The definitive guide for MFG/QC issues and what you ecommerce sourcers and inventors must know

[Niptuck MD]

First of all, it was great to meet all the focused INSIDERS at the 2018 summit. Especially @MJ DeMarco @Chitown @million$$$smile Im glad that you all got to meet me; I haven't been too active on the forum but thanks to @LightHouse challenge at the summit to make a GOLD/NOTABLE thread that has changed.... with this post...

Through my years of traveling through many plants dealing with numerous big corporations engineering and supply chain departments, and resolving their problems at a grander more complicated scale
the key takeaway that I bring to you all from that realm to this IS......!

DUE DILIGENCE

is something that we neglect but is ever so needed and despite all of the fluff out here on the internet, it is difficult to process all of that while trying to maintain a job to pay bills, take care of home life/family and while establishing your business and dream.... But it has to be done. and the best way for that is to meet people that have access to that sort of information that can easily pinpoint you to what you need to know. I hope to fill that need with this guide in these topics;

The favorite strategy of factories (in the eastern world) that don’t want to correct problems is… to wait. And wait. Until their customer (who needs to deliver his own customers) must let them ship.

YOU GUYS (BIG OR SMALL) That source must lead the way (unfortunately) and have these focused dialogues with your suppliers. It will only do your firms good.

WARNING; there are going to be a lot of acronyms and abbreviations going forward so I hope this primer will educate or inform all of you at a nominal level.

-Supplier Quality Issues (conformance, product quality issues, raw materials sourcing issues)
-Manufacturing process and batch quality conformance (often times due to time restraints and meeting ROP (rates of production) the suppliers suppliers' (suppliers that supply to your supplier components for means of production) doesn't check product defect rates through a quarterly held quality process called PPAP (production part approval process) and a short formed version called PSW (part submission warrant)

-Manufacturing issues that the suppliers may not reveal to you (due to lack of communication, time differences, lack of communication between themselves at the plant)

-from prototype (initial product) Design To ===> manufacturing
this should help those of you that have NPD (new product developments) that either have an idea or prototype already created that you would like made (this prototypes may or may not be viewed as a digitized CAD (computer aided design) model. you would be surprised at the levels of agony that even big corporations engineering and materials departments go through on a daily level for ANY type of components due to lack of communication and or misinterpretation of information and specifications (specs)

- How to deal with reoccurring defects despite time lost on previous batches
In other words, factories especially in China do not believe in a westernized term called RE-WORK. They have enough human capital to dump large batches just to keep the production lines moving 24/7.

If they stalled halfway trough your production, or after substandard quality was detected, there is a reason. Here are the three most common types of issues:

-1- They are giving priority to another customer who is bigger than you… or who is better at defending his interests. You will have to guess by yourself. Once again, having someone on site helps–you can see what is on the lines and understand the situation.

-2- They have a technical problem that prevents them from producing your order, and they tell you it is impossible. If you have some technical experience, you might be able to help you.

In some cases it is simply a matter of common sense. For example, this week I sent a technician to see why a factory could not press a plastic label properly on the product. She used different temperatures and timings, and she found a solution after 5 tests. It took less than an hour. Sometimes we wonder “why didn’t the factory do this?”

-3- They think your conditions/penalties are not fair (for example you ask them to pay for air freight when they are “only” ten days late).

You will know right away if you are in this situation: they will tell you clearly. It requires a negotiation. The better prepared you are, the easier it will be.

and most important of all to take away from this initial post is what @SteveO said as a general means of approaching negotiations DONT GET EMOTIONAL.

Yet, with any factory -- overseas or domestic it is ESSENTIALLY important to stay on top of quality control because mistakes happen and shortcuts are made no matter where the factory is located. There are many intricate details when manufacturing in China and for small time business that don't have resources or the ability to get onsite for ensuring the quality and accuracy of the manufacturing of our goods along the process. Due diligence is your friend..... The cost is minimal and the benefits are priceless.

Despite the fact that It may (ahem 90% of the time) is there fault, they don't know. they are trying their best; Hopefully ya'll got a little more awareness from @Arrabista presentation on open mindfulness and cultural gaps/differentiation.

I hope you guys will benefit from this its just some way I thought on my plane ride back to add value to TMFF.

Feel free to PM me (as others have done) I promise to get back to you to the best of my availability.

 

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[Niptuck MD]

So we begin with

Supplier Quality Issues​

Due to the fact that many of your sourcing fastlaners source a myriad of products from Alibaba (as assumed mostly) and or HKTDC I will try to keep this generic. For those of you that use Thomas-net, feel free to PM me about what issues you all may have had reoccurring or non-reoccurring.

