China Manufacturing Decoded
 

China Manufacturing Decoded

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Join Renaud Anjoran, Founder & CEO of Sofeast, in this podcast aimed at importers who develop their own products as he discusses the hottest topics and shares actionable tips for manufacturing in China & Asia today! WHO IS RENAUD? Renaud is a French ISO 9001 & 14001 certified lead auditor, ASQ certified Quality Engineer and Quality Manager who has been working in the Chinese manufacturing industry since 2005. He is the founder of the Sofeast group that has over 200 staff globally and offers services (QA, product development & engineering, project management, Supply Chain Management, product compliance, reliability testing), contract manufacturing, and 3PL fulfillment for importers and businesses who develop their own products and buyers from China & SE Asia. WHY LISTEN? We‘ll discuss interesting topics for anyone who develops and sources their products from Asian suppliers and will share Renaud‘s decades of manufacturing experience, as well as inviting guests from the industry to get a different viewpoint. Our goal is to help you get better results and end up with suppliers and products that exceed your expectations!

Episodes

7 Manufacturing Challenges Due To Lack Of Transparency In China & How To Mitigate Them

Wednesday Sep 02, 2020

Wednesday Sep 02, 2020

In This Episode...

Recently Renaud wrote a blog post on the 'China Law Blog' titled: Verifying and Monitoring Your Chinese Suppliers. In it, he discussed 7 challenges facing buyers with Chinese suppliers which stem from a lack of transparency. We'll discuss these challenges in today's episode.

When we speak of risks and challenges these days many buyers are thinking of the effect of the US/China trade war, the situation in Hong Kong, and other political issues on their business, but the risks covered here are related to the daily struggle that buyers have just to receive their products at the quality they expect and some of the steps you need to take to mitigate them.

Show Notes

Start to 4:35 - Introduction + what are the 'risks' and challenges facing buyers today that are NOT box-office news topics like US/China trade war, Hong Kong, Xinjiang, etc? The 7 situations where challenges occur due to a lack of transparency and how these are very damaging. Podcast episode on social compliance audits (referred to around 2:25)

4:35 to 12:17 - 1. Supplier screening & qualification - taking control of your supply chain and not letting the supplier keep sub-supplier information, etc, from you. 

12:17 to 18:33 - 2. New product development (manufacturing side) - includes how prices can be increased without warning and suppliers can skip pre-production steps like a pilot run.

18:33 to 25:54 - 3. New product development (design side) - including why you should expect to be given up-to-date designs for your product and not being sucked into losing the rights to your IP to OEMs who want to lock you in by holding your designs. Podcast episode on choosing the correct supplier (relevant to this section).

25:54 to 30:40 - 4. Confidentiality of information - how Chinese suppliers can play 'fast and loose' with information and IP that should remain confidential and how to safeguard against this.

30:40 to 37:29 - 5. Purchasing materials & components - being wary of counterfeit components and how to keep tabs on suppliers who may switch out components to improve their profits.

37:29 to 40:02 - 6. Manufacturing (Sub-contracting) - can you be sure that the production is truly carried out at your supplier's factory as agreed, or is it being subcontracted to a sub-supplier that you don't know about due to being too busy? Solutions to this issue.

40:02 to END - 7. Your supplier selling your products without permission - are you open to abuse by the supplier because they have your tooling and can use it to produce your products and sell to other clients or in your market against you? What to do to avoid this.

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Why Conduct On-Site Social Compliance Audits? | Vetting Chinese Suppliers (Part 6)

Wednesday Aug 26, 2020

Wednesday Aug 26, 2020

In This Episode...

We continue our exploration of the vetting process when sourcing new Chinese suppliers in this episode. You can read more about this topic in the series of blog posts on QualityInspection.org which we refer to throughout - read all of those posts here.

Social compliance audits are the next factory audit type that buyers need to be aware of and consider, certainly if you're from a big brand or in a niche where social issues (such as child labor) are common, for example, apparel.

