What You Should Know Before

Choosing Your Factory in China

What you should know…

From first time shippers to seasoned

veterans, choosing a factory in China can be

a daunting task. Before placing the first

purchase order, certain research should be

done to ensure the buyer is protected.

There are countless stories of distributors

wanting to buy from a certain origin

supplier, paying the purchase order, and

then the supplier “disappears” taking the

buyer’s purchase order payment and never

sending the goods. It happens all too

frequently.

Finding a Factory

Getting a list of factories that produce the

commodity that you are interested in is the

first step in sourcing processes. While

doing a basic internet search might seem

to be an effective method, it is best to

search manufacturers that have been

vetted by a third party.

Another option for sourcing is public

Customs and Border Protection (CBP)

declarations documents. While many

freight forwarders advise importers to keep

this information private some importers

still show who their factory is at origin and

it is public record.

If it seems too good to be true, it probably is.

Does a certain vendor offer you prices significantly

discounted from market value? A customer of ours

recently placed a large order for tires with a new

supplier who had quoted the product one third less than

their other quotes. After the money was wired to the

“factory’s” bank account, the online supplier

mysteriously disappeared, along with the money for the

entire purchase order.

Be wary of any deep discounts from a new supplier.

What is important to YOU?

1. Do you have complex product

requirements?

2. Is cost the main factor?

Be sure to have strict guidelines on what is

important to your end user before

choosing a factory.

Smoke in Mirrors

A factory visit alone is not enough to

confirm the supplier is legitimate.

While a factory visit is indeed an

important aspect of the selection

process, the buyer needs to ensure

documents and finances are also

inspected. There are many reports of

the so-called factory representative not

even being associated with that factory

at all.

Use Your Common Sense

1. Have you searched the supplier name “+

scam” in the internet?

2. Does the number on the supplier’s

website link to the same factory?

3. Does the email address of the supplier

have the same URL as the website?

4. Does the factory ask you to pay a non-

Chinese bank?

While these more “common sense” approaches

are not sure bets to make sure a supplier is

legitimate, it is still worth looking into the

answers to these questions before doing a

more in-depth factory inspection with a third

party.

Supplier Audit

A supplier or factory inspection is a vital

component of choosing your business

partner.

All too often, we hear of companies

getting burned by not doing their due-

diligence prior to sending a costly

purchase order.

Quite frankly, any “scam” is costly in our

opinion – no matter the size of the order.

What Should Your Inspection Consist

of?

•Inspection of products, workers, facilities and

general output. Can the supplier handle the

quantities and complexities of the product? 

• Quality Control Systems

• Financial History

• Social Compliance

• Tax/Legal Issues

• Background of Supplier, including the reputation

in local and international marketplace, origin of

ownership, years in business, etc.

Should you have any questions about choosing a supplier in China, please call LILLY + Associates International at 305-513-9540 or visit our website at www.shiplilly.com.

With offices in Asia, United States, Latin America and the Caribbean, LILLY has helped their transportation customers stay protected when using a supplier.