How to identify, verify, vet and choose new offshore suppliers and manufacturers

Hello,

I would like to give you some advise on how to identify, verify, vet and choose new offshore suppliers and manufacturers based on my many years of experience working with China and Low Cost Country manufacturers. My advise here is mostly for those who are trying to build LONG TERM relationships with CUSTOM MANUFACTURERS. In other words, going through my advice below is worth it, if you are planning to build a relationship with a supplier and continuously buy products from them, and especially if the products you will be buying are specially made to your specifications and drawings. 

Using trade agents and travelling to the factory & visiting them….these can all be beneficial, but many times the buyer will not have so much volume or the extra profit margin to pay for these services and expenses. Everything has a price. When you visit plants, it can take a whole day just to see a single plant and take a tour inside. If you have many of them on your list, it can take weeks of time, moving from one hotel to the next and taking long trips to go from city to another city. If this is the case, as the buyer, doing the homework properly by yourself remotely over the internet will make it possible to succeed for almost no extra cost and may eliminate the need to visit plants. Again, visiting potential long term suppliers is very beneficial, but if you simply can't do it at this time, here are a few effective methods that bring good results even if you do not travel to your supplier's site:

• Ask potential suppliers for a copy of their Quality Management Certification, such as ISO9001, QS9000, ISO14969....etc. Make sure to check who the issuing agency is and how reputable the issuer is. Some agencies do through audits and are known for their seriousness while others basically "sell" certifications. You will need to do some research on this.
• Similar to the above, ask your potential supplier whether they have ever sold a product that has other certifications & marks such as UL, CE, FDA, RoHS compliance, Electromagnetic Compatibility.....etc. There are many such certifications and you should know which ones relate to your industry. Ask for a copy of them and check online the registration number for its authenticity. Keep in mind there are many fake CE and UL marks....etc. and counterfeit products in the market, unless you carefully check whether they are indeed registered you will not know.
• It can be of great value to ask your potential suppliers for a few customer references. Especially references from customers that are in your country can be very beneficial because you can call them, speak in your own language and find out whether they were satisfied with the products and services they received from the supplier. Look at who the given references are ? If they are large corporations it may be more reliable and better as compared to a single person company. Or if the references are from military or government agencies that could be a bonus because, usually they do choose suppliers more carefully. Also find out when they last sold to that company or person ? If they have been supplying them for the last 10 years continuously, that is of course much better than a customer reference who bought 10 years ago once and never again. However keep in mind that not all potential suppliers will provide you customer/client references, and that should NOT be taken alone as a red flag ! Some manufacturers and suppliers have confidentiality agreements with their buyers not to give away any information or they may simply not give it to protect their business from others potentially stealing their customers. You should be able to accept this with respect if they say NO. However, if they do give you good references which you can check and confirm, you should give a bonus point to those suppliers.
• You can check shipping records from customs data (some online sites and government sites provide this free of charge) of the supplier and find out really how much they are indeed shipping and whether they are really successfully shipping on a continuous basis. You may find out to your surprise that sometimes a “big looking” plant may not have shipped to the biggest buyer and consumer, namely the USA a single time or may have shipped something three years ago and nothing thereafter. They may not know truly the customer expectations in the USA if this is the case. However keep in mind that some plants use other agents to ship and therefore ask them whether they ship under their name or an agent’s name so you can correctly check their shipping records. Check the approximate volume and value of the shipment to get an idea.
• Another useful open sources intelligence technique is to check a potential supplier’s internet presence and how their name and website is performing. Even though not always true, serious companies generally have a better overall internet presence and they use multiple marketing & promotion channels such as Youtube, Facebook, Twitter, Pinterest, Alibaba, MFG.com.....etc. Exceptions exist however for some, such as factories that sell through other agents, and you may not find their website and name so outstanding even if they perform well. Apart from such exceptions, find out as much as possible about their websites number of back links, page rank, appearance numbers and other scores and data. There are many free sources on the net to check these. Check their websites carefully, check for the quality of photos and spelling. I have seen many times that companies that pay attention to their website’s look and quality, pay also more attention to their customers and products. Check whether they have high resolution photos showing their building and entrance with company name and logo clearly seen on the building, check their equipment and major machines and if you know the business you can guess whether those machines and inspection equipment can indeed meet your specifications and expectations. Check blogs and customer feedback, complaint records…etc on the internet. There are sites where past customers rate suppliers, write feedback…etc. such as MFG.com or Alibaba.com. Of course sometimes people write nasty things with bad intentions just to hurt a potential competitor, but if the company you want to deal with has received bad feedback from several different customers over the past year, then it is probably time to rethink about your options. Sites such as Alibaba do have Trustpass and Gold Membership, which are big bonuses a potential supplier should have. Check them out carefully. Even the faces of the plant workers on the photos can give you a good idea about the plant’s overall performance. Plants that supply good quality for competitive prices know the business well and they earn good money. In return they pay their workers a better salary and do everything else to keep them happy. This can reflect itself on the smiles of the personnel. Truly happy eyes and faces can be an indication of a good work environment.
• If the potential supplier/manufacturer does not have online downloadable company and product brochures and catalogs, ask them to send you a link to those or to email them to you. Look at their brochures and catalogs carefully. If they have plenty of spelling mistakes or if photos are not clear, if products illustrated in their catalogs never show a logo or script, company name,....etc, this could be a red flag. Truly successful suppliers usually hire good translators to avoid spelling and language mistakes, they take photos professionally using high resolution cameras, good cameramen.....they proudly show their logo and name on products and elsewhere etc.   