Ideally, using a social compliance audit to assure that your supply chain is free from illegal practices such as modern slavery is an important factor in vetting and working with a new supplier. Many large companies, like Walmart for instance, have their own standards that they insist that suppliers meet concerning employee welfare, adherence to local laws, and elements like environmental standards, too. Fundamentally, a social compliance audit protects you from being associated with things in your supply chain which could damage your company or brand.

So, let's explore what this type of audit is, how effective it is, and the drawbacks it has, too.

Show Notes

Start to 8:53 - Introduction + explaining WHAT a social compliance audit is. Some examples of the 3 'big' circumstances that importers want to avoid: Child labor, forced labor, and dangerous working conditions.

8:53 to 10:24 - Does adding in the cost of improving working conditions increase costs overall for buyers? Why the costs associated with paying injured staff, negative government scrutiny, or reduced efficiency due to a shortage of staff put off by unsafe conditions can quickly escalate.

10:24 to 13:55 - Elements of a social compliance audit that are probably given too much importance, for example, working longer working hours and overtime. Even where hours worked are into an 'illegal' amount, this doesn't mean that abuses are occurring, especially in China with migrant workers.

13:55 to 17:20 - What does a 'dumb' importer do when performing a social compliance audit? The dangers of sticking rigidly to a standard in terms of forcing suppliers to lie in order to pass (this may be unavoidable if big customers demand certain things).

17:20 to 18:00 - How the 'smarter' importer approaches social compliance auditing with a selective focus. If the supplier is safe and improving, this should be the goal. Focusing on things like consensual overtime is a red herring.

18:00 to 20:30 - The different social compliance standards and how these have become a good business for large testing groups, to the point where it can be used by buyers and labs to profit from the suppliers who are forced to be audited in order to win business.

20:30 to 22:30 - How and why factories in places like China and Vietnam are improving over time naturally these days and why, therefore, many social compliance audits aren't helping other than for improving the buyer's image.

22:30 to 23:26 - The risks of social compliance auditors being corrupt.

23:26 to 24:45 - How buyers train their suppliers to lie by enforcing rigid social compliance audits with a lot of short-term pressure (pass or lose the order) and also possibly create corruption in the supply chain if the wrong auditor goes in.

24:45 to 26:52 - Why a rigid social compliance scale is good for a buyer's statistics, but not so helpful on the ground. Is it merely ass-covering?

26:52 to END - Exploring a better, more holistic way to approach social compliance audits which is likely to be less open to abuse and more likely to lead to positive changes.

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The end of Just-In-Time (JIT) manufacturing?

Wednesday Aug 19, 2020

Wednesday Aug 19, 2020

In This Episode...

A lot of commentators are discussing what's going to happen to the manufacturing industry 'post-COVID19,' in fact, we've discussed it ourselves before here!

But one topic keeps coming up, JIT manufacturing and how it has been negatively affected by the virus and other circumstances.

So, let's explore this supply chain model - why has it been so popular, how has it come under strain this year, and what's next for importers who currently use it?

Show Notes

Start to 1:31 - Introduction

1:31 to 11:22 - Some examples of what JIT is and what it isn't. Discussing the dangers of holding too much inventory, especially where risk and working capital is concerned, and long supply chains.

11:22 to 12:51 - 3 benefits of JIT: Lower working capital, ability to be more responsive to the market by accelerating production of good sellers rapidly, and the ability to cut losses on poor sellers and halt production quickly in order not to hold stock of them.

12:51 to 16:00 - Why JIT (Just In Time) Manufacturing works well with a short supply chain with fast processing times, such as automakers.

16:00 to 23:05 - How and why is JIT susceptible to external circumstances, such as the coronavirus pandemic. Is it even JIT's fault that disruption from the outside can happen, or is it actually your supply chain's setup? 

23:05 to END - What's the scope for things to get 'back to normal' or will there be lasting changing to the way supply chains are structured? The role of the US/China trade war in spurring change in, specifically, American companies.

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The Importance Of On-Site Factory Quality Audits | Vetting Chinese Suppliers (Part 5)

Tuesday Aug 11, 2020

Tuesday Aug 11, 2020

In This Episode...

