Shipping from China- Importance of the Pre-Shipment Inspection

Far too often there seem to be China buying stories where buyers fail to follow up on orders with the appropriate inspections, whether it’s the factory audit, pre-production, pre-shipment, or any other. We’ve discussed quite a bit on this blog about the importance of not taking a good relationship with a factory for granted (for more on this see our posts on Captive Buyer’s Syndrome and how to carry out factory audits in China). Believing that your order is immune from mistakes because of a good history with a supplier, will simply leave you vulnerable for when that unexpected issue does crop up.

A client of ours once had an experience that highlighted this kind of vulnerability. This client had placed a rather large order with a factory, many containers worth of product, but since they had been working with this factory for a long enough stretch of time, they felt comfortable enough to skip the pre-shipment inspection. As you may have guessed, this eventually back-fired on them as, upon receiving the shipment, they noticed that nearly 10% of the ordered products was missing from the containers they had ordered.

They then contacted us and asked us to go visit the factory and find out the details of what had happened. We learned that the containers had been loaded at night and that the missing product had most likely been loaded with a different shipment. This wasn’t the end of the story though as the factory only claimed about half of the missing product had been misplaced. The factory claimed not to believe the buyer’s claim of 10% of the order because they had not reported the problem immediately upon receiving the containers. So they explained that they would only compensate for half of what our client says they misplaced.

When you face a problem like this you want to make sure you have as much evidence as possible to support your claim. This includes shipping forms, clearance documents, and photo evidence of what you are claiming is a problem. When you can provide all of these, you add a lot more strength to your argument. In general, factory owners are going to prefer to resolve things directly with their customers, as their top concern is to keep good customers coming back.

In this particular story the factory even claimed that they had lost the camera from that night and thus could not provide any photos. This gave us the upper hand in negotiations, which ultimately led to the supplier agreeing to provide compensation for all the misplaced goods under the condition that the buyer would continue to place orders with the factory. This client has been continuing to place orders with the factory and has made sure to conduct pre-shipment inspections for every order.

What lessons can you learn from this experience?

• Inspections are too important to ignore. Even if you feel relatively comfortable with the relationship you have with a factory, don’t underestimate the importance of diligent inspections. There are a wide range of QC inspections you can engage in at all points of your production process.
• Insist that your supplier or on-site QC inspector takes photos of the loading process. This way if something does come up you can verify the legitimacy of any claims either party is making.
• Finally, when you receive the goods, examine the quantity and quality of the product immediately. If there are any problems, you should report them to your on the ground representative or directly to the factory. The less of a delay there is, the less grounds the supplier will have to repudiate your claim. Also, take pictures that show where the problem is so that you can compare these against your suppliers’.

Now we turn it over to you. Have you ever received an incomplete shipment? How did you deal with it and what strategies do you use to avoid similar problems from coming up with your order?

• Iris Zhou- CPG Sourcing Associate