January opened Asia Quality Control’s blog with a series of cautionary tales.
AQF kicked things off with a comparison between the ‘Western New Years’ celebration and the Chinese New Year celebration. Later, AQF summarized some of the dangers the sourcing world faced in 2012. They gave us a big shock with a letter from a supplier, thus explaining why social audits are necessary. Finally, if buyers ever wondered where their money is going, AQF provided a detailed graph breaking down costs when buying from Bangladesh.
Author, David Fisher, explained to us how the Chinese celebrate their New Year. Unlike the West they don’t take just a few days off. Chinese take weeks off to celebrate the New Year. 2013 will leave the year of the Dragon behind and begin anew with the year of the Snake. Ten days before February 10th, people will begin to prepare. Many factories will begin closing and migrants will travel through China returning home. Five-ten days after February 10th factories may still be closed! Before CNY, Fisher tells us, “alternatively, some factories may quickly push the products out of the factory before the holiday, giving them even less time and attention than average.” Fisher is advising buyers, be prepared for no contact with suppliers in February!
The AQF blog noted the dangers sourcing endured, during 2012. May this serve as a warning to buyers in 2013.
- Supplier Email Hacking — one company was scammed out of 29K USD, with no way of retrieving the payment. AQF team advises buyers, always make sure the email is legit. Never send funds without a proper PO or contract with signature.
- No Recourse for Late Goods — Some suppliers have been known to be delinquent in delivering goods without compensating the buyer. AQF tells us in order to avoid this mishap always have a bilingual contract written up with a local and reliable lawyer.
- Supplier steals custom toolings or molds — Many buyers provide suppliers with the buyers’ own custom mold or tooling design. After the contract is finished, where does the tooling or mold go? How is IP protected? AQF advises buyers always have a contract in place detailing tooling ownership. Buyers should visit the factory and check the tooling or mold to make sure buyers’ design has not been hijacked. AQF tells us to consider using a third party as a storage location for tooling.
- Unprofessional and Unlicensed inspection firms in China — Many ‘quality control firms’ seem to be showcasing themselves as professional inspectors. AQF tells us that unless they have the proper Chinese government issued license, AQSIQ, don’t work with them! The AQSIQ license ensures you are working with a ‘reputable’ source.
With these as a warning in mind, cheers to sourcing in 2013!
The AQF Operations team gave us a startling wake up call with regards to the importance of social audits. A woman received her box of Halloween decorations ordered from a supplier in China. She opened the box and discovered a letter from someone at the factory. The letter detailed harsh conditions the workers are ‘forced’ to work under. AQF stresses to us, visit the supplier. If for some reason you cannot visit, engage a third party to visit the supplier. There’s also the possibility of hiring a social audit firm. AQF tells us, “a professional auditor should also be able to ensure that your manufacturing is happening on-site rather than being contracted out to a less compliant supplier.”
Author, David Fisher asks us, “ever wonder where your money goes?” Fisher then presents a graph depicting where money goes when sourcing to Bangladesh. 60% goes to materials. 19% goes to labor. 18% goes to industrial costs. Packaging, testing-dyeing-washing, local intermediary/purchasing office all come in at 1%. Fisher notes one thing in particular, testing. Testing is only one percent. This is rather startling because we want to be sure products are safe and are held to certain standards. Fisher tells us, “this makes it even clearer why buyers need to leave the quality inspections and lab testing in their own hands rather than trusting the factory to do this.”
Thank you AQF team for providing the latest on smart sourcing. Cheers to Sourcing in the Year of the Snake!