Chinese suppliers

How to Properly Audit and Vet Your Chinese Suppliers

China boasts about attaining the pinnacle of manufacturing worldwide, and for good reason. According to The Economist, China produced nearly a quarter of the global manufacturing output by value in 2015. This apparently included 80% of the world’s air-conditioners, 70% of its mobile phones and 60% of its shoes. Virtually any product you can think of can be made in China and for much lower costs than anywhere else. Due to this, most of the private label products present in the market were probably manufactured there. When trying to acquire a Chinese supplier, you will often find that countless suppliers are able to manufacture your product but finding the right one is a grueling task. Here are some tips to help you audit and vet your Chinese suppliers effectively and avoid the many cases of scams you’ve probably heard about online.

Perform a background check

Before you settle on a Chinese supplier, it’s necessary to perform your due diligence and confirm whether or not they are reliable. You can search various public sources online for relevant information such as credit reports and banking information to confirm their credit worthiness. Regarding their licensing, ask the suppliers for their company registration numbers and verify them in the Chinese National Enterprise Credit Information Publicity System.

However, finding information on your prospective Chinese supplier can be difficult if you don’t know where to look and can’t read Chinese. You can contact a company like ExamineChina or GloBis to conduct a background check on your behalf. They will provide you with valuable information such as financial records, business scope, shareholders and much more. Alternatively, you could hire a reliable sourcing agent which will include this check as part of their service.

Use online directories effectively

Online directories such as Alibaba, Made-in-China, and Global Sources give a convenient listing of suppliers you can choose from but provide inadequate reassurance of their legitimacy. Giving credence to this fact is the reality that any supplier can purchase an award status or star rating in many of these directories that are supposed to inspire confidence. They don’t even have to earn such a status! Nonetheless, this doesn’t mean you can’t make use of them when it comes to vetting selecting suppliers. Visit multiple online directories and cross-check the details (phone number, address, etc.) listed by your prospective supplier; a lack of consistency in different directories is an indication of a fraud. Also, use such directories for price-checking. If you are skeptical about the costs listed by your prospective supplier, ask for quotes from similar factories to get an idea of the expected price range.

Order samples correctly

Once you find a supplier that meets your requirements, it’s imperative that you request for a sufficient number of samples. Asking for only 1 or 2 samples will not give you an accurate idea of their manufacturing capabilities. Many suppliers will opt to make the best version of your product and pass it off as a sample. This will fool you into thinking they manufacture high-quality products when, in fact, their quality is mediocre. Instead, you should order for 10-50 samples depending on factors such as product size and cost. When you need to pay for the initial sample charge, and you do not hire a sourcing agent, then insist on using an escrow service like Alipay (if they have a supplier account on Alibaba) since such payment is much safer. As for acquiring the samples, try hiring a courier to pick them up directly from the supplier’s address so that you can compare it to the address they have listed.

Carry out a factory audit

If you hire a good sourcing agent, you don’t have to worry about this because they normally have in-house quality teams to do this for you. If possible, you could personally visit the factory to inspect the conditions. A factory audit is one of the most important things you can do before committing to a specific Chinese supplier. In fact, just mentioning the fact that you’ll conduct a factory audit at the beginning of your negotiations will help weed out the many trading companies and intermediaries pretending to be actual manufacturers.

An audit will also determine once and for all whether manufacturing capabilities listed on paper are true since Chinese suppliers tend to make extravagant promises then fail to deliver. Be sure to find out the condition of their factories as well as warehouses to assess their reliability and perform comprehensive quality checks of their products.

Know your product intimately

You have to be well-versed with the specifications and details of your product (the material composition, manufacturing process, certifications, etc.). Trying to bungle your way into negotiations with prospective suppliers without adequate knowledge of your product is a recipe for disaster; it will make you an attractive target for scammers and deceptive suppliers. Furthermore, such information will enable you to properly vet suppliers regarding whether or not they can manufacture your product according to your needs. Therefore, research extensively about your product and prepare a list of questions that will assist you in the vetting process. For instance, if your product is fragile, will it need extra care for packaging? Is your product complex, requiring an elaborate manufacturing procedure? Thus, asking about your supplier’s packaging and manufacturing policies is extremely important.

Utilize search engines and databases

Don’t forget about Google when vetting prospective suppliers. Simply typing in ‘[Company name] + scam’ or similar variations can instantly alert you to any involvement in previous shady deals that have been posted on the internet. More often than not, retailers who’ve had a run-in with scammers leave a trace of it in online. With a Google search, you can also find out whether or not your prospective supplier has participated in any trade fairs. Participating in trade shows is an excellent sign that the supplier is interested in cultivating relationships with customers. Keep in mind that many Chinese factories are using websites that aren’t optimized for an English search engine and will, therefore, show little presence in Google search results. In that case, try asking a friend who can understand Chinese to conduct a search on Baidu (China’s primary search engine) for better results. Databases like Chinese Supreme Court’s database can also be a great help when it comes to vetting. Manufacturers that were previously sentenced and hadn’t paid required damages often show up here; which is an obvious red flag.

To know more about How to Properly Audit and Vet Your Chinese Suppliers, please don’t hesitate to contact us.

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