A client asked for my advice about a common situation:
- They are about to give a relatively large order to a factory.
- They had a bad experience with that same factory in the past. They had too many defective products and it was quite costly.
I have met with many importers in this situation. Here is what I usually tell them.
First, why keep working with the same factory?
Have they promised they would improve? On what basis? In most cases it doesn’t happen, and the next production run they make for you might be much worse.
Do they have a bunch of excuses, and do they promise it won’t happen again? Do you have a good reason to believe those same mistakes can’t happen again?
Now, I understand it might be very hard to have another manufacturer make the exact same product. You might be buying an ODM product (with the design belonging to the manufacturer). Or the product might be technically challenging to develop in another factory, while this supplier is already “ready to go”.
That can be quite frustrating. But sometimes the best is to start again from scratch, with a new supplier who really knows how to control their incoming components and their processes.
And, next time, start early and develop a backup. It takes time and energy, but it will give you an alternative you can turn to should things go wrong with the main supplier.
Second, can you reduce your exposure to risk?
Instead of issuing an order for, say, 10,000 pieces, issue one first for 3,000 pieces and tell the supplier another one will follow if quality is good. This way, you hand them a smaller advance payment, and you incentivize them to do a good job.
Note that they will hate that idea. They will want to make all 10,000 in one go. They will say it is more costly — and it might still be in your interest to pay a little more for that.
If they do a bad job on the first batch, you can scrap your plan of buying higher quantities from them. You can contain the problem.
Another idea is to request more favorable payment terms. When you complain about all the quality issues you found in the first batch you ordered, they might offer a discount on the next order. Instead, ask for paying a deposit of only 10%. Or ask to keep 20% of the amount unpaid until you get the goods in your warehouse, in your country.
They are quite sensitive to the risk of not getting paid. This puts pressure on the manufacturer to do a good job. That’s precisely what you want!
Third, be aware of what quality inspections can and can’t do for you
If you work with an unreliable manufacturer, a QA agency can help you in various ways:
- Document your standard, and in particular what types of defects should be classified as critical, major, or minor. This is quite helpful for communicating your expectations to the supplier.
- Send an engineer before production starts, to analyze the causes of the main issues you suffered from in your last order. This way, a few tasks can be given to the manufacturer to minimize risks.
- Send an inspector early in the production cycle, to give some feedback. If quality is substandard or very inconsistent, you can request that all pieces be checked again in the factory under a trained inspector’s supervision — that might help.
- Once production is completed, send inspector(s) to check average quality. This step always carries a bit of tension. If the findings are still unsatisfactory, the factory can’t ship the goods out and get paid… That kind of pressure usually pushes the supplier to try and do an acceptable job.
- Manage sorting and re-work if needed, and inspect again once the factory thinks all is good.
However, if you work with a manufacturer that is not used to making products that are up to your standard, it will be a long uphill battle that you might well lose…
Quality inspections will NOT remove all quality-related risks out of the equation. Even if an inspector is placed in the factory every day for 3 weeks, the factory may not listen to him/her and may refuse to rework the issues he/she finds. The factory’s motivations matter a lot!
So, make sure you work with the right people. It really is the key to success. I wrote a series of articles on the theme of China supplier verifications. I hope it helps…