We continue our exploration of the vetting process when sourcing new Chinese suppliers in this episode. You can read more about this topic in the series of blog posts on QualityInspection.org which we refer to throughout - read all of those posts here.

Now that you have done a preliminary investigation into your potential new Chinese supplier and perhaps even visited their factory to do a subjective evaluation, the next step in the vetting process is to perform a factory quality audit.

Understanding your manufacturer's grasp of quality and in-house quality systems means that you're able to assess whether they're going to be able to fulfil your quality needs down the line. Even if they're a legitimate company, this doesn't mean that they're able to produce your goods at the quality you need.

This is where an experienced auditor's keen eye and checklist can help you. A personal factory visit is useful, but do you have the expertise to look into the quality system (or lack of one) and root causes of quality issues?

So, this episode will give you a detailed introduction into how and why factory quality audits are a logical 'next-step' in your supplier vetting process as now you start to get a real understanding of your supplier's quality capabilities and reliability.

Show Notes

Start to 2:00 - Introduction + China/UK weather update (!). A reminder of the vetting new Chinese suppliers mini-series of episodes (here's episode 1 to get you started). 

2:00 to 9:00 - WHAT is a factory quality audit? Factory audits defined, different types, the difference between such an audit and a factory-visit where you form subjective evaluations.

9:00 to 12:15 - Talking about audit structure and standards, such as ISO 9001:2015.

12:15 to 15:33 - Explaining what a 'Quality System' is and why it's important to audit it. The effect that ancient Chinese wisdom from Sun Tzu, for example, still has on today's Chinese businesses and their approaches to quality.

15:33 to 19:15 - How the auditor will approach auditing your potential supplier. Importance of the checklist they need to follow and controlling the audit. What they do to cut through 'BS' manufacturers are likely to show or tell them.

19:15 to 35:47 - Renaud's TOP 8 CHECKPOINTS to focus on in a factory quality audit.

35:47 to 38:55 - Will potential suppliers be resistant to a factory audit which could be uncomfortable for them? How some suppliers can try to discourage visits by professional auditors.

38:55 to END - What can factory audits miss or what are their blind spots? Wrapping up the pod.

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The State Of Manufacturing In China 2020 Survey (Results & Feedback)

Monday Aug 03, 2020

Monday Aug 03, 2020

In This Episode...

What are the relationships between foreign importers and their Chinese suppliers like in 2020? Have they been negatively affected by the coronavirus pandemic or other reasons?

To find out, we sent a survey to both our Sofeast and QualityInspection.org readers to assess the state of manufacturing in China in 2020. 

The results are discussed in this episode. Listen in and you may get some helpful insights that could help you anticipate possible issues that we're seeing occurring this year.

Do any of our findings resonate with what you're seeing from your Chinese suppliers?

Show Notes

Start to 3:40 - Introduction. What was the survey and what were we expecting from it?

3:40 to 36:30 - Going through each of the survey's 7 questions one-by-one, providing the statistics, and feedback per point from Renaud.

36:30 to end - A quick summary. What did and didn't surprise us about the results of the survey?

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What Are The Benefits Of The Shenzhen Free Trade Zone To Importers?

Tuesday Jul 28, 2020

Tuesday Jul 28, 2020

In This Episode...

What is so useful about free trade zones in China?

Why should importers with Chinese suppliers consider utilizing them?

Sofeast has recently opened an RMA and fulfillment facility in Shenzhen's Pingshan Free Trade Zone, so, based on our experience there, we're going to explain the benefits.

 

Hopefully, after listening to this episode, so you will understand if using warehousing, RMA, and fulfillment in the FTZ is better for your business in terms of costs, time, and effort than in China-proper.

Show Notes

Start to 6:27 Introduction into what Free Trade Zones are.

6:27 to 9:01 - FTZ RMA facility is better than local ones (such as in the USA) due to far lower costs and proximity to your suppliers. 

9:01 to 10:42 What does the inspection, sorting, and repair/rework process that the FTZ is perfect for look like?