For those of you that source from suppliers on Alibaba or HKTDC this may help you deal with some issues that you may have. IRRESPECTIVE of what you are sourcing;

when you are selecting a supplier for your product, always SKYPE Them first. They can put whatever they want on alibaba and when you open up an inquiry or an RFQ (request for quotation) they will try and hawk you on emails or WhatsApp messages. By Skyping with them you will get a better sense of where they are at and at the same time they will get a sense of where you are at. A lot of suppliers will act as if they will only cater to orders of mass quantities 1000-5000-10000, so for those that are starting of small (i.e <1000) be very aware of your position. I don't want to reiterate or step on anything that is not on @Walter Hay guide. but I think this information will go hand in hand from what happens after you find a supplier that will cater to your batch needs.

When you Skype with your initial suppliers, try and get past the face. Usually the more reputable suppliers will select whom they believe is the best English speaker(s) of their team or department to interact with new inquiries and RFQ's... Often times these individuals have no idea of what goes on down below in the production facilities. They may not have any knowledge of production quality measures neither. To keep the story short, they will not help you after you have gone through with your RFQ. you need to establish a direct relationship whether it be continuous email or Skyping and (if you can) get over there physically (wherever your supplier maybe) with the leader of production or an overseer (quality manager, quality engineer etc etc) somebody that can understand the lingo and what you are exactly looking for to ensure the least defective processes made for your respective products that you are manufacturing.

I will try and illustrate the complexities and what all goes through a batch environment or manufacturing process with a basic item from alibaba (since most of you source from alibaba).

NOTE (this will differ with Thomas net manufacturers)
----------------------------------------------------------------------------------------
For example, let us say that you are sourcing a simple product. Bumper guard (an automotive
accessory component)

High Quality Steel Front Bumper Guard With Led For Ford Ranger 2015 - Buy Steel Bumper,Car Front Bumper Guard,Front Bumper Guard Product on Alibaba.com

you can see this is a supplier has a relatively low min order.... you can assume from the start that this is a medium to small manufacturing facility.

but furthermore, if you see the images, of the actual product you will find that this product uses (A) some form of raw material casting (often times coated for visuals) and (B) a manufacturing machining process (or processes if laser engraved or welded/ brazed etc etc) at a minimum.

For those that begin to find suppliers for this example, they should inquire about these processes and what materials are used. (I know from enough experience that all automotive manufacturers/suppliers in china use some form of casting basic Stainless Steel from one of the numerous foundries nearest to them....) then they will go through the process of powder coating or polishing it, welding it and or brazing it to the prints specs etc etc.....

what YOU guys WONT know until you obtain a sample or if you get a large batch and find out from your customers is the quality of the steel and or defects that may come from a MANPROS (manufacturing process i.e laser cutting, laser engraving, welding, brazing, joining, CNC machining etc) and or from the RAW material source (the foundry in this example)

Defects come and go from a myriad of things; But there are tools that quality engineers/personnel utilize to hone in and zone in on what may be the RC (root cause or root causation)

So running with this example of the bumper guard, you want to get an overview of the product and how it is machined and or made... you want to make sure you get defect rates of past batches ran THAT SAME QUARTER or YEAR. The quality leads of ANY REPUTABLE FACTORY must have these at their disposal (may take a day or two to get but they should have it on hand)

All of these such documentations are held in what is called a Plant Information Management System or PIMS.

Any reputable factory big or small that produces different SKUS for their customers will have to have one to store their prints, their PPAPs (production part approval processes) documentation and metrics, plans and methods.

Often times in china, they may not have ALL of the required specifications and documentations but they will have some. And this is where the fun begins....

Going with the same example,
the listing states



pay close attention to the tabs 3-9

3) material: STEEL (doesn't specify which type of steel but more on that later)
4). weight (8kgs) this should be in accordance to the print they have on file
5) "excellent fitment, easy installation you guys would be surprised this isn't always necessarily true
6) DESIGN: OEM/ODM/Customized designs are highly welcome (the last part (customized designs are highly welcome) should be translated for you guys as Ya'LL GET READY FOR A COLONOSCOPY or something of the likes of an IRS Audit ) this is one of the 3 major pitfalls in design to manufacturing issues
7) Inspected (are they " highly inspected the GEL-COATING" or all aspects of the components (the initial casting, the inspection or affirmation of tolerances after each machining process etc etc)
8) gurantee: (1 years on the overall product OR,
9) this is the KICKER Quality: well and high quality control ; (you guys are going to find out after you start asking the questions I will show you and figure out just how relevant their QC (quality and qualitative control) measures really are

 

[Niptuck MD]

Also to supplement one of the most important things to consider right from the GETGO, is
what actually should be the first thing to be checked, “Is the supplier a properly registered and certified company?“.
This is the easiest thing to verify. You ask a copy of the documents and read them.
Points to check include company official title/name (in Chinese), address (should be the same on all documents or there should be a very good reasons for the discrepancy, and validity dates. The minimum list of documents to check include

-Company business license: also check the business scope of the company and see that it covers the product you need;

-Company ISO 9001 certificate: also check that it covers the product and services you need;

-Any other company wide certificates respective to your product such as ISO 14001, TS16949 (for all things AUTOMOTIVE) etc there are several others

-Export license; this may or may not be required depending on your respective country

 

[Niptuck MD]

The second question to get an answer to is :”Is the supplier able to make the product I need ALL THE TIME?”
Even when a factory has all the equipment tools and experience to make a product, there is no guarantee that it will make quality product consistently.
Consistent quality requires measurable and verifiable processes. Processes to make the right product first time, as well as quality control processes to catch any product that displays a problem, before being shipped to you.

