The Case for Supplier Audits and Factory Visits
When talking with a U.S. footwear manufacturer recently about their product sourcing strategies, I discovered that they had just started sourcing product from China, and further discovered that no one from the company had actually visited the vendors or factories, and they were relying solely on their agents to take care of matters such as QC, Vendor Compliance, etc. My comment was, “you’re playing a dangerous game, and you need to get someone from your company over there on a regular basis to audit your suppliers.”
While using an agent gives the company a certain level of comfort in that they agent should be responsible for providing a good quality product, at the end of the day, you, as the importer and brand owner, will be liable if something happens with one of your products. If it comes to a legal battle, it will be important that your company can prove it took all the necessary precautions such as evaluating the factories on a regular basis, inspecting the goods before shipment from the factory and inspecting them again upon arrival at your warehouse
If you can prove due diligence, even if a court should conclude you do have product liability, they won’t be able to add a negligence charge that can lead to punitive damages or even criminal liability.
In addition, because of the shipping times, in many cases the agent has already been paid if a problem is found during incoming warehouse inspection. The agent has your money, you have a claim, and you can wind up being involved in a lengthy negotiation before you arrive at a settlement.
Another reason for factory visits is maintaining relationships with existing suppliers, while spending your time in China visiting and vetting new suppliers. Business culture here in China favors frequent personal contact with your overseas partners, and factory visits are one preferred method.
At the very least, there are several reasons why you should regularly visit your Chinese factories:
• You really want to see for yourself to whom you’re giving the orders.
• You wan to meet the management, and see if they are competent and trustworthy.
• You want to see if the factory is technically competent, and see what QC standards and practices they have implemented.
• You want to see if they are complying with your company’s Social Compliance policies, and Chinese Labor Laws.
• You want to find out who else is working with the factory, versus what you’ve been told by the sales department.
• You want to find out the actual production capacity, versus what you’ve been told.
• You want to see what part of the production is subcontracted out, and if so, visit the subcontractors.
Now, in the case of the above mentioned manufacturer, where they may not have experience in China, a company such as ShoeTemp Associates can provide services including reports on suppliers, arranging your visits, hotels, transportation, and translation services.
Or, as an alternative measure, we can act on your behalf, visiting suppliers for compliance audits, and send a full report back to your company with our evaluations. This saves your time and expense of traveling overseas. We can be your “eyes and ears” here in China. See the other areas of our website for further information.In future articles we will cover areas of what to look at when visiting factories, QC issues, and social compliance issues.
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