10:42 to 11:52 Rather than using a local rework company, sending defective pieces back to the FTZ means your supplier can take responsibility and send their own staff to do the repair/rework. How does this work?

11:52 to 12:08 There was a lack of repair services in China, until now..!

12:08 to 15:01 Suppliers deliver finished products/components to the FTZ and they have 'exported' - can apply for VAT rebate and request payment by customer - they like this and it can help you to have a better relationship with the supplier. Our FTZ facility can store your goods (it's cheaper than locally or even other places in China) and fulfill them as per your needs, so you rely less on the supplier to get things right or safely store your products (the supplier's warehouse may be damp, may not be insured against fire, etc). It's suitable for batches of products of a certain size, but not dropshipping piece by piece (we handle this from our Dongguan contract manufacturing facility)

15:01 to 17:00 If importers have the need to bring together orders components/products and ship them out from China in batches, using a FTZ fulfillment center can improve relationships and results from suppliers.

17:00 to 19:49 If you use a 3rd party (such as our company) to act on your behalf from the FTZ to deal with your supplier Chinese-company to Chinese-company - this allows easier payments, invoicing, and builds more trust with the supplier who knows that they can take legal action against us if we, say, do not pay them (much harder for them to do against foreign companies), therefore they are more likely to offer preferential credit terms and other benefits to you. Therefore using a dedicated 3rd party China buying office in conjunction with the FTZ location is helpful.

19:49 to 21:15 An FTZ location allows you to receive components and goods from different suppliers without letting them know important information such as your IP, product type, other suppliers, costs, your retailers, etc. Overall, this helps protect you against suppliers using your designs or undercutting you in your market by selling cheaper.

21:15 to 22:15 If some parts come in from suppliers in a foreign country, let's say somewhere like Vietnam, to be assembled with other from China, is it worth paying fees to import them to China and spending the time to go through Chinese customs? By utilising a Free Trade Zone facility, this cost can be avoided.

22:15 to 23:29 Customs clearance - are there tangible reductions to delivery times due to the FTZ's reduced bureaucracy in regards to customs clearance?

23:29 to 26:24 Do the Chinese FTZs eat into Hong Kong's status as a free port where there are also lower import/export duties and processes? Hong Kong still has benefits, but labor costs there are high.

26:24 to END Summarising the benefits of the FTZ - where is the Pingshan FTZ in Shenzhen located? Take a look at this map for a rough idea (you can see how close it is to Yantian port).

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On-site, Subjective Factory Evaluations | Vetting Chinese Suppliers (Part 4)

Thursday Jul 23, 2020

Thursday Jul 23, 2020

In this episode...

This is the fourth part of our series on vetting Chinese suppliers which loosely follows the blog posts in this series that Renaud wrote before.

In this episode, we’re discussing your subjective impressions when you finally go out to a supplier and visit them (or the questions your factory auditor should be answering if you have sent them in your stead, which is perhaps more likely during the coronavirus pandemic when travel to China isn't possible).

So you'll want to use this opportunity to check the facts with your own eyes, and Renaud is going to give you a number of tips about this which are split into three categories:

  1. Factory fit 
  2. Factory management
  3. Factory setup and condition

Show notes

Introduction - This episode covers a fairly loose list of topics that you need to pay attention to when visiting a supplier. (START to 3:30)

Factory fit (3:30 to 15:40)

Factory size - Huge suppliers may have a good reputation, but if your orders only make up a fraction of their sales they may not provide you with the best service as you are not a priority, therefore finding a balance is needed. Size is the most important factor to consider when assessing a supplier's fit. (4:25 to 6:16)

Seasonality - If your supplier has many customers with the same seasonality (requiring products to be made at the same time), this could lead to delays and for your order being bumped in favour of larger customers. (6:16 to 7:07)

Focus - Who is the supplier usually dealing with? Their requirements have an impact on their focus - for example if their number 1 customer generally requires fairly low-quality goods, but you need them to produce goods at a very high quality, then their focus isn't a good fit for your needs. (7:07 to 8:36)

