Online supplier directories and B2B marketplaces like AliBaba, Global Sources, IndiaMart, DH Gate, and HKTDC have made finding suppliers much easier by placing the world’s suppliers at your fingertips. No matter what you want made, there’s a supplier for it somewhere in the world – and you get to shop for the cheapest option too. All you have to do is to sit at your computer and do a lot of trawling through the Internet.
So many suppliers, how do you choose?
Having so many options to buy from have made matters extremely confusing. All the suppliers say the same things – they post photos of perfect products and immaculate factory premises, they say that they have millions in annual revenue, hundreds of employees, QA departments, and service the European and North American markets.
How do you tell which are the high performing suppliers, the ones that you can trust and rely on? Which ones are the fraudsters and scammers?
Supplier verification – the solution?
Some of the buyer-supplier platforms have introduced their own supplier verification systems. AliBaba offers a trade assurance program where you have suppliers that have been verified by AliBaba and/or a third party company. Global Sources has a similar system.
These programs cannot give you the answer to your questions. Here’s why:
- Verification confirms the existence of the business, but even this cannot be fully relied upon.
Supplier verification tends to focus on checking the company’s business registration details. But business details can be falsified. In 2011, AliBaba’s CEO David Wei and COO Elvis Lee both had to resign after an internal probe found that employees had knowingly allowed fraudsters to evade the company’s authentication and verification measures and set up fraudulent storefronts.
- Verification procedures only serve the financial interests of the suppliers and online marketplaces
The online marketplace needs suppliers to list themselves and need customers to feel that they can trust the marketplace. Suppliers need customers to believe in their business. It is in the supplier’s and marketplace’s interests to say that they are verified as it is good for business.
Bring in the quality company
The way around all these problems is to visit the supplier yourself, or hire a third party quality inspection company to evaluate the supplier for you. The upside is that you’ll be getting a professional who’s acting in your interests, has production knowledge, and understands supplier behaviour.
Here are some tips for selecting a QC company:
- Quality inspection is a very competitive industry and in places like China, companies fight for the customer’s attention by undercutting one another’s prices. The game is who can offer the lowest price. But the only way that these prices can be achieved is to make extreme comprises that ultimately mean compromises in your quality. A price that is too low should be scrutinised very closely. You get what you pay for.
- Quality inspection companies can actually be spin-offs by the supplier. Suppliers will do anything to survive and it is their objective to get those goods, defective or not, out of the door. Rejects and rework mean more costs for them. Suppliers may get people who are friendly to their interests, like former employees or customers, to form a quality company and use that as the ‘third party’ to pass their products. Usually the former employees or customer will be shadow directors or owners.
- Quality inspection companies may use temporary staff who have very basic skills and have no quality control knowledge to do the product inspections. There are a couple of warning signs you can look out for, one is the cost of the inspections (as discussed earlier) and the second is if the inspection company says that they don’t use the same inspector for repeat jobs to ‘reduce the possibility of corruption’. This is a very strong indicator of a high turnover and casual workforce that work on a on-call basis.
To select the right company, the easiest way is to pick up the phone and try to speak to someone. You learn a lot just from the way the person speaks to you. Ask them lots of questions about their personnel and the customers they serve, see if you can interview the inspector and make sure that the person is familiar with your product. We would also recommend doing your own research on quality inspection companies and not rely entirely on what’s listed on online supplier marketplaces.