To be able to make your product consistently CONSISTENT, a supplier should have the following:

-Clear and adapted production processes, including a good industrialization process, clear work instructions to workers, a reliable document and version management system (plant information management system PIMS), and a foolproof system to select components and material used to make the final product;

-Solid quality control processes, including regular incoming goods (RM or raw materials) inspections, in production quality control at various steps of the fabrication process, reliable rejected parts system (SCRAP and SR or Scrap Rate), final goods and packaged goods inspections

-Systematic data collection and storage, for instance to allow problem root cause analysis in case product displays failure after shipment.

This is harder to really evaluate. All Chinese supplier will know what you want to hear and they will know what to answer to you when you ask about process.

Ultimately the only way to get reliable information is to see evidence of the process on the shop floor (in person on via webcam)

For example;



-Seeing a specific caliper next to the machine where a metal part is formed is a decent evidence that some in-production quality control (IPQC) is done. Especially if you also see a record sheet attached to a production batch file;




-Seeing a dedicated location or (room) for quality control, with dedicated technicians perfoming checks and completing a quality record sheet is apt evidence

-In electronic product factories, you may see automatic testing systems running in line. If you also can see that these data are stored in the ERP (enterprise resource planning) system and can be retrieved on a batch per batch basis, you got strong evidence as well

All these do not have to be high tech. Many smaller suppliers will use paper work and simple filing systems, but they are able to catch problem and trace causes of the problems even if they do not have a fancy ERP system. Here, the spirit and mindset are there despite the bells and whistles utilised by larger robust factories

 

[Niptuck MD]

To summarise this section....

Realize that your supplier is often dealing with countless subcontractors for materials so the chance of delays runs through a long chain. You will find that your Chinese manufacturer will often wait until the last minute to break bad news to you regarding delayed shipments, defective product or any number of unwanted problems. Understand that this brinksmanship can be traced to a society where responsibility for bad news or failure to meet planned objectives could result in criticism, ostracizing or even severe punishment

Don’t forget, Chinese counterparts are speaking and writing in a second language they probably do not fully understand, especially idiomatic Western expressions. Understand that note-taking for them can be a difficult task, especially listening and being able to get it on the paper when it’s coming to them at light speed. So avoid ambiguous jargon and slang-filled sentences. Write emails in a clear concise manner with succinct bullet points that offer next-step solutions. Follow up with brief phone/skype calls to clarify the email and to see how much of what was “accurately” communicated truly was.

The more information plowed at Chinese contacts, however well intentioned, just gives them more to trip over. Keep it short, simple and positive.

Try to differentiate your manufacturing base. All too often an avalanche of purchase orders on too few factories will result in burying the company’s reputation. Chinese factories just don’t have the middle management capabilities to ramp up as fast as Western companies expect. Chinese factories usually won’t turn away the business; most are hungry for work as they survive on razor-thin profit margins. They’ll promise you the moon and the stars but you’ll end up in a crater.

2BContd

 

[Niptuck MD]

Today I am going to emphasise the importance of

Pre-Shipment Inspections​

To Inspect or Not To Inspect . . .
… that is the question:

-Are these factories better enough to relax your quality control?
-Can you skip these pre-shipment inspections and afford to rely on the supplier’s own QC measures?

This is very tempting isn’t it? Still, I strongly recommend that you continue to perform pre-shipment inspections.

The control may be lighter then what would be done for other factories.

A real case....

To illustrate why, let me introduce a real case that my cohorts and I went through.

The client was in the midst of purchasing high-end professional speakers from several factories in China. The companies were evaluated and found rather good. We also know that they use several people from outside China to reinforce their practices. In particular, one of the factory has recruited a non-native (westerner) with sole responsibilities in engineering and quality. Quality assurance and quality control policies were discussed with him and all seemed to be well under control and properly documented.

Still, sticking to our policy of not relaxing our own quality control too easily, we recommended to require inspection for each delivery. When the goods were ready for the first purchase order, we asked good quality inspector’s professionals to perform the pre-inspections at the factory. And the results were surprising: too many small problems for a professional product and the delivery was rejected. Supplier was asked to rework the goods and solve the defects.

(Here we see lacerations and issues with material in the back construction and fabric of the cone within the speakers)



We were all glad that we did not relax too quickly, in spite of the seemingly good management of the supplier. It takes more than a few good managers to ensure quality consistency. It requires that all the staff adopts a special focus on quality.

