You can’t visit suppliers in China due to coronavirus. How can you validate their production capacity without going on-site?
As we head into 2021 travelling to see suppliers in Asia, in particular China, remains difficult for most buyers due to coronavirus restrictions. Even if you can travel, you face the risk of transit and a long mandatory quarantine period in a hotel before you’re even able to conduct your business, so most buyers are staying at home for now. However, before placing an order you still need to know that your supplier has the production capacity to handle it, otherwise, you could be burdened by spiralling delivery delays, quality issues, & costs.
There’s no better way to validate what’s happening on the factory floor than seeing it in the flesh, but if we can’t go on-site, how do we validate a supplier’s capacity from abroad?
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Here’s a summary of key sections of this episode:
✅ How the coronavirus will continue to impact buyers through ’21. When can we expect to see vaccines freeing buyers to travel again and possible restrictions? Is China back to normal? Can the West recover in 2021?
✅ WHY we need to be able to validate a supplier’s factory’s production capacity before we start placing orders. You need to understand if your supplier has the capacity to handle your orders so you’re assured that you’re working with one who can produce it on time, on budget, and handle any bumps in the road along the way. Too small and they’re likely to slip, too large and they may not be attentive to your needs as your order is not important for them.
✅ Can yes mean no in East Asia? The culture in this region means that saying a direct ‘no’ is uncomfortable for suppliers, even if they should, so they sometimes say yes to orders even if they know they may not have the capacity to handle them smoothly.
✅ Tips for assessing a supplier’s capacity over the phone. If buyers are abroad and want to probe a supplier to see if they have the capacity required, there are a number of questions to ask over the phone, such as:
- Questions about what they buy from outside, such as components and if these are custom-made (more supply chain risk) or not, capacity per day, % of good pieces, etc.
- Questions about what they actually do in their facility, such as their processes, daily capacity per process, defect rate, etc.
- What their peak and slow seasons are – for instance, around CNY is a risky time to place orders.
✅ What factors impact a supplier’s capacity? *Hint: It’s a LOT more than just employees & machines. Employees and machines are the standard figures given by suppliers to ‘explain’ their capacity, but in fact, you need to get some visibility on the following factors, all of which affect capacity:
- Staff numbers (for garment factories).
- The equipment’s state of repair.
- Sub-suppliers in the production and delivery of materials/components.
- Quality is key, as poor quality requires rework which takes away capacity.
- Material and production planning.
- Staff training.
- Proces engineering.
- Small tooling and fixtures and well-integrated automation.
- The warehouse’s efficiency.
- Engineering change notifications.
- Making prototypes and samples using the production tooling.
- The mix of products being made at any one time, especially if it’s high mix low volume.
✅ Why factory audits are a good solution for buyers abroad. For example, in a technical process audit, an auditor who is familiar with your supplier’s production processes goes on-site and checks the capacity, the factors above, potential risks, and more, reporting back to you.
Even more content about validating suppliers…
Take a look at this content, too:
- How to validate a factory’s production capacity WITHOUT going on-site?
- For even more information on validating suppliers, listen to our mini-series on vetting Chinese suppliers which includes numerous episodes on due diligence, factory audits and visits, exploring testing facilities, and much more when it comes to vetting suppliers.
How are you validating suppliers’ capacities right now from your country?
Let us know your experiences by leaving a comment, please.
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