Keeping key processes in-house - if one production process is very critical to your products, choose a manufacturer who keeps this in-house instead of subcontracting it. (8:36 to 9:03)

The contact person - who will you be working with? If they're not experienced it could cause you trouble later. Don't base buying decisions alone on how effectively the representative communicates, as great suppliers may not always have staff who speak good English. (9:03 to 11:38)

Respect for IP - Does the supplier show you a showroom full of different designs? Did they develop all of these products, or are they 'touting' the designs of their current or former clients? If this is the case, how can you be sure that your product design and IP won't be next? (11:38 to 12:25)

The pros & cons of working with large or small suppliers - this is related to finding a supplier whose size is a good fit. Large = good resources and facilities, but a possible lack of attention. Small = good access to management, your order will be valued, but they may have poor structure and a lower level of experience, a poorer network for sourcing materials and components, etc. (12: 25 to 15:40)

Factory Management (15:40 to 23:00)

Are the managers/production supervisors/team leaders present on the factory floor? - why this is important in terms of how well the supplier has control over its production and can make improvements. Do they email instead of verbally communicating with the team? This affects productivity and shows poor leadership. (15:40 to 17:30)

Are any metrics displayed? - this demonstrates an overall understanding of the present performance and grasp of where the supplier is at right now. (17:30 to 18:20)

Are operators paid the piece or by the hour? - by the piece is a red flag as this pay scheme causes a lot of problems such as operators hurrying to produce quantity without being so concerned about quality. (18:20 to 18:52)

Hands-on management who look to improve things are positive - they're likely to be a sustainable supplier over a longer period. (18:52 to 19:45)

Management who show an interest in and understanding of finances and profit point to being a sustainable supplier - suppliers who try to make a sensible profit and understand their costs will have a more secure business and be more sustainable over time (19:45 to 23:00)

Factory Setup & Condition (23:00 to END)

This is what you should be looking for when in the factory:

Cleanliness - this reflects on how well the operation is run. (23:00 to 23:51)

Are products in contact with the ground? - shows how well your products may be respected, or not. Are electronic parts in contact with non-ESD surfaces or packaging. This demonstrates their culture of quality and how well they'll pay attention to your quality standard. (23:51 to 24:42)

How are the operator's toilets? Clean, have soap? - seems strange, but this speaks to the culture of the supplier and whether they're concerned with improving conditions for workers and are a forward-thinking supplier. (24:42 to 25:37)

How is the condition of the equipment? - again, this shows how concerned they are with the upkeep and maintenance, as newer or well-cared-for equipment will affect your product quality. (25:37 to 27:50)

Is the testing equipment maintained properly? - if the supplier truly pays attention to quality their testing equipment should be well-maintained. If not, are they capable of producing products which reach your expectations on quality? (27:50 to 28:28)

Is the owner's car very expensive? - it's normal to see fancy cars in China, but if the factory is relatively shabby and the owner is driving a Rolls Royce this could show that he is trying to suck the maximum cash out of the business and is therefore not necessarily in it for the long run. (28:28 to 29:20)

Organized factory layout & operator PPE - the management is serious about organization and safety which is a good sign. Safety goes hand-in-hand with quality and staff improvement. (29:20 to 32:15)

Safety and Social Compliance - personal safety is a bigger problem than child labour in countries like China and Vietnam. If your suppliers don't take it seriously, can this reflect badly on your brand were something to happen? (32:15 to 33:12)

Management style - how operators are treated and whether they're in fear of management, if they have younger staff who will be faster and more adaptable tells you how dynamic the company is, and is the work broken into very short cycles? If so, it's lazy management with little process-engineering and low efficiency. (33:12 to 35:16)

Their in-house capabilities - do they do a lot of the work in-house, or they're just packing boxes? If the latter they may a trading company! (35:16 to 35:45)

Check for shipping marks on packages - this will give you an idea of the kinds of customers they work with which can give you an indication of the level of price and quality they usually work with (35:45 to 37:20)

Summary - also mentioning how factory auditors can help answer these questions for you and take additional pictures should you choose to send them in instead of visiting yourself (37:20 to END)

*****

You will also find this long list of questions to ask useful, as well: 24 questions to ask during a Chinese factory visit.

