Importance of Factory Audits and Supplier Qualification

Workers at a cast iron factory in China

Qualifying your supplier and maintaining steady and regular audits of factories that you cooperate with is essential for China sourcing. Often buyers will assume that once a relationship with a factory has been firmly established, the hard part of the China buying process is over. However, most will find that even with some of the more reliable suppliers, without diligent quality control, situations will arise that can have potentially damaging consequences to the overall quality of your shipment.

Factory qualification and due diligence is key in any sourcing program. I would recommend conducting your due diligence whenever you are looking for a new supplier, whether it is a new project or simply expanding your current production capabilities. Once you’ve started manufacturing and purchasing from a factory, continue to conduct regular onsite inspections and due diligence checks. You never know when an unexpected operational or management change can potentially harm your order.

Below are two of my personal experiences of potential sourcing disasters that help to illustrate the importance of qualifying factories:

1. The Importance of an In-depth Pre-Qualification

   

   Make sure to visit and prequalify your factories!

   There was one client we were managing that was sourcing products made of cast iron. This was a particularly big client and we eventually found the need to expand our options of factories in order to ensure continuous supply. We were able to eventually find a new factory that seemed especially promising. This supplier was offering very competitive pricing and meeting all of our client’s requirements. We then followed up with the factory by requesting samples. Though the sample took a while to be delivered, when we were able to examine them, the quality seemed exceptional and looked almost identical to what we were currently sourcing. However, the delay in delivery is one of those important warning flags that indicate the need to proceed with caution. When we followed up with an onsite inspection, it became very clear very quickly that this factory had not been totally honest about their capabilities. They did not have the production capabilities to create the cast iron products that they had sent us. Nor did did anything in their sample show room match the quality level of the samples.

   After being very persistent with our questioning, it was soon revealed that, not only had this factory not made the sample they sent, but they had actually gotten it from the factory that we were already working with!

2. Don’t Get Complacent

   The other example is from an experience in the pharmaceutical industry. We were sourcing the leaflets for the packaging and the factory we were working with had every indication of being reliable. They had passed our inspections, were one of our company’s qualified suppliers, and we had been ordering double-sided printed leaflets from them on a monthly basis for some time without any problems. One day during production, one of our production line workers stopped his machine because he had found a leaflet with a side left completely blank. When we first began to investigate the issue with the leaflet supplier, we were told that this was simply the result of carelessness and they would make sure to avoid the situation in the future. However, after digging deeper we found that what had actually happened was that the factory had reached capacity during the high season and outsourced our production to a small printing house rather than handling the order themselves. So despite our longstanding relationship with this supplier, they still failed to communicate this crucial change that ended up negatively affecting our order.

Imagine placing an order with a factory that intends to supply you with a product made by your current factory, or shipping incorrectly printed leaflets that you failed to notice because of relaxed quality control as the result of a comfortable relationship with your supplier. When it comes to China sourcing, you can never be too careful. Choosing a factory to cooperate with should involve more than a simple search on Alibaba. You have to make sure you do your due diligence, be aware of any early warning signs, and visit the factory before giving them your business. Finally, never get too comfortable with your current Chinese manufacturers, regardless of the relationship you think you have with them, which is a sure sign of “Captive Buyer’s Syndrome”. Be ready for the unexpected even from the most comfortable of working relationships.

• May Lee- CPG Sourcing Team Leader