Due Diligence and Verification

In my blog and educational videos at CSIC I explain the two types of due diligence professional buyers conduct when evaluating a potential supplier.  A factory audit is a review of the suppliers QC systems to confirm they have the ability to make your product.  An operational audit is an investigation into the financial stability of a company.

To further explain how these services can be applied, below I share an email from CBI founder Kevyn Kennedy to his potential client.

Hi Kathy,

If you need quality control, we suggest AQF (www.AsiaQualityFocus.com).  Prior to contracting another factory, however, we suggest you contact us for due diligence and then AQF for QC.  Worth the investment of a few 100 USD for sure.

My firm, CBI, is not quality control in the traditional sense.  If you need someone to inspect your products prior to shipment, we suggest you contact Asia Quality Focus as mentioned above.

CBI are investigators.  What Asia Quality Focus does overtly, we verify covertly.  Lots of fun.  We offer a complimentary service to our CSIC partners.  For example: –

*  If you need a sourcing company, contact Passagemaker (www.PSSchina.com)

*  If you want someone to look at the accounting books (vague though they may be), contact Fiducia (Fiducia-China.com)

*  If you need a quality control company, contact AQF

*  If you need due diligence prior to signing your contract, we suggest CBI.  And after the initial due diligence you might be interested in an unbiased view of how the sub-contractor operates when they do not realize they are being monitored, contact CBI.

We do not present name cards when visiting, we may act as an interested buyer.  What can that add?

As an interested buyer, we have no right to inspect their accounting books, but we do have the right to inspect their production facilities.  If they tell you they can produce 10,000 widgets per day, but have only one production line that is obviously not up to the task, where do they produce?  Common problem in China.

As an interested buyer, we might ask for a sample right off the production line.  NOT a sample that they have made especially to show you.  We would send this sample to you.  Is the quality the same as what you were expecting?  Are the materials up to speed?  If not, you may have a problem.  This use of the “Golden Sample” is common in China.  The first sample the factory gives you is fine, the large production…not so much.

What would happen if one of my investigators went to the sub-contracted factory begging for a job and joined their team?  From the inside, would he hear of worker abuses like the kind detailed in the this video that happened to Disney! Of all companies!

If a normal quality control company cannot uncover such practices, don’t blame the quality control company.  The factory was just on the ball that day and trained their staff what to say.  Our discreet visits, however, can let you behind the scenes.

I understand that in this case your sub supplier sent you a load of bad quality products.  Asia Quality Focus could have helped in that one.  But just last week CBI did a case where the supposed shipment had not even been produced!  CBI could have learned the situation on the factory floor weeks prior to shipment had we been allowed to covertly interview factory workers coming off their shift.

CSIC operates as a team and I am happy to recommend our partners.  Likewise, I am always happy to introduce our services.  From what I see, you could use a quality control company for current shipments, and our due diligence (provided by CBI) for future partners.

Other than that, thank you for writing me.  It is a pleasure to converse with you, and I look forward to being of service.

Best Regards,

Kevyn Kennedy

CBI CONSULTING LTD.  (www.CBI-Consulting.com.cn)

Wishing you successful China sourcing!

Mike Bellamy

About the blogger

Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). He is also the author of, “The Essential Reference Guide to China Sourcing” (chinasourcinginfo.org/book) and founder of PassageMaker Sourcing Solutions (www.PSSchina.com)

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