Supplier Selection & Verification
Thanks to online directories like Alibaba and Global Sources, it is pretty easy to come up with a long list of potential suppliers. But it is not so easy to take this long list and narrow it down to the best one single supplier in all of China for your particular needs.
Also, keep in mind that the online directories make their money in the form of listing fees paid by the supplier. So, their interests are aligned with the seller, not you, the buyer.
While the directories may use terms like “verified supplier” and “safe payment system”, if you look at the small print, those directories offer no promises about quality nor can they guarantee that the seller will even deliver on their promises for price and lead time. In short, it is up to you, the buyer, to make sure the seller is legit. And at the risk of over simplification, here is the general process:
3 Steps of Supplier Selection Process & Verification
Step 1: Not a scam?
First step is to make sure the seller is a real company, not some guy operating out of an apartment in Hong Kong pretending to be a factory in China.
Step 2: Experienced?
After confirming the seller is a real business, then you need to confirm they can actually make the product they say they can make for you. In hopes of getting your order, Chinese suppliers always say “yes”. It’s not enough to ask “can you make this widget” you have to confirm they actually “have” made that widget and are likely to be able to make an order of those widgets for you. So, you need to think about doing a comprehensive audit if you are serious. But here are three essential questions to ask that will help verify if the seller is likely to meet your targets for price, quality and lead time.
Q1. Check References
It doesn’t cost you anything to ask for references. If a supplier can’t give you a few happy clients to speak to, you should run away.
Q2: Visit in Person
Checking out the seller with your own eyes is one of the best ways to get a feel for the actual situation at the factory floor. Even if don’t have the time to visit the factory, you want to confirm in advance that it’s not a problem to visit the production site. If they come up with a bunch of excuses for why you can’t visit, then it likely means one of two things:
- They don’t have the ability to produce your product and are scared that you won’t like what you see if you visit in person
- or it could be they are a trading company and worried you will cut them out of the loop if you go factory-direct.
If you don't have the time or interest in visiting the factory in person on your own, consider engaging a 3rd party. Factory audits have become commoditized and only cost a few hundred USD. But make sure you use a reputable auditor as the smaller independent auditors have been known to take kick backs from the factory they are auditing! https://www.sourcingservicecenter.com/ can get you pointed in the right direction.
Q3. Quality Manual
Ask to see the supplier’s written quality manual. This document explains to the workers how to assembly, package, catch defects and improve quality. A professional factory will be happy to show you an ISO-compliant Quality Control Manual. It’s a big red flag if they don’t have a written quality system. They may say things like “we don’t need paper work, we make these products every day and know what we are doing”. But because workers switch jobs, managers change, suppliers are swapped out on a frequent basis in China, it’s up to you as the buyer to verify that the factory has a stable quality system in place.
Check out the link below if you want to see an example of what a well-written bilingual quality manual looks like.
Sample Quality Manual: Assembly and Inspection Documentation
Step 3: Financially Sound?
The final step is to confirm that the business is in sound financial position. You don’t want to spend the time getting a supplier up to speed, only to have them go bankrupt in the middle of your order and disappear with your deposit!
That’s a very quick overview of the Supplier Selection & Verification process. Visit Due Diligence for more information on due diligence and Supplier Selection & Verification.
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).