non-price attributes.
The next step is to validate if the suppliers are legit. In my opinion there are two essential types of verification.
Type One is the Factory Audit. This is to verify that the supplier has a quality control system in place and they have the production experience to supply you with the goods they say they can make for you.
Type Two is an Operational Audit or Due Diligence. This is to confirm that the supplier has a good reputation and is financially strong enough to stay in business long enough to complete your order. In other words, they are not likely to disappear with your initial payment.
There are professional service providers available who conduct these types of verification at very reasonable prices. I highly recommend you engage professional support if you don’t have the skill set in place in-house to audit factories on your own. E-mail me and I would be happy to recommend the 3rd parties I use for verification. But for your reference, here are some other tools you can use on your own which compliment the work of 3rd party service providers to verify suppliers.
- It doesn’t cost you anything to ask for references. If a supplier can’t give you a few happy clients to visit with…this is a big red flag.
- Confirm that you have the right to visit the production line and check on your order. If they come up with a bunch of excuses why you can’t visit, it either means they don’t have the ability to produce your product and are scared that you won’t like what you see if you visit or it could be as simple as that they are a trading company and worried you will cut them out of the supply chain once you realize they provide little value.Speaking of trading companies, sometimes, especially if your order is small, it makes sense to use them, but I hate trading companies that say they are the factory when really they are just brokers.
- Ask to see the suppliers Quality Control Manual. If they don’t have an ISO compatible and well documented system in place for making a given product…run away. If you want to see what a Product Quality Manual looks like, you can check out a sample at www.PSSChina.com
Having verified that your suppliers are legit, the next step, and our next video, deals with negotiating the price and then moving into production.
See you next time. Wishing you successful China sourcing!