In this case, it seems that some imported parts were delayed and the production had to take place very rapidly to keep the committed schedule. So the root question was

“Were the well documented processes by-passed knowingly? Or were workers under too much pressure and they skipped some steps?”

Or were the workers in the factory not experienced enough to perform the QC deeply enough and due to short leadtime, the experienced managers did not have time to review any or all of this??

We will never know, but the key is that the goods ready for shipment were not up to standard. The supplier recognized this (which believe it or not is a big deal)

However being a reputable supplier, they swiftly performed the required rework and re-made batches that due to time constraints were not worth re-working.

And we have all reasons to believe that they performed some decent root cause analysis and implemented appropriate corrective actions.

But imagine what would have happened if you had gotten the goods in inventory. Or worse even, if the goods had been dropped shipped to the end user...... could be chaotic from their point of you and ultimately for you (think time lost, production rate lost, time wasted in shipment to you etc etc)

2BContd.

 

[Niptuck MD]

Continued from above;

So as you can see, there is already a generic idea of how many of the suppliers on the top page of Alibaba are displaying their pages; only when you zoom in with a 20X and start probing around you begin to unravel their true attention to detail and stance on manufacturing perfection batches for you.

Often times due to other customers that are producing much larger batches then you (initially) they cater to them first; but a wise old man once told me “only the squeaky wheel gets oil”
You being a customer must not back down from your products’ importance on THEIR pecking order.
Especially for you establishing sourcers and ecommerce starters, THEY may be able to afford to lose your business, but you cannot afford to lose TIME nor MONEY on wasted samples and or defective merchandise.

With that being said, if they are hesitant to get you details or show you how their processes are end communication. Do not waste time further.
However if they do get you details, you are on the right track. Again, they may take some time but be patient, it will be worth it trust me.

Throughout this thread i will be showing more examples and will try to incorporate more visuals to help explain this topic further.

Below is the 4 levels of Chinese factories




To be contd.

 

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[Niptuck MD]

The third question to get an answer to is :”Are the supplier and its internal systems mature and solid enough to withstand a small crisis or the loss of a key person?” Many smaller companies are able to provide their customers with decent quality and good service, but this is based on a few experienced people

for those of you that have established supplier relations and will be contiuining the ongoing relationships something for your consideration;


-A strong factory manager enforces the processes in place, but if he is not there, suddenly the shop floor gets messy.

-A very experienced technician is able to set up the machines for your particular product (s) but after he leaves the company, no one could make it any longer because documentation was not clear enough for the other workers (miscommunication or lack thereof)

-A very dynamic sales person has good project management skills and is able to get the factory do what his or her customers require. But when he moves to something else, the replacement is more junior and has less influence on the factory. The client experience degrades quickly
If point 2 was hard to evaluate, point 3 is even harder. It will be hard to be sure the problem will not arise at seemingly good factories. But is is possible to screen out poor factories where problems will certainly occur.
The biggest issue here is that when someone with AUTHORITY of the plant leaves or something happens, whomever takes over will they be able to continually keep your products production running as fluid as it was before?

 

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[Niptuck MD]

The mantra for today is

“You get what you INSPECT, not what you EXPECT”.​

Take a look at the following pictures from overseas.... these are the manufacturing environments that failed our surprised audits when we just dropped in. (Hence no time for the plant manager to take the brooms out of the closet no heads up were given)



Parts, yes parts are beside that rubble...... customer orders are just lying around reckless abandonement....



Rusted raw castings and materials everywhere; (this may be an issue make sure if you are sourcing alloys or metals that are non-galvanized) that they are NOT STORED outside. Make this very clear; rust is such an underlying problem that causes headaches for everyone! It’s a LOSE-LOSE situation

—————————————————————————————————————————————————

 

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[Niptuck MD]

The first question to get an answer to is: “Is this particular supplier ABLE to make the product I need?” A reputable supplier will tell you if they are able to make a product in compliance with your requirements. However, many poor suppliers will bluff there way into your business, hoping to get away with it once you have placed an order or RFQ.

To be able to make your product, a supplier needs each and all of these:

—The right production equipment and tools on the shop floor;

—The right test equipment and measurement instruments on the shop floor to verify quality and tolerances;

—Experience in purchasing the material or commercial parts required in your product;

—Workers with the right skills, and in some case, with right certifications (e.g. welding)

— Real experience in a similar product or technologies


Only you know your own industry and you know which equipment and tools are key. You also probably know what type of testing and measurement are required. If you dont know ASK someone that does know. (Hence more AWARENESS DUE TO DUE DILIGENCE)




Here are some typical examples of how suppliers fail or pass for one of these requirements:

- A supplier claims he can make a 800 mm long metal part that requires a dimension accuracy of +/- 0.1 mm. But when asked to show how they will test whether the parts are within tolerances, he shows a class III tape measure that has a tolerance of more than +/-1 mm.