 

In parts 1-3 of this series, we’ve covered what bad suppliers look like, how to verify their legitimacy & suitability with numerous tips and questions, and how and why to assess their engineering capabilities. 

Catch up with them here:

  1. 7 Ways Suppliers Can Cheat Importers Or Cause Problems
  2. Initial Vetting Process & Approaches To Weed Out ‘Bad’ Suppliers
  3. How To Evaluate Your Supplier’s Engineering Capability

All these steps take place before the factory visit, which we've covered in this episode. 

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How To Evaluate Your Supplier's Engineering Capability | Vetting Chinese Suppliers (Part 3)

Monday Jul 13, 2020

Monday Jul 13, 2020

In this episode...

This is the third part of our series on vetting Chinese suppliers which loosely follows the blog posts in this series that Renaud wrote before.

In this episode, Adrian & Renaud discuss the importance of evaluating your potential Chinese supplier's product engineering capabilities which are especially important if you're working on new product development with the supplier.

We mainly concentrate on the 5 key engineering attributes you need to check:

  1. CAD Compatibility
  2. In-house Design Capability
  3. R&D Facilities and Capability
  4. Prototyping Capability
  5. Initial Prototype Test Capability

These give you a roadmap you can use to assess whether your supplier has the engineering experience, knowledge, and capability to create your new products before you start working with them.

Show Notes

Introduction - WHY to evaluate engineering capability in order to choose the right supplier. Tightly linked with many importers relying on their supplier's expertise and competencies to fill in gaps in their product development (design & engineering) that they do not have (for instance, implementing a camera module into products). If you choose the wrong supplier, you open yourself up to risks. Not just competency either, it may be that you choose a supplier that is the wrong size for you to be a priority.  (START to 7:16)

What are the attributes you should be checking? - size, incentives, time-scales, and business model. Work with a lawyer to address the greatest risks. (7:16 to 9:47)

What to do if your potential supplier won't sign a manufacturing contract? - some suppliers know that you need their expertise and will, therefore, refuse to sign a contract that puts too much responsibility on their shoulders. Instead of caving to their demands, you can find a new supplier, or redevelop or simplify your product to avoid the issue. This would typically happen with an ODM factory, whereas an OEM or CM + design house are other options where you will have more control (also more expense) (9:47 to 12:50) - read more about supplier choice and their pros & cons.

Does your supplier have CAD compatibility? - can files be sent back and forth and worked on with no issues? This is important if you are both working on product designs (12:50 to 13:25)

Do they have good engineers internally? - what you should look out for when assessing the capabilities of the supplier's mechanical, electrical, electronic, and/or software engineers (13:25 to 17:10)

Questions to ask and evidence to request to see engineering capability - Renaud shares some of the key questions you need to ask the supplier, such as about past projects which are similar to yours, in order to see that the supplier can truly reach your expectations (17:10 to 20:10)

Some more attributes that engineers need to display in order to assist on the R&D side and with certifications - electrical engineers need to be able to calculate motor torque, understand control systems, etc. Electronic engineers should have an in-depth understanding of PCBAs, but can they also design them in such a way that the products can pass FCC scrutiny for example? Do they know how to test the PCBAs? Software engineers - what environment are they used to? Can they work with your team on it seamlessly? Do they have examples of sensors etc that they have worked on before? Do they have experience of speeding up early prototyping for proof of concept? They may also have to help you with tooling, which is expensive. Do they have experience of reviewing tooling or do they just trust that the mold fabricator does a great job? (20:10 to 25:30)

How well can the supplier help if things go wrong? - if there are technical issues with custom-made parts (such as poor surface-finishing), can someone from the supplier's team go on-site and check why it's happening? Do they have experience with reliability testing? If the supplier is unaware of effective testing, that's a major red flag. (25:30 to 29:12)

The importance of asking questions and getting examples if you're unable to go on-site - until you can visit your supplier, quizzing them on past experience in R&D, testing, etc is a good option. Do they have experience in your materials, products, packaging, etc? If they test in-house, question their testing capabilities, too. Do they understand your quality standard? (29:12 to END) - Sofeast can also assist you to find suitable suppliers.

