3 ways to successfully evaluate your Chinese suppliers
Updated: Sep 12, 2018
It’s no easy job trying to find a reliable, trustworthy Chinese supplier. Not only is there a language and cultural barrier to deal with, there’s also a reputational problem to deal with. For many, ‘Made in China’ is still a byword for all kinds of issues regarding quality and trust.
How best to evaluate a supplier, and see if they’re worth your trust time and investment?Is it good enough that they are the verified supplier on reputable platforms like Alibaba, Global Sources, Made-in-China? Does it mean anything that they are ready and willing to provide auditing reports? Is a visit to the factory worthwhile?
After conducting an extensive survey with many people who have more than twenty years of trading and manufacturing experience from all over the world, including China, there are three practical insights we would like to share with you, so you can create your perfect list of Chinese suppliers.
While e-commerce platforms like Alibaba, Global Sources and Made-in-China make purchasing easier, the trade show is still the foundation of building trust with your supplier(s). Why? Cause being a golden or verified supplier on any of these platforms doesn’t really mean anything. To get certified, a company simply needs to be registered — there’s no way to identify what kind of business they are legally authorized to run or even how much is their registered capital. Meaning? The business could be a total fraud. Red flag!
There’s also the distinct possibility that suppliers have paid the platform to rank them at the top or promote their business. Organic search or net neutrality does not exist in China. There is only the question of who pays more to get the most exposure. That is the reason why, even though you can use the same keyword(s) to search Chinese suppliers on Chinese sites or search engines, each time the results come back differently. Hence, none of these platforms actually ensure the suppliers are more trustworthy.
Flying all the way out to find a potential supplier sounds pricy, but can totally pay off.
Our client, Alberto Zanotti, has been doing business in China for a decade. As the CEO of the GEA trading company in Italy, Zanotti says: “I mostly meet my suppliers at the Canton or Hong Kong Trade Fair. I have a team in Italy and Hong Kong, and we do our best to play it safe. Doing business in China is like a man walking on a thin bar — even after all these years, I have to see them in person.”
There you have it. Visiting a trade show might sound a bit outdated, but it’s still a reliable and tried-and-trusted analogue failsafe in an often confusing digital world. Touring a trade show can be like speed dating: You never know if a new partner is the right fit, until you meet them and talk in person.
Apart from anything else, you’re bound to have an engaging, enlightening and hopefully enjoyable experience meeting new suppliers and checking out the competition.
Pro Tip: Watch out when you are at the Canton Fair: Sometimes you will come across stalls where the booth’s name doesn’t match the company’s name. Make sure to ask them about that.
Check out their registered information
Evaluating your supplier(s) through a trade show is great, but putting all your eggs in one basket is never a good idea. To check the legitimacy of your supplier, you can simply visit the Chinese state website of National Enterprise Credit Information Publicity System to check if your supplier(s) has officially/legally registered under Chinese law.
This will also tell you whether your supplier(s) is a trading company, wholesaler and/or manufacturer. You can find information of where and when the company was registered, as well as if they have been previously fined or red flagged by the government for any reason. This is what it looks like:
Unfortunately, the site is Chinese-language only. Now is a good time to bother your Chinese-speaking friend! You probably should have at least one employee who can speak and read Mandarin Chinese. If not, freelancer platforms like Upwork may be a good tool for you.
This is a crucial time for you to evaluate your Chinese supplier(s), as the information on this site is not something Chinese companies can pay for, unlike, for example, certifications on Alibaba. This is as legit as it gets.
Pro Tip: If you come across a supplier you cannot find within the system, be sure to ask them if they have ever changed their company name, or if they are a Hong Kong company before you eliminate them.
Pro Tip: If you are available to visit the trade show due to a schedule, budget, or staff shortages, this is an absolutely must-do step before considering signing any contract with your new supplier.
Visit the factory in person
Now you have a sense of your supplier(s) from the trade show, and did some background digging online. Now it’s time to do a site audit, so that you can get a proper sense of who you might be going into business with.
One suggestion is asking the supplier to send the audit report(s). This is a great idea — if the supplier is honest. Audit reports can be faked in multiple ways — some might keep double bookmaking, or the auditors themselves may be corrupted. In addition, Photoshop is not exactly hard to learn, which means these reports are not a completely secure way to verify your supplier’s claims.
A visit to the factory to see things for yourself is absolutely necessary.
Pro Tip: If you schedule a visit, be aware that many fraudulent factories are adept at recruiting locals to fake temporary production lines or similar. On the other hand, showing up unannounced may be seen as bad etiquette and could affect your business relationship.
If your supplier has sent you a 5S audit report, and you turn up to find the factory site is disorganized, lacking proper signage, and appears to lack a health and safety regimen, proper accounting for tools, and/or no QC system, these are all signs that tell you a report is faked.
Being there gives you an understanding of their production capacity, standard; where and how exactly your products are being produced and their company culture. Ask to see employee records, talk to staff, check everything. After all, there’s no point risking hundreds of thousands dollars’ business, or more, over the cost of a hotel and plane tickets.
Pro Tip: Lots of trading companies pretend they are manufacturers, and will even take you to visit “their” factory, since guanxi (a discreet network of trust and back-scratching built on powerful familial or business relationships) is a magic weapon in China. So make sure you run the registration check on the official website mentioned above.
It is not necessarily difficult to find yourself a trustworthy Chinese supplier, certainly not after you go closely observe these three steps. If you are still not sure, consult or discuss your supplier(s) with friends and/or trusted colleagues who have had experience in China (your own “guanxi” network, in other words).
Last but not least: good luck with your supplier shopping!
Better ideas? Or question(s)? Feel free to leave your comment or send us an email: firstname.lastname@example.org