- A supplier of a very high precision power supply could show a small stock of a specific current sensor used to control power stability. Most other companies visited for the same project had no such sensor or even could not find the agent selling them.

 

[Niptuck MD]

Let’s say you have done your DD, Now, what

Is there something you really don’t want to forget??

Here is a somewhat lucrative checklist:

Describe the product

• Write down precise product specifications

Identify and pre-qualify supplier(s)

• List potential suppliers that offer the right kind of product
• Communicate your standard terms (about payment, QC…)
• Ask a rough quotation
• Do a background check on the supplier and an audit of the factory

Share product information with potential supplier(s)

• Ask the supplier to sign and chop an enforceable NDA
• Share product specs with supplier(s)
• Send a sample to supplier(s), if applicable
• Get feedback about product specs

Develop special tooling/molds with supplier(s), if necessary

• Find a price agreement
• Get a development agreement signed and chopped by the supplier
• If necessary, wire money

Develop samples with supplier(s) [for a new product]

• Supplier sends 1st sample
• Client comments about 1st samples
• If necessary, supplier sends more samples
• Approval of golden sample
• Comments for production

Develop samples with supplier(s) [for a new labeling or packing]

• Supplier sends 1st sample
• Client comments about 1st samples
• If necessary, supplier sends more samples
• Approval of golden sample
• Comments for production

Finalize product specs

• Confirm with supplier that product specs are correct

Issue PO, confirm 1 supplier

• Select 1 supplier
• Make the product spec sheet an exhibit of the purchase order

Authorize the supplier to start production

• Get a manufacturing agreement signed and chopped by the supplier
• Launch the payment process (transfer of deposit / opening of letter of credit)
• Remind the supplier to book the materials/components immediately

Comment on production samples

• Supplier sends samples taken from mass production
• Comment on samples
• If necessary, supplier sends samples again

Inspection/testing during production

• Share PO & share product specs with inspection firm/staff
• Get an estimate of the price/time necessary, and confirm
• Tell supplier about inspection plans
• Supplier proposes timing of inspection
• Get report & give feedback to supplier

Book shipment with a forwarder

• Get quotes and compare them
• Confirm a quote
• Start tracking shipment with forwarder

Approve quality before shipment

• Share PO & share product specs with inspection firm/staff
• Get an estimate of the price/time necessary, and confirm
• Tell supplier about inspection plans
• Supplier proposes timing of inspection
• Get report & give feedback to supplier
• If necessary, proceed to re-inspection and issue a debit note to supplier

Shipment

• Forwarder advises closing date
• Authorize shipment
• Forwarder confirms the products were made available in time
• Forwarder confirms the products were shipped out
• Supplier sends a copy of the documents
• Confirm that the documents are all correct

Final payment

• Check the quantity of shipped products
• If payment by bank wire: transfer the balance
• Supplier sends all original documents
• Confirm receipt of all original documents

Customs clearance

• Forwarder/agent applies for clearance
• Payment of import duties

Domestic transport

• Arrange domestic transport
• Confirm receipt of products

Warehousing

• Arrange sufficient manpower and space

QC on incoming products

• Share PO & share product specs with internal QC staff
• QC service checks conformity & quality
• If necessary, give feedback to supplier and inspectors

@Envision @amp0193 @Hyrum

Feel free to share ya’lls take

 

[Niptuck MD]

Guys/gals, a thorough pdf that was compiled by me over the years that may be of help breaking down this science/process.

@amp0193 @SYK @Eskil @TKDTyler

 

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[amp0193]

Hol. Lee. Shit.


What a brain dump @Arun Siva. Can't wait to see what you've got coming next in this thread.


You blew my mind this weekend, and I've been thinking about what you said about raw material quality non-stop ever since.


It's too late now, but I've got some questions that I hope you can answer that I'll post up soon.

 

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[Niptuck MD]

It's too late now, but I've got some questions that I hope you can answer that I'll post up soon.

Anytime bro. You know where to find me @amp0193 also this thread will enlighten on a myriad of topics covering as many pitfalls that i have witnessed as possible. Trust me, big corps deal with the same issues that even aspiring FLers endure...

 

[Niptuck MD]

I know next to nothing about manufacturing processes, although I've made it a point to educate myself, since talking to you.

Is there a 3rd party that could inspect the QC processes of my factory? What would this type of service be called?


Also, about raw materials:

How do I know if the factory is consistently using the same raw materials? Or that the material is even what it claims to be? Say 1020 steel as an example.

Do I need an inspection company to examine the steel stock prior to manufacturing?

Do I need to do this before every order?


I had a recent failure that was either due to inferior material, or a poor weld. I'm going to have a local welder teach me this week quality vs. poor welding, but as far as material goes... I have no idea.


Are there inspectors that could correctly identify a high-quality weld? This seems like something I need to have checked every time.