The advice you've been listening to draws on this blog post:

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Initial Vetting Process & Approaches To Weed Out 'Bad' Suppliers | Vetting Chinese Suppliers (Part 2)

Monday Jul 06, 2020

Monday Jul 06, 2020

This is the second part of our series on vetting Chinese suppliers which loosely follows the blog posts in this series that Renaud wrote before.

In Episode 10 we explored the bad behaviours or trouble that the wrong supplier can cause, such as scamming you, raising prices dishonestly when they know you have little choice but to pay, or just not being competent enough to be able to produce your products correctly.

Now that you know what you don't want from a supplier, what are some of the first steps you can take to weed out suppliers who aren't suitable? Adrian and Renaud discuss this initial vetting process, approaches, and some actionable tips here...
 

Show Notes

Introduction - we'll be discussing questions to ask and actions to take that can help avoid red flags when sourcing new Chinese suppliers (START to 2:40)

The following tips are fairly unstructured, but can all be helpful as a part of your preliminary supplier vetting process...

Test the water with a factory audit - a supplier should be secure enough to accept a factory audit. If not, then what are they hiding? Either way, conducting an audit teaches you a lot about your potential supplier's ability to do the job you need them to, and audits are affordable (2:40 to 6:20) - learn more about factory audits.

Do a search engine search for the supplier - if they have behaved badly in the past, it's likely that there might be some articles or news about them online, so search their company name and see what you can find (6:20 to 8:45)

Is the supplier's online information consistent? - a red flag is where the supplier has different information on Alibaba, Global Sources, etc. If they don't match, why not? You can also see verified information about the supplier on these platforms, so it's a good place to see what they're offering very quickly (8:45 to 13:07) - For anyone thinking of sourcing suppliers based on Alibaba's recommendations alone, Renaud wrote about 'Why An Alibaba Gold Supplier Status Doesn’t Mean Anything' here.

Has the supplier consistently participated in trade shows? - if they have it is evidence that they are a legitimate supplier as trading companies, very small, or unprofessional businesses may not do this (13:07 to 13:45)

Try purchasing a sample and insist on paying to their company account and collecting the sample from their address - by doing so you can confirm 2 things: 1. That they are who they say they are because you collect from their address (is it a factory, apartment building, office downtown? If it's the latter two you could have an issue). If they do request you to pay to a personal bank account, or maybe one in Hong Kong, this is a red flag, too - as a legitimate company should be able to provide a real business bank account (13:45 to 17:30)

Check the business in the Chinese government database - you will need the company's Chinese name and address, but with this (and the ability to read Chinese) you can learn a lot about the supplier, such as their company size, the scope of work they do, the investment capital (a low amount suggests they aren't a manufacturer), and any past or present court cases and decisions against them and the reasons, too (17:30 to 20:02) - performing a legal records check on the supplier is a fast and inexpensive way to check for this helpful information.

Check if the company holds any trademarks or patents in their own name - if it doesn't look like they do a lot of R&D but they have trademarks, patents, etc, this is a possible red flag. Have they been taking IP from past customers and registering it in China under their own name without their knowledge? (20:02 to 21:34)

Request the supplier's business license - it will be in Chinese, but it contains a lot of the useful information listed above if you can read Chinese. If not, get someone knowledgeable to analyze it (there should be a QR code on them which shows the registered info online). A good point is to check if they have an export license, too. If they do not, they'd have to deal with an intermediary which can add some risk of IP-leakage, etc (21:34 to 23:48)

Check their ISO 9001 certificate - this is common in China now, but you should ask for the certificate which you can verify with the issuing body and also the manual which should list the quality objectives and scope of the Quality Management System is - this is not suitable for people with no understanding of it, but at least be aware of this certificate's veracity if the supplier claims to hold it (23:48 to 25:53)

