1_Procurement Insights, Global Sourcing

3 Steps to verify Chinese Suppliers

China accounting for more than 30% of all global manufacturing share. Before starting to work with Chinese supplier it is most important to ensure that they are legitimate and will be able to produce and supply what we order?

Following three basic steps will help us greatly to verify a Chinese supplier.

Step 1 – Background Check

Background check will help us to know whether the company is legitimate or not. Some trading companies try to shows themselves as manufacturer. We should generally avoid a dishonest supplier. Working with a trading company may be okay, but any company should be straightforward about its business model.

Asking the company’s registration, business license, and import/export permit will help us to know the actual status of the company. A supplier hesitant to furnish these details could be a red flag indicating that they are trying to hide their actual status.

A registration certificate generally has information such as the company name, location, date of establishment, registered capital, and most importantly, the scope of business. If it is a manufacturer, the business scope section should clearly say ‘manufacture.’ The documents can also verified through government registration databases such as The National Enterprise Credit Information Publicity System.

Step 2 -Ask for a Sample

A genuine supplier is most likely to put their best efforts to give a perfect sample. A sample will allow us to assess their workmanship and professionalism to see if they can meet our standards.

If we require to pay for the samples, it gives us a chance to double-check the company’s authenticity by asking them to share their registered bank account details for payment. We can crosscheck their registered name against their business documents. A hesitate supplier asking to pay by other not so popular means to pay, could be a red flag.

Sending a courier service or freight forwarder to pick up the sample from their factory or registered office also helps to verify their company locations. it will cross check their address against the information on their documentation.

Step 3 – Factory Audit

Visiting a factory in China is undoubtedly one of the best ways to conduct supplier verification, but it may not be always possible. A factory tour and supplier audit let us inspect their working, meet their managers, and also see the production process.

A factory audit requires in-depth assessment of the manufacturer’s facilities and processes. If we do not have the time or relevant experience to conduct a complete audit, we can engage a third-party auditing service.

A general Factory Audit Checklist consist following headings-

  • #1: Supplier Facilities
  • #2: Quality Control System
  • #3: Incoming Materials Inspections
  • #4: In-Process Quality Control
  • #5: Final Inspection
  • #6: Packaging
  • #7: Non-Conforming Materials
  • #8: Communication, Documentation, Control, and Work Movement
  • #9: Handling of Complaints      

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