• Use Google maps for aerial intelligence: On Google maps you can enter the supplier’s address and see the building from top, sometimes check the streets by drive through traffic and see the actual surrounding of the area. A company claiming to have 10,000 workers will mostly likely not fit into a 3000 square feet small building without even a parking lot. You can see all these from the satellite and street images on Google maps !
• Examine the answers the supplier gave you carefully before ever engaging yourself further with an unknown supplier. If a supplier vaguely answers your questions and if they skip to answer critical questions such as “What is your product return policy ?” be aware of the dangers in front of you. Good companies hire good sales people who speak and write English reasonably well and understandably. They employ good engineers and answer technical questions in detail and honestly tell you what can go wrong and what specifications are difficult to meet. Beware of a supplier who tells you just two hours after you send him detailed drawings, that he can provide a perfect product to you. Good suppliers will take the time to examine your detailed drawings and will come up with questions if the drawing is complicated. They will also clearly indicate what tolerances they cannot achieve and what alternatives they can propose to you. Beware of suppliers who make mistakes on their quote sheets and information they send to you. If a supplier sends you a quote sheet and the prices are extremely low and they apologize after you ask them how they can offer these prices and tell you they miscalculated the weight….and they have to double the price….etc., this can be an indication of a bad start ! Or if a supplier does not know that American drawings show dimensions in inch unless otherwise stated and assumes centimeter units without even asking you and quotes based on this, it can be a risk to continue with that supplier if you are an American buyer. Not always so, but a warning sign ! Good suppliers prepare documents such as proposals and quote sheets carefully. Also good suppliers will not immediately urge you to send money. They will first assure that both sides understand each other well and all details have been discussed and agreed on prior to sending you an invoice.
• Try to get quotes from multiple potential suppliers if possible. Different suppliers have different equipment & expertise and the supplier who has the most suitable equipment, employee expertise and infrastructure to produce your product will most likely give you the best offer on all three: 1.) Quality 2.) Price, 3.) Lead Time. In other words, if your needs and requirements match the supplier's capabilities perfectly you should ideally hit three of these birds with one stone. Compare offers you obtain from a number of suppliers. Do not necessarily choose the cheapest. Use your commonsense. If an offer is too low to be true, it is most likely a red flag that can put you into trouble soon. Look at what the average price offered is and compare your favorite offer with the average price. If lower than the average, try to find out what made that particular supplier be able to beat the others before you make a firm purchasing decision. Generally speaking, the best and most suitable manufacturer will offer you a little below the average price, while still within reasonable limits (a price that is not too low). But again, this depends on many things and should not be considered valid at all times. 
• Call the potential supplier by phone to see who answers the phone ? Are there indeed many people or is it always the same person. Do they have a receptionist and separate phone numbers for different managers ? Can you really reach an English speaking person easily or do you end up not being able to understand a single word the person on the other side of the phone line tells you ? Are you getting to someone who clarifies your questions quickly or are you being transferred from one guy to the next and finally someone hangs up on you ?? After calling them, close your eyes and ask yourself: "Did they answer my questions properly and professionally and make me feel comfortable ?" If your answer is NO, then think twice about how they will be able to satisfy you with their products if they can't satisfy you with words or in writing ?? A phone call will cost you a couple dollars but can save big headaches later on. 
• If the value of your purchase is high, negotiate good payment terms and try not to put yourself under the mercy of your chosen supplier. You may try negotiating a 30% advance payment with order and remaining amount after first articles. Or 50% with order, remaining 50% after first articles inspection and approval and just before shipment. This way, the manufacturer will try to finish production on time so he can get paid the remainder on time. If you are outsourcing to China or any other foreign country, do not expect a net 30 days or 60 days term with your first order. This is highly unlikely. Once you do business for some time and build mutual trust, you can discuss with your supplier and expect better terms. If your order is significantly large, say $5,000 and above, and a first time supplier asks you to pay all at once in advance, negotiate better payment terms as the above. If they insist on getting paid all of it right away without sending you a single sample, ask yourself whether that supplier is indeed the best choice ? If you are offering a supplier $2500 in advance with your order and $2500 after you inspect the first articles (samples) of your order and approve them, this is a fair offer. If they insist receiving all $5000 right away, that could be a red flag (not always though). However, if the payment is for a mold or tooling, then it is very normal to expect the supplier to ask you for full payment of the mold / tool in advance, because mold / tool making is a tedious work taking weeks and using plenty of materials and the manufacturer would not want to make the tool and samples for you and hear from you that you cancelled your project or went bankrupt. You can try negotiating a 30% advance/70 after samples approval or a 50%/50% term for molds and tools also, but most of the time, you may not get this accepted and you should respect the manufacturer for this without any prejudice.

There are many other techniques and methods you can use for free. These are just some that are effective. Do use as many of these techniques as possible and others to make sure you have found the right supplier for your product needs. Also keep in mind that none of the above methods should be taken as a single criteria in making a purchasing decision. Instead, the overall score from your evaluation combined with proper interpretation and commonsense should lead you to decisions. There are many small shops and manufacturers who are actually good but would probably perform badly on the above listed evaluation criteria. Be aware of this fact too ! On the other hand, we are here for you, with an already well established manufacturing basis and network you can benefit from. 

Good luck !

Avni Alptekin (M.S. Engineering)

AGS-TECH, Inc.

Visit us on the web: http://www.agstech.net