Question them about how they protect your IP - do you have a standard agreement for customers like us? How do you protect my IP? Many importers do NOT ask these questions! If they do provide an agreement, get you lawyer (familiar with Chinese law) to check it and assure that it's enforceable (25:53 to 27:56)

Ask for reference customers - who do they work with? You can learn a lot from this, although it's not always practical for suppliers to give too much of this information away (27:56 to 31:00)

What is the typical order quantity and quality standard? - if they deal with huge companies who place much larger orders than you will, you may have to expect a lower standard of quality than you're expecting. So the supplier's 'level' should be appropriate to where you're at as a business (31:00 to 32:30)

Familiarity with export standards - if they are unaware or lack understanding of the standards surrounding the products they make (such as UL standard for batteries), this is a red flag (32:30 to 33:19)

How is their communication? - real manufacturers may not have the best communication. If they do, you may be dealing with a trading company. However, don't discount a manufacturer where their English isn't perfect, as it is fairly normal (33:19 to 34:50)

Conclusion - Buying in China for the first can be confusing, so talk to other importers or find someone with experience who can provide some advice - keep eyes open, do due diligence, gather intelligence - these are three key takeaways (34:50 to END) - We also mentioned the book, 'Poorly Made In China' - this is a modern classic that gives great insight into the (many) things that can go wrong when you start manufacturing in China!

The advice you've been listening to draws on these 2 blog posts:


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7 Ways Suppliers Can Cheat Importers Or Cause Problems | Vetting Chinese Suppliers (Part 1)

Monday Jun 29, 2020

Monday Jun 29, 2020

In this mini-series of podcast episodes, we will explore the process of what it means to work with the right Chinese supplier and how to qualify them effectively, screening out the bad options and focusing only on the one or two best choices.

You can read more about this topic in the series of blog posts on QualityInspection.org which we refer to throughout - read all of those posts here.

When starting to source new suppliers, you need to be aware of the risks, and these bad behaviours are what we focus on in this episode - the 7 ways Chinese suppliers cheat or cause trouble for customers.

Show Notes

Why is vetting new Chinese suppliers so important? (Start to 1:45) - the topic is drawn from this blog post which you can read for extra information.

Introduction to the components of trust between supplier and client - firstly, do you trust them their character and truthfulness and secondly, do you trust them to be able to actually fulfil your orders correctly? The need to be careful not to put yourself in a situation where you rely too much on one supplier who may not have your best interests in mind. (1:45 to 7:38)

7 ways Chinese suppliers can cheat you!

The 5 bad behaviours

1. The supplier disappears after a deposit, or a fee for samples is wired. (7:38 to 11:25)

2. Price increases unexpectedly after a deposit is transferred and you're 'hooked.' (11:25 to 16:33)

3. Price increases from one order to the next, without relation to production cost increases. (16:33 to 18:55)

4. Lack of respect of IP rights (selling the buyer’s design to other customers). (18:55 to 25:05) - you may also enjoy this blog post related to IP theft in China, too.

5. Lack of transparency (subcontracting outside of an approved facility, changing a component without notice, etc.) includes a discussion about how face is gained when you get away with things and also the concept of chabuduo (more or less). (25:05 to 31:24)

2 lacks of competency/experience

6. Lack of reliability: late deliveries, inconsistent communication…why over-promising and underdelivering has become common among Chinese manufacturers. (31:24 to 34:50)

7. Inability/unwillingness to reach the desired quality standard. At what point do you 'pull the plug' on a supplier who is unable or unwilling to produce goods at the quality standard you are expecting? (34:50 to 37:55)

Previewing the next episode  

In part 2 of this series, we will move on to discuss how to screen out the 'bad' suppliers who are likely to cause you the problems discussed in this episode? This will include tips for better vetting, such as background checks and smart questions to ask that will help you quickly identify which candidates aren't right for your needs. (37:55 to END) 


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