Yes there are 3rd party companies (buying and sourcing agents) in CHina and the US that cover all of the inspections, sourcing verifications etc but utilisation of those services depends on your budget and where you are at with your business (you can PM for more detailed input)

Regarding raw materials, surely you will not be able to get all of these answers or wont know for sure but since you said you were going there you can definitely ask for material certs and see if there have been prior inspections done to the raw materials that they get (unless your plant also sources their own raw materials then most likely they will not have all of it)

Regarding your failure, it could have been; obviously you wouldn’t have known to ask but from a manufacturing perspective the questions I would ask are:

how many pieces had poor welds?
Where they uniformly the same welds in the same area? (Send me a pm with this if need be)
Where there any cracks around the poor weld areas?

Going to a welder to analyse some welds is fine but for welding and brazing processes in bulk manufacturing there is something called NDT or Non-destructive testing.

This NDT tests for exactly the quality of welds, brazes, joint fitments etc etc

I am sure your plant may not have an NDT inspector; however they must have something to check welds. You want to also make sure the right welding process is utilised for what your application is..

There is

MIG welding
TIG welding
Plasma
Oxy-acetylene

Is your supplier using the correct welding method for your specific product?

Again, i dont know the intricate details of your product, but these are factors that go into the process from a manufacturing standpoint;

 

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[Niptuck MD]

here is a useful guide I received in part of a supplier paid training; hands down one of the best modules i have encountered in dealing with potential suppliers/manufacturers and the negotiations

 

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[Niptuck MD]

Can you get into the social implications of springing a surprise audit on your factory?

Is this normal/expected?

Or does this damage the relationship?

By last minute i mean maybe 24-36 hours in advance of people actually going on site and seeing their production runs being done....

It is very normal and must be done; however one would gauge the importance of this depending on where they are at at their sourcing stage; i think you @amp0193 are well immersed in your product and if you were to go over there (not sure if you already visited your supplier my bad) you would pick up a TON just by their body language and mannerisms and then whatever i shed light on here you could use to your advantage if things aren’t up to your standards (or quality manufacturing standards etc)

In terms of social implications, the workers only do what their cell leaders tell them... the cell leaders do what the shop leads or in many cases the plant manager tells them. depending on the plant you select (each plant is ran differently with a different hierarchy and management style nothing is cookie cutter because of lack of importance nor care in many situations)....

If you (the customer) are a valued (customer) and are somewhere in the middle of their group (think from factories perspective a scale of their top customers in terms of production size (1-10 with 1 being minimal batches and 10 being their big fishes) even if you are somewhere between 4-6, you doing due diligence and asking and probing around shouldn’t derail the train. Ultimately you will have a backup supplier if shit were to hit the fan, but these factories cannot afford to lose the small-medium range sourcing customers, because they run on slim enough margins to begin with and need you more then you need them....

 

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[Niptuck MD]

This is something that has come up with the big dogs that is often taken for granted (when not implemented within their supply chain)... Some of the factories look to get business from others (there have been instances of prints "missing" etc etc).

Draft a vendor guide with terms and conditions​

Maybe you’ve analyzed a manufacturer from overseas and you’re confident that you’d like to work with them. The next step is to set expectations as explicitly as possible, typically done by creating what’s sometimes called a “vendor guide".

This is a document outlining policies and procedures that a manufacturer must abide by in order to work with a particular buyer. Vendor guides often can be quite lengthy, particularly those for larger retailers like Home Depot. Vendor guides typically include guidelines related to social compliance, shipping and logistics, packaging standards, approving samples, and receiving authorization to start production.

Perhaps the most crucial component of any effective vendor guide is a terms and conditions agreement. This should specifically address areas including:

- Payment terms
- Nondisclosure agreement (THIS IS CRUCIAL)
- Penalties for late shipments or defective orders (dependent on the setup you have with your respective freight forwarders)
- Right of inspection
- Exclusivity, i.e., to what other markets the supplier can distribute (if your operation is big enough)

You never know what to expect in the JUNGLE.
people come and go.. factories come and go... leaders of factories quit and go to the one down the street....

AGAIN INSIDERS, this is by no means a scare tactic whatsoever. I have witnessed the hardships of this and arduous debating and hardship in purchasing departments and on both ends of the manufacturing spectrum. Just telling you all its a JUNGLE out there just be prepared to expect the unexpected

 

[Niptuck MD]

What's your background?

Do you consult/work for large corporations? Or is this all for your own businesses that you've learned this?

Both. I have worked for some big names
but would like to see the middle tier (more understanding and ethical companies make it) as well

 

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[Niptuck MD]

Did they arrive to the final factory like this from whatever factory made the screws, or is it more likely that this happened at my factory? i.e. left outside.

When you approached your point of contact about this what did he/she say?
(More then likely they will pass the buck on their screw supplier)... however despite the root causation, you communicate to them that you will not tolerate rusty components Period on any of your batches henceforth.

 

[Niptuck MD]

Another area for those of you sourcing non technological products.

