What is a Supplier Factory Audit?

A Supplier Factory Audit is a vantage point in which the buyer can get to know and verify all the information provided by the shipper and confirm in detail the veracity of that information before actually transferring any money or committing to a project with that factory.

It is very often that people start working with a new supplier that they met on the internet, there are many platforms in which the sellers advertise their products, the main platforms are www.Alibaba.com, www.MadinChina.com, and www.globalsources.com; but online trading is like online dating, everybody exaggerates on their profile, only speak about their attributes but not their flaws and pictures look lovely, but when you get to meet your date in person is a whole other story.

Usually, the pictures of the products they sell online look great, and the price range is similar to a whole bunch of them listed online, so how to proceed and what to look out for?

When contacting the supplier, it is of the essence to ask for a formal catalog and quotation of their products; their response time is a signal useful to decide whether to go forward or not. If they replied fast and the answer is clear and complete, then is worth investing a little bit more time, but make sure you get the quotation and catalog right away, if not, it´s usually because they don’t have one and they are working on it, which you will notice because they regularly hand in an Excel file lacking presentation and product description.

It is also very normal for suppliers to send you a presentation of their factory; they will show you pictures of the facilities, production lines, staff, certificates, and annual revenue, which they might be real but they also might not be, so the question now is, what is the factory audit inspection going to do for you?

By performing a Supplier Factory Audit, a third party inspection company (Globex Asia Inspections) will pay a visit to the factory, verifying the existence of the factory, auditing their facilities delivering remarks such as if they have a raw material warehouse, final products warehouse separated from the rest, the conditions in which the machinery and the staff are working in, whether they have internal Quality Standards and random inspections, making sure if they can actually deliver the volumes being settled on, if their certificates are real, if they are licensed to produce and export, if they count on any environmental or social certification, among other details that are of the essence when starting a new relationship with a supplier.

Sometimes they have two or more bank accounts as there are two or more companies registered under the same commercial name, and by verifying all these specs, the importer can make an informed desition as if to start the cooperation or not and what to expect.

Unfortunately, we have seen customers live very negative experiences; more than once a customer has approached us saying that they transferred money already to the supplier, being told that if they don´t finish paying they won’t release their container at the port, certainly every importer wants to avoid paying demurrages and extra expenses at the destination port, so they pay and when they receive the container and open it up they get sand, wet sand to make it heavier. 

We have also seen how the buyer is against the clock, and they have negotiated every single detail, so they wire an advance payment (usually 30 or 50%) and the moment they send proof of payment communication is interrupted and they never hear about the seller again. After a few days of anxiety we receive contact and arrange an unexpected visit to the address the supplier provided to the buyer, and when we get there we find that supplier was never established there; we either find an abandoned lot, a commercial building with no record of that company or even industrial parks; very smart, cause if you think of doing a double check on google maps, the site will be there, but not your contact, your cargo or your money.

The idea behind this article is not to create fear but to create conscience, there are many companies around the globe doing business with China, some of them have the infrastructure, some others have enormous budgets, and fairly speaking, international conglomerates are not the target audience for this article.

The information provided in this post is written with the intention of supporting small and medium companies to start successful business endeavors in Asia, reducing unnecessary

risks as much as possible. With the proper guidance and care, it is very possible to get your business going and as the months go by experiencing China´s dynamism, truly a unique place for conducting business.  

It is worth mentioning that inspection services in China can be customized based on the expectations and particular requirements of every importer; get in touch with us to schedule yours!