Why Is It Important That The Third Party Service Provider Be Independent From The Factory?

Here is how we answered a question about why is it important that the third party service provider be independent from the factory? As the answer is applicable to a wide range of products, I decided to blog about the Q&A.

Why Is It Important That The Third Party Service Provider Be Independent From The Factory?

Question about why is it important that the third party service provider be independent from the factory:

We all know that these third-party service providers ensure that your goods are safely delivered right from the production factory.  But more than that, I'll share with you my experience what can go wrong when they are not independent from the factory.

Mike’s Answer: 

Thanks for your email.

First, I would like to explain a little bit about third party quality control (3PQC).

A seller (the first party) sells goods to the buyer (the second party). But many activities needed performed such as
inspection, auditing, and quality control. For example, the buyer is not certain the goods will be up to companies specifications and quality standard, and they have no staff on the area to check it, so they need an independent inspection company. 

Without third party service providers, global trading would only be possible between a few large companies.

I am going to two examples of what can go wrong when the service providers are not independent from the factory.

First Example:

I know of a European company that hired a former employee of their factory to be the European company’s inspection agent. That former employee had a good relationship with the factory before he left.  They were friends.  So it was very hard for that former employee to crack the whip really and say “Correct these quality control issues.” Essentially, the former employee was too close in terms of friendship with the factory to do a decent job of presenting the buy side.

Second Example:

I’ve also seen situations where the foreign buyer goes out and hires an auditor or an inspection person, puts them in China, and says “Work with this factory on a day-to-day basis to monitor their quality.” Everything goes well at first, but I’ve even seen situations where the foreign party says “Let’s rent some space in the apartment building next to the factory.”  So over time, the inspector makes friends with the factory. He gets close. I’ve seen cases where the inspector was actually dating the sales girl at the factory. What a mess. 

Make sure that your inspection or quality control partner is really at arm’s length and independent from the factory.  There are a lot of sourcing agencies and quality control agents out there that do a little bit of both, meaning they do sourcing, and they do quality control, quality assurance to be specific.  I tend to stay away from them for two reasons.

More on sourcing and inspection on the next blog, stay tuned!

Thanks again for your email.  Hope the ideas above are useful to your planning.  Glad to help and make introductions if you like.

ABL Blog: Sr. Editor and Primary Content Creator:  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

Mike is the author of “The Essential Reference Guide to China Sourcing
(available on Amazon).

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