Sourcing products from Asia is often a popular path. Items are comparatively cheaper than American products for similar quality. To keep the price low and margins high, many successful Amazon sellers source products from Asian markets.

Thanks to the internet, you don’t need to physically visit the Asian markets to source products. With Alibaba and AliExpress reigning in the Chinese wholesale market, it is very easy to source Chinese products. But most of the products on these sites are already available on Amazon.com, and with news about the U.S. government planning to add a tariff on Chinese imports, the future doesn’t look bright. For better prices, look for items that haven’t already saturated the eCommerce market and come from countries that comply with U.S. policies and standards. One of the best options is the Indian market. Still unscathed and comparatively cheaper (if you know where to shop) than the Chinese markets, India is one of the best places for sourcing products.

What to Source from India
In recent years, India has developed as a manufacturing hub and raw materials source. Many global organizations outsource their work to India and import Indian goods. With labor charges less than 10 times the cost when compared with the U.S. and Europe, Indian products are significantly cheaper with few, if any, compromises in quality.

Here are few categories to consider sourcing from India:

Leather products: Indian leather is world famous, as are Indian leather products. Many multinational companies in this niche get their goods manufactured from India. (I have personally seen this.) The manufacturing cost of one high-quality leather belt is around $1 and its wholesale rate is around $2. I’ve seen belts like these sell for around $20-$30 on Amazon.com. Leather jackets are manufactured at the cost of $12-$25. So sourcing leather products like belts, shoes, jackets etc. is a great way to get started.

Textiles: The textile industry is also very well known. Products like stitched and un-stitched clothes, bed sheets, curtains, etc. can be purchased cheaply, thereby preserving a higher profit margin. The interaction with Indian textile factories is much more streamlined then that of other nations.

Jewelry: About 20% of the world’s gold production is consumed by India. Much of that amount goes into manufacturing jewelry. India’s jewelry sector is backed by the government and banks. If you want to try to manufacture jewelry, then India is a prime sourcing location. Imitation jewelry also plays a huge role in the Indian jewelry sector. The manufacturing cost of imitation jewelry starts with as low as Indian Rupee (INR) 10-15 – or well under $0.25 – for items which can be easily sold on Amazon.com for more than $5.

Other product categories to consider sourcing from India include kitchenware, handmade items, toys, bags and stationery.

 

[TKDTyler]

Guys/gals, a thorough pdf that was compiled by me over the years that may be of help breaking down this science/process.

@amp0193 @SYK @Eskil @TKDTyler

Solid! You couldn't have posted this at a better time - I'm in the middle of sketching out a couple new products and a lot of these concepts I haven't taken into consideration yet (mostly DFA).

I wish there was a way to have gold posts. I wouldn't mind seeing a full presentation on the subject at the next summit that goes into better/personal details either...

Rep++

 

[amp0193]

these are the manufacturing environments that failed our surprised audits when we just dropped in.

Can you get into the social implications of springing a surprise audit on your factory?

Is this normal/expected?

Or does this damage the relationship?

I do see the immense value of this. I see the pictures you shared, and I don't have any idea if my factory is that sloppy or not.

 

[Niptuck MD]

That's what I said. And I'll be checking every damn screw when I go there in a few weeks.

In terms of checking screws, i would ask them if they have had this issue in the past; (forget about your situation but if they have had rusty screws in the past) and then I would go on and just re-emphasise the neglection on their part to actually assemble screws in whatever your component is....

You may end up doing them a favor if their assemblers are installing rusty screws in other products as well (indirectly)

However, rusty screws can be easily remedied if you just ask for galvanized screws for your product. Galvanized coating (coating of zinc on steel) is what makes many metal substances sourced rustproof. There are a myriad of products are galvanized for this very reason

 

[Niptuck MD]

Types of quality inspection agencies​

There are a number of companies providing quality inspection services in China. When evaluating a QC inspection firm, apart from looking at their size, knowledge and experience of the product, Renaud advises to also find out if the inspection agent is focused on reliability.

The "high flexibility, low touch" agency

This type of agent is suitable for hands-off buyers who:

• Need to book an inspection fairly quickly
• Work on simple consumer goods, and are happy to get reports with many photos and little text
• Want to know the inspection cost in advance, in a predictable way
• Do not mind booking the inspections by themselves, every time

Such buyers tend to deal with many product categories and many suppliers, says Renaud. Shipments should never be delayed. They use quality control as damage control — they only check goods to avoid disasters.

The "high reliability, high touch" agency

This type of agency is suitable for hands-on buyers who:

• Value quality over speed
• Work on complex products, or have special requests. They want to work hand-in-hand with a technician who will come up with a suitable solution
• Want to work with a partner company (who takes over certain activities in their organization) over the long term.

Such buyers tend to work with fewer manufacturers, they often deal with only one product category, and they sell in a channel that will not accept quality problems.

