11 Questions To Weed Out Bad Suppliers [Podcast Ep05]
There are thousands of factories in China. We’ve dealt with loads of them for our clients.
How exactly do you vet manufacturers and choose one that’s the right fit for you? That’s what we’re going to teach you in this episode.
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1. The first is not a question, it’s a statement.
Whenever you introduce yourself to a manufacturer always tell them you’re going to visit the factory.
Or you can tell them you’re going to arrange a factory audit, that you want to ask a few questions in advance, and that you’ll verify the details when you visit.
This is very important because knowing you’re going to visit their site,
a) One, the supplier will appreciate the fact that you’re taking the time and effort to see their capabilities, because they’re very proud of their factories.
b) Two, it prevents lying because you specifically said these are precursor questions before a site visit/factory audit to validate or verify this information.
So, it’s less likely they’ll take chances and tell you things that are not true. It just reduces risk.
2. What is your MOQ?
Saying this is your first time contacting a supplier, or your first purchase from China, or you’re starting up a new business….
These are all telltale signs to the manufacturer that you’re not going to order big volumes and that you’re a small buyer.
This normally gives you the lowest level of priority in their sense of urgency.
The question to ask is, “What is your MOQ?”
Establishing their expectations upfront is always helpful, and lets you know how to discuss orders and quantities.
3. How big is your factory?
Ask them to tell you about:
- the size of their factory
- the number of workers
- the number of production lines
- the number of units they produce every month
- their capacity every month
This really covers two different questions. Their utilization and their capacity.
Utilization is the actual quantity they’re producing. Capacity is the quantity they’re capable of producing.
You’ll get a good idea of their capabilities.
It will also demonstrate to them you clearly understand the difference between capacity and utilization, and they’ll immediately take you more seriously because you know what you’re talking about.
4. Which countries, customers, or markets do you supply?
This will give you great insight into the types of customers they deal with.
For example, U.S.A. or European customers/countries are more complex markets than South East Asian markets like India or Sri Lanka.
Establishing this upfront will tell you whether they have the capability and experience to supply to sophisticated markets like USA or Europe.
5. Can I have a copy of your company presentation?
Ask them for information about their company and background. Preferably their company presentation.
Bigger, more serious manufacturers are prepared with a good presentation of their capabilities and other relevant information.
Smaller factories often don’t have a presentation or will send you a brief, low-quality one. You’ll have to exercise your judgement here.
6. Can I meet your production manager/factory boss?
This is for when you visit and audit the factory. Ask them to arrange a meeting with the production manager or factory boss.
You should also ask them if their legal representative will be able to sign off all the purchase orders and contracts, between you and their company.
This gives you an idea of what their management structure is like. Most of them answer positively.
If they answer negatively it will shape how your relationship and communication will be with them going forward.
7. What standards or accreditations does your factory have?
For example, ISO9001 or SEDEX 8000.
Ask for the certificates to see when it was last approved.
Also ask them which customers require them to perform those audits.
That’s always a good sign of the size of customers they’re dealing with.
8. What equipment and machinery do you have in your factory?
Ask them for more information on equipment/machinery in their factory so you can understand their production capabilities.
You can normally tell by the size/quantity of the equipment they have if they’re a big manufacturer or small one.
The number of production lines is another indicator.
9. Do you have certifications for products you manufacture?
For example, do they have ROSS for Europe?
Do they have any other safety standards that the products comply with?
Bigger, better factories have done this type of testing in advance.
Smaller factories will respond that they can do it on your request.
This means a lot. Try to establish who their customers are, what brands they supply, and which products.
If they can share that with you it would be most helpful because you can research these products in the market and see what customer feedback is like.
Always ask if they can give you pictures of their factory and production lines so you can visually evaluate what they’re telling you is accurate.
Also ask for company registration documents, so that you’ve got it in advance for the pre-audit.
This will allow you to check their business registration with local government websites to verify they’re a legitimate company.
10. Are you an approved supplier for Walmart/Target/K-Mart?
Large retailers have their own internal auditing and approval systems, and vendors are very happy to disclose that they’ve been accredited by one of them.
Related to this, ask if they hold any product licensing or patents.
Manufacturers who hold licenses – e.g. an Apple-approved product – or hold their own patents are of a higher caliber.
11. What are your payment terms?
Ask the supplier about their payment terms, if they’ll accept Letters of Credit, and what their lowest deposit is.
How to choose between a manufacturer or a trading company
- Establish the MOQ of the manufacturer
- Establish the payment terms of the manufacturer or trading company
- Establish what your buying quantity is going to be
Based on this information you can make a decision.
Key differences between a manufacturer and trading company:
Manufacturer can be harder to deal with, more strict about their rules of cooperation, and more strict about their minimum order quantities.
They have very little flexibility or tolerance for making changes when going through the sales process or finalizing details.
Trading companies are often very experienced in your product category and have a much wider array of manufacturers to choose from.
This means, based on your particular requirements and quantities they may be better able to facilitate your purchase, and they may also manage the relationship with the manufacturer in a better way.
Because they have other business and production volumes going through that manufacturer, they’ll get a higher level of cooperation than you will.
They may also get more favorable payment terms.
They’ll be able to guide you and give you a lot more advice on what to ask from the manufacturer.
Their prices will be slightly higher but based on the above considerations it’s worth it unless you are:
- buying very big volumes
- able to communicate very well with the manufacturer and build that close relationship yourself
Do you have any questions about sourcing and vetting suppliers?
Leave a comment below and let us know.
We’d love to help you if we can.