PPE Part 2: How to confirm if the supplier can actually make the PPE you want to buy.
Insider’s Guide: How to buy PPE from China during Covid-19 pandemic.
Looking into buying PPE equipment from China during the Covid-19 pandemic. Confirm that your supplier can actually make the PPE. Perform your due diligence to ensure the seller can make the products you want to buy.
Introduction to our series on buying PPE from China during the Covid-19 pandemic.
A growing number of buyers are looking to China for supply as the world scrambles to source personal protective equipment during the Covid-19 pandemic.
China sourcing was never easy, but the sourcing game has been taken to a whole new level of complexity as the pandemic turns the supply chain upside down. A totally new set of dangers now exist on top of the common pitfalls that have plagued Chinese supply chains for decades.
In this series of blog posts and video tutorials, the author will walk the reader thru 6 essential steps for safely sourcing PPE from China.
Safely source PPE from China: 6 Steps
- Is the seller a real company? Avoid the scams
- If yes, are they making the products you actually want?
- If yes, can this supplier export out of China to you?
- If yes, can you import into your county?
- Does it still make economic sense after factoring in the costs of air or sea transportation?
- If the goods arrive in your country’s port, how to ensure they make it to your door?
Before we explore the steps in detail, let’s first confirm these articles are right for you as the reader.
Target Audience for this article on how to buy PPE from China during the Covid-19 pandemic.
In my consulting practice during the past few months, I have found that the potential clients fall into 3 categories.
This series of articles is written for readers who fall into Groups 2 and 3. If you fall into group 1, shame on you and consider the arrest of this joker who horded masks in NYC before you make your next move.
Insider’s Guide: How to buy PPE from China during Covid-19 pandemic.
Part 2: How to confirm if the supplier can actually make the PPE you want to buy.
Key Steps:
- Is the seller a real company? Avoid the scams
- If yes, are they making the products you actually want?
- If yes, can this supplier export out of China to you?
- If yes, can you import into your county?
- Does it still make economic sense after factoring in the costs of air or sea transportation?
- If the goods arrive in your country’s port, how to ensure they make it to your door?
Step Two Explained in Detail: Can the seller make the actual products you need?
In step one (link) we covered how to avoid scams when sourcing PPE during the pandemic. Now let’s explore how to confirm if the supplier you found can really make the products you want to buy.
In order to meet the global demand for PPE, many Chinese suppliers are pivoting away from their traditional product lines into the production of PPE. In China, we are seeing electronics factories and toy producers jump head first into the PPE production.
That’s great news in terms of helping to meet the global demand for PPE.
But that’s also very scary when you consider that many of the current PPE suppliers were not even in the medical device industry as recently as 6 months ago. It’s highly likely that their product knowledge, quality processes and production methods are neither well defined nor stable. An ISO compliant sneaker manufacturer would need to almost totally re-write their training manuals and quality control methodology if they start making masks!
Case Study: PPE Supplier Verification during the Covid-19 Pandemic
You avoided the obvious scams and the potential supplier looks good. But how can you be sure the supplier is legitimate and will meet your needs for a particular PPE?
In the China sourcing industry, when we talk about verifying the legitimacy of a factory or supplier, we are generally looking at two aspects:
Quality Audit: Does the supplier have the ability to product the products I want to buy?
Due Diligence: Is the company a legitimate business with good reputation and not a scam or business on the verge of bankruptcy?
While Quality Audits and Due Diligence both fall under the category of supplier verification, they are two distinct fields of expertise which require radically different skill sets.
- For example, Quality Audits require auditors who are trained in ISO and familiar with the tricks of the trade on the production lines of Chinese factories. These auditors go out in the field to visit the factory.
- Due Diligence on the other hand requires researchers who are skilled at desk research, data analysis and accounting tricks in China. They conduct interviews by telephone with the company and collect documents and data from the court systems, the real estate manager where the company is located, the media, business associates, banks and the local government office where the factory is based. The subject company is not even aware that they are being investigated.
In essence, field research and desk research are two complementary methods. When combined they give the buyer a comprehensive answer to the question “is this supplier legit?” I sleep better at night when the feedback I get from my Due Diligence (desk research) matches what it coming back from the Quality Audit (field visit to factory). If there are discrepancies, I look a little harder until I am satisfied with the answers.
In part 1 of the 6-part series (link) we covered due diligence in depth. Now let’s turn attention to Quality Audits.
Conducting a Quality Audit on a factory during the Covid-19 Pandemic
This step is designed to ensure the supplier has the equipment and experience to make a given PPE product. In normal times, audits can be conducted by the buyer. At the time of writing, China is not allowing foreign nationals into their county in hopes of preventing a new wave of Covid-19 infection. As such, you will most likely need to engage a 3rd party to conduct your audits and product inspections. Asking your seller to conduct an audit of themselves on your behalf is downright stupid, but some buyers still do it. Crazy!
There are various types of QC audits, but luckily most buyers need not spend more than US$400 to have a proper assessment done on-site at the factory by a professional 3rd party. You can find sample audit reports and links to reputable auditors/inspectors at www.SourcingServiceCenter.com
Most factory audits cover the following:
Quality System: on-site visit to confirm if there is a QC system in place.
Factory Profile: official business name, ownership, organization chart, contact details, production line status, production capability and capacity.
Employees and Workforce: overview of HR policies, management style and workers situation.
Experience: trade history, client information, available samples.
Verification of Documentation: review of licenses and certificates.
Importance of Freshness of Due Diligence during Covid-19 Pandemic
(ensure supplier can actually make the PPE)
Things change fast in China. If key managers leave or the product line is changed (for example, I had a textile factory try to get into mask respirators with no prior experiences simply because they thought the margin would be better in PPE) good suppliers can go bad overnight.
Speaking of margins, as a rule they are very tight in China. This means most businesses cannot withstand a downturn if it lasts more than a few months. Covid-19 is a downturn like China has never experienced! You don’t want to send a deposit to a factory that is about to close its doors.
So, make sure your factory audits and due diligence is as fresh as possible.
Managing Expectations when conducting audits and due diligence during the Covid-19 pandemic.
The tools and techniques outlined above will significantly reduce the risks of entering into business with a bad supplier. However, audits and due diligence are just a few of the tools buyers should have in their sourcing toolbox. As buyers, we need to be vigilant and keep an eye on our suppliers at all phases of production, not just the initial supplier selection phase.
Among the links below you will find a 50-minute video tutorial on exactly how to manage the production after you have placed the order with a new supplier of PPE.
PPE Supplier Verification in China: Additional Resources
Articles on the subject of PPE Supplier Verification
Mike’s Interview with Smart Company
China Sourcing Success/ Failure Factors
Short Videos about Supplier Verification in China
Big Mistake: Failing to confirm if the supplier has a robust QC system
Full Video Tutorial covering Supplier Verification in China
Video tutorial: https://www.youtube.com/watch?v=bjhnX98LfNk
Conclusion (ensure supplier can actually make the PPE)
Even before the Covid-19 pandemic tossed a monkey wrench into global supply chains, it was my long-held opinion that conducting due diligence and QC audits are both essential steps to do BEFORE you send any money to a supplier when sourcing from China. Perhaps I am jaded after living here in China for a long time, but I assume the worst unless proven otherwise. Trust BUT verify. So important these days as scammers and unqualified sellers flood the global PPE market.
revised from: Apr 9, 2020
ABL Blog: Sr. Editor and Primary Content Creator: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
Learn more about Mike and AsiaBridge Law at
https://www.asiabridgelaw.com/business-advisory-services/
Mike is the author of “The Essential Reference Guide to China Sourcing”
(available on Amazon).