 

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[Niptuck MD]

Not sure if this will pertain to any of ya’ll however it may (as i hope all of you sourcers scale up to skyrocketing levels)

This issue has came up several times... (something routine with the big boys) (again not to scare any of ya’ll just sharing the actualisations that big corps and well known brands have to deal with in this new age of manufacturing)
And that is...

Do you need a backup factory?
(There was a scenario when a mid-big level company that dealt with a factory that had issues due to meeting target production date)​

Chances are, they did not work with a big factory on this. Bigger factories tend to be less flexible, more expensive, and less interested in unproven product concepts.

However, there are two problems with relatively small manufacturers in China.

An immature quality system
The biggest risk is that they show their inability to manufacture at the right quality standard. Good communication and development skills DO NOT correlate with good manufacturing skills.

The worst situation goes something like this:

• The buyer does no inspection in the factory before shipment,
• The factory sends a few well-chosen samples taken out of production, which reassures the buyer,
• Upon arrival, the buyer finds that most products are defective,
• All the supplier offers is a discount on the next order, as well as profuse/redundant apologies (or excuses),
• The second shipment is bad too (there is an 80% chance that the second shipment is no better than the first one).

Why does this happen? Here are the main reasons:

• The customer did not audit the supplier’s manufacturing facilities,
• The customer did not send any inspector to check product quality,
• After the complaints, the factory sees this customer as a troublesome customer who actually cares about quality (and who might leave at any time),
• The discount means factory managers don’t care about the second order (no profit, no attention).

The factory can’t ramp up production volume quickly enough
In case the product sells well, can the original manufacturer follow this growth?

In the consumer electronics business, volumes can be multiplied by 10 over a 6 months period, and production delays are very, very painful.

Unfortunately, most factories are unwilling to invest in new equipment and to hire tens of new people without clear long-term visibility. What if your version 1 is successful but your version 2 is a flop?

If capacity is insufficient and orders shoot up, subcontracting will be necessary. And guess what… the subcontractor will have to learn how to make the product, and will have to be checked too! If you don’t do it, you are counting on your supplier and that’s usually not very wise.

The arduous reality of getting a new factory started
Onboarding another new Chinese manufacturer to make a complex customized product can take as long as it took to onboard the first one… And there is always a chance that they give up if the boss’ priorities shift in the meantime.

The key is to get as much done as possible during the first 2 months, while they are still excited. After that period, everything takes longer. So the buyer needs to have a process for getting all the information to the right people in the factory (not the salespeople) in a short time period.

 

[Niptuck MD]

For those of you that have dealt with this here is a short list of suggestions to think about when negotiating with the suppliers (this applies not only to Chinese suppliers but overseas suppliers of any accord)

NEGOTIATING WITH YOUR SELECTED SUPPLIERS

-Understand perfectly the production process

- Be very clear on who is going to be making decisions

- “I can’t” is not in their vocabulary, so be wary if you get silence for an answer

- Make them recap and restate the agreements, do not assume they understood just because you feel you were clear enough”

- Give realistic purchase estimates. If you promise 10 more times than you are planning to buy, they will cut corners to meet their profit so it will hit you back with poor quality (they work on small margins)

- Expect long negotiations: even points that have already been agreed will be raised again in the future

- Pricing: Do not get obsessed with the cheapest deal. Quality has a price and you should also consider that.

- Learn about your suppliers cost structure (how much goes into labor, materials cost *NOTE this may take some extensive probing but maybe can be done better if confronted face-to-face with them)

- Make sure you have good contracts in place (and readily accessible). It may be a lucrative option to get a (Chinese or whichever country you are sourcing from) knowledgeable lawyer to draft them (so that the terms are enforceable and it covers all the points you need to cover- IP, stocks, product quality, product specifications, penalties, etc) - This may or may not apply to your scale of business but just something I have seen help clients in the long run save a lot of anguish and money....

- Again hate to reiterate this but double check and verify if they have the necessary equipment/machinery & capability to produce your product. Ask them to produce a few samples in front of you (if you are there) or ahead of time for it to be sent to you if you cant be there in person, even if they don’t match your exact specifications, you will save $$$.

-If you are not a fluent Chinese speaker, bring a native Chinese speaker to the negotiation- he/she will be a valuable support (This only applies on your business model and how large your business is)

 

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[Niptuck MD]

 

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[Niptuck MD]

Some more easy to understand concepts about validation and quality inspection methods.

 

[Niptuck MD]

its been a really busy weeks.
but here are two infographics to help you ALL regardless of what you are sourcing or manufacturing;

WASTES. there are 8 main wastes in your respective supply chain (ALL companies big or small have wastage) its targeting and monitoring and reducing it is what differentiates you from the latter.



If you guys and gals are having an issue more then likely it is in one of those 8 areas.




the folowing is just a simple approach to tracing (issues or the commonmost issues that are reoccuring that you create a "system" to ensure it doesnt happen again)

 

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