Be explicit that there eventually may be a production location audit

When speaking about a production location audit, it is assumed that the building and facilities, management staff, factory workers, production, warehouse and storage, quality, and product development are all covered on gathering good information.

In China, factory audits are not a legal requirement but is required if you really want to manage the risks.

Middlemen Series - Be explicit that there eventually may be a production location audit - Bait and Switch Strategy avoidance

Why should you be explicit that the production location audit may be coming?

Also, need to talk about this issue of showcase factory.  Be explicit that when you place the purchase order, production is going to take place at the factory you visited because there’s a bit of a bait-and-switch that can go on.  These factories know that you want to visit a nice factory with well-organized production line, no scraps laying around, staff in uniforms, well lit, emergency exit signs, good food in the cafeteria, staff whistling at work so happy to be there.  They know that you want to see this.  So sometimes this “factory owners” or the trading companies will take you to a showcase factory, where you tick off all the items on the box: Nice factory location, clean, happy staff, whatever.  And then when they get your order, they actually send it out the back door to a sister factory where there’s no quality manual, staff don’t have any uniforms, there’s no safety precautions, overtime isn’t paid.  The price is really low, and they’re not going to pass that discount onto you.  Plus, the quality may have problems.

Red Flag Assessment

Once you have completed factory location audits either by yourself or having a 3rd party factory inspection services in China then you need to evaluate the information gathered, most importantly the quality. Is there any process visibly in place? How are the quality issues dealt internally and externally?

More to come soon in our Middlemen series ...

In a blog article to come, we are going to elaborate the switch and bait strategy on the factory and also the product outsourcing that one of the reasons why the quality of your products may have problems. 

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About the Author: Michael J. Bellamy

About the Author: 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).

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