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Choosing the Right China Factory
By Bill Quarless, President, Impact Products Ltd.

Current estimates put the number of Chinese factories at more than 200,000 – and hundreds more factories will open for business this year. You can be sure almost every one has a slick catalog and an impressive Web site, and very few will admit to you up-front that aren’t capable of handling your project. You’ll have to find that out the hard way, when slow production, delayed shipments or defective returns are threatening to destroy your entire project.

Or will you? Ultimately, it’s up to you. If you do a little homework and take a systematic approach to supplier selection, you can avoid common pitfalls and benefit from the great cost savings and efficiencies China has to offer. At Impact Products, we’ve spent the last decade developing just such a system. We call it “identify and eliminate.” Apply it, and you’ll be amazed at how easy it is to find the best supplier for your particular project.

STEP ONE: IDENTIFY

Start by creating a database of every potential supplier you can find. At Impact, we have an electronic database and catalog library of over 3,000 factories that have been screened and sorted into 23 product categories. We acquired these factories by attending China trade shows, visiting Web sites and participating in China trade organizations. Networking and word of mouth have also been excellent sources of suppliers. You can use these same sources to build your database. The key is to get started sooner rather than later. If you wait until you’re desperate to find a factory, you’re almost guaranteed to make the wrong decision.

STEP TWO: ELIMINATE

Generating a database is easy in comparison to what comes next: separating the wheat from the chaff. Each and every time we start a new project, we carefully evaluate the factories in our database and use a process of elimination to find the best one for that particular project. Our evaluation is based on several criteria. Here are five key ones:

1. Experience. This is our #1 criterion. We only work with experienced specialists. If a factory has never made a similar item, we move on to the next factory. The reason is our own experience. Years ago, we worked with a few big, successful factories that had great general experience but struggled to make a simple item just because it was new to them.

2. History. We use both paid services and Chinese government organizations (akin to the American Better Business Bureau) to thoroughly research factories before we use them. We’re looking to see if the factory is considered reputable and reliable. Trust me: A little homework of this kind in the early stages can save a lot of headaches later on.

3. Location. Believe it or not, where a factory is located can have a major impact on a project. Taxes are just one reason why. All goods produced in China are assessed a Value Added Tax (VAT), a percentage of which is rebated to the factory once its goods are exported. But that rebate rate varies from province to province. So, in theory, a product can cost 10% more just because you made it in the wrong province.

4. Communication Skills. We have a multilingual staff that speaks several dialects of Chinese fluently. But we still rate factories based on their ability to communicate clearly and effectively with us. That’s because communication is a two-way street. We also look beyond the words and rate the factory’s speed of communication. If management is slow in responding to our initial requests, we take that as a sign and eliminate the factory from consideration.

5. Production Capacity. We specialize in high-volume manufacturing for the DRTV industry. In that industry, production needs can go from a few hundred pieces to millions of pieces in just a few weeks. So we rate factories on their ability to scale production quickly. We assess this based on the factory manager’s ability to explain maximum daily capacity and the number of production machines and workers on staff.

Of course, we also evaluate price and quality, which is a process unto itself. On price, factories can take inexperienced players for a ride by gouging on mold charges or quoting under cost only to raise prices prior to production. We use proven techniques to uncover these scams early. On quality, we take pains to acquire and study “quality reference” samples of similar items a factory has made, letting them know that workmanship will be closely scrutinized throughout the production process.

THE FINAL STEP: INSPECT

Once you’ve identified and eliminated factories for your project, the final and most important step is to verify everything you’ve been told by conducting a factory inspection. As with everything else, we have a detailed checklist for this process that follows many of our evaluation criteria:

• Experience: Does it look like this factory has the machines required for production?

• History: Who else do they manufacture for, and how long have they been a customer? Do they retain customers for a long time? If not, why?

• Communication Skills: How well do the factory managers understand our needs? How well do they communicate their capabilities?

• Production Capacity: Do they have enough workers? Are the workers properly trained?

• Quality: What type of quality-control measures do they have? What testing do they do?

On the ground, many factories are nothing like they represent themselves to be online and in their printed materials. That’s why this step is so critical. Something else to consider: Sometimes the biggest and newest factory isn’t always your best bet. As you’ll often learn in the price evaluation phase, someone is paying for all that overhead! Moreover, some of the best quality products we’ve ever seen have come from factories we’d be embarrassed to show a client. That’s because traditional factory bosses put all their resources and efforts into the products they make, instead of the building that surrounds them.

Take each of these factors into consideration when choosing a factory for your product, and your odds of making the right choice will greatly increase.

* * * *

Bill Quarless lives in Hong Kong where he is president and CEO of Impact Products Ltd. He can be reached at (852) 2139-3961, via e-mail at bill@impactproducts.com  or online at www.ImpactProducts.com.

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