What happens in China, stays in China. Or does it? The world inside Chinese factories pt.4

Part 3 of “What happens in China, stays in China; or does it?” series was about various methods of locating reliable Chinese factories. If you haven’t read it yet, before moving onto part 4,please feel free to take a look.

It's a competitive market out there for factories and they are also very well aware that first impressions are extremely important to acquire new customers. In this age, first impressions don't always happen face to face. The first impression you get of a factory is usually through some website, and digital documents. While this makes things a lot more convenient, it also makes it harder to distinguish the fact.

Let's say you've engaged with a few factories online and they have sent you an introduction PDF. The information on those introductions don't always reflect the actual situation.

Don’t be instantly amazed after seeing a factory introduction PDF with their high revenues, employee numbers, main customers, products, production/testing equipment or capacity.

First of all, you almost have no way of confirming the authenticity of most of this information. The factory might be going bankrupt while they show decades of high profitability, or they might show high amount of employee numbers to appear larger than they are. They might write some established brand names as their customers, while in fact they may have never done business with them, or they might show products that they have never touched before as their main products. You should be prepared to it the best you can before engaging in business.

• Revenue or financial situation of a factory.

Obviously, you can’t access to the financial files of a factory, but you should have a good feeling of the situation by the empty seats at the office or empty production lines whether they are financially doing as well as they claim they are. If you are interested in this part, make sure to take a look at part 3.

• Employee numbers.

Of course you can’t access to those files either or can’t really count them unless you have exceptional counting skills like in those old Vampire movies. What you can do is that if the factory claims to have 2000 employees and during your visit you barely see a few hundred, well you know it isn’t correct right off the bet. Many factories exaggerate those numbers by some margin still, no matter how large they are, so don’t sweat it too much unless there’s a huge difference between the claimed numbers and the employee estimate you have after your visit.

• Main customers.

Approaching those big brand names directly, won’t be much of a help, because they are 100% bound to an NDA which forbids them to discuss any information regarding their manufacturers. Actually the factories are also under NDA, where they aren’t allowed to share this information, but it’s one of those things that everyone kind of turns a blind eye to, as long as the factory isn’t going all out to use those brand-names for advertising purposes. So, your best bet is to actually see things in person during production while they are manufacturing a big batch of products for those brands. If they claim to be working with a few big brand names, it’s highly unlikely that they won’t have a single production line manufacturing for them in any given day. And let’s say to your luck, they actually didn’t have anything going on during your visit (it is unlikely but it might happen, especially if they aren’t the main suppliers for those brands), you can simply ask them when they will be manufacturing for those brands and you want to pay a visit another time to check it out. Also factories usually have finished products in their warehouses. You can also ask to take a look at their warehouse to check the “warehouse conditions”. Factories don’t like keeping items in warehouses but most established brands leave no choice to factories but to do so. Let’s say they also don’t have any products in the warehouse, well they should at least have empty packaging or carton boxes for those brands, because they have no other option to buy more than they actually use during assembly. So, they will always have those in stock in their warehouses.

• Main products.

Factories like showcasing additional products that compliment theirs, to sort of “gain face” and possibly new orders in their showrooms or in their introduction files and pretend that they also make those. For example, a keyboard manufacturer, might include mouse and gamepads maybe even headsets, or an apparel manufacturer might also showcase plastic luggages or even leather bags. Fortunately, this part is a lot easier to figure out if you know what you are looking for, compared to the other points I mentioned above. You can simply check their production lines, testing equipment and can pretty much tell whether they are actually capable of manufacturing the products they claim to. Just because the products compliment each other, doesn’t mean that a factory is capable of building them as building most of those products require absolutely different machinery, technology and knowledge.

• Production/testing equipment and capacity.

This is also one of the easy ones to check. If they claim to have certain equipment or machinery which you haven’t seen during your visit, before you leave, make sure to ask them to show you where those machines are. And as for capacity, you can ask the capacity of a production line, lets say maximum of 1000 units/day per line, and for the arguments sake, let’s say they have 10 lines. That makes 10K units/day, 300K units/month. So if they are claiming to have a capacity of 2 million units/month, well you know that it simply isn’t possible.

When it comes to a factory’s physical capacity or products, you will notice things a lot easier and more often than the other points. If you are familiar with the Chinese culture, actually these points are considered more like “pink lies” to attract more customers and drive more business. They don’t necessarily mean any harm, unless there’s something majorly wrong about them. So don’t let those details be deal-breakers right away, but more like “little secrets” that you keep to yourself rather than directly facing your suppliers to save them face. After you get more familiar with the factories, you can eventually come to a point where you start joking about these "little secrets" and they might even help you find good suppliers for those products once you establish a good relationship.

I was thinking about going ahead with part 5 and 6 in this series. But I've realized that it would be much more suitable to conclude World Inside Chinese Factories as a chapter here. ”What happens in China, stays in China; or does it?” series will continue with various interesting subjects however I will continue publishing them under different chapters.

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