Chinese factories: what can be checked

For the average importer, there is a lot of choice when it comes to methods for gathering information about a Chinese factory.

If you need basic due diligence before issuing a first order, if you want to collect evidence of misbehavior, or if you just want to reassure yourself, there is probably a way to get the right information. Here is the menu:

If you visit by yourself (and let’s assume you have no particular manufacturing expertise):

• What they are making, and what equipment they have
• What certificates they can present (warning: it guarantees nothing!)
• How big they are, and what they capacity appears to be
• Whether they have English-speaking sales staff, and whether it looks like they produce for the export market (for better results: ask for customer references)
• And what is probably the most important: whether they seem interested in your business, and whether you “feel” their boss and their management

If you pay a quality control company to send an auditor on site:

• Their equipment, their size, their capacity, their certificates
• During ISO 9000 factory audits: how organized and reliable the manufacturer is
• During social compliance audits: whether they respond correctly to questions, and whether their accounting/payroll books seem to tell the same story (click here to understand why I am so cynical about these audits)
• During a QC inspection: whether your products are conform to your specifications (or golden sample) and whether their proportion of defects is acceptable

If you ask a lawyer to check their background:

• What their sales, costs, margin, growth, and profit/loss are
• What their assets are (and whether the company you are in contact with really owns a manufacturing operation)
• Whether they have a business licence that fits their activity, whether they have an export licence…
• Who the owners are, and whether they seem to have a good reputation

If you pay an investigation firm to collect information in “undercover” mode

• Whether the factory really does not resort to child labor, legal violations, etc. (an investigator can pretend to be looking for a job, and can get a lot of first-hand information)
• Whether the factory really refuses to sell its current customers’ designs when a potential client asks for it
• What prices they quote to another client for the products you are currently buying

I only discovered about such investigations earlier this month, when I met with Kevyn Kennedy (the GM of CBI Consulting). He distinguishes his company’s “covert audits” from the traditional announced audits performed by third-party QC firms.

Unfortunately, many Chinese suppliers are very good at putting together a nice show, and at presenting supportive evidence (even when it is all fake). If you really want to know the truth (as ugly as it may be), sometimes traditional QA firms can’t respond to your needs.