How to Assess Offshore Manufacturing Companies
A question that we often hear when working with new clients is, “How do you assess offshore manufactures and more importantly, what characteristics do you look at to ensure success?”
Believe It or Not – Industrial Manufacturing is a Relationship Business
It doesn’t matter if you purchase domestically or offshore, the greatest potential gains will be had when a mutually beneficial relationships exists between you and your supplier. This philosophy ensures alignment with your prospective suppliers long before any commitment is made to purchase. Having this understanding will pave the way for reduced conflict and miscommunications, with a focus on meeting common goals.
Not All Perspective Suppliers Are Willing or Able to Commit Long-Term
Of course, you will come across suppliers who are unwilling or unable to have long-standing relationships. To help identify which companies are likely to want mutually beneficial relationships we have put together five determining characteristics to implore with potential suppliers.
1 – Experience: Have they made this before? Have they serviced this market prior?
Your first step is determining if your potential supplier has successfully delivered products into the markets you are looking to operate in. If the answer is yes, this demonstrates a certain level of quality, safety, testing and regulatory compliance. Should the supplier have limited experience in your prospective markets, you will need to thoroughly evaluate production samples of their products. You must also ensure that they are aware and willing to abide by the market standards for your product, this helps if established very early into the relationship.
Your best-case scenario is that your supplier has both experience in the market and the product category. If they do not, it helps if they are unified on a common goal and motivated to improve their people, processes and equipment in order to meet the standard.
Do not be afraid to take your time on this stage. It is much better to have a supplier who shares your ambitions and goals than one who is content with the status quo. In our experience, the ambitious supplier is much more likely to invest in improvement, whereas the other has little incentive to do so.
*Note* Don’t be fooled by the “golden sample!” In order to have a concrete idea of their expertise you will need to review more than just a single sample, including how they work the product, which processes they utilize and the production equipment they use.
2 – Quality is their Priority: Do you have the same understanding of what quality entails? What is an acceptable level of quality to your supplier?
One of the most important items to have alignment on from the onset is that of quality levels. You and your prospective supplier should have a unified understanding of what is and is not considered acceptable in terms of quality. This really begins by effectively communicating what your needs are to your supplier and have them truthfully respond – now we know this is not always the case!
You can request to review your prospective supplier’s quality procedures and documentation, this will not tell you much but is a good place to start. One of the most effective ways of reducing this quality risk is by physically visiting these factories. By walking on the production floor, speaking with employees, seeing their people, and observing their processes and equipment. By seeing this it becomes much easier to determine if you are unified on the meaning of quality.
Some things you will want to be aware of while visiting manufacturing plants are as follows:
- Is it workspace clean? How easily can potential contaminants transfer into new production?
- How are finished products stored?
- How much waste is evident? Are you able to see how much produced material needs to be reworked?
- Do they have acceptable equipment that can meet your desired standards?
- How are the workers manufacturing your goods, what is their process?
3 – They are Open and Honest: They do what they say they will, they act with integrity
Now this goes beyond simple cultural differences and the Asian concept of “face”, this pertains to whether they carry themselves with integrity. This section is largely based off the mindset of the management team but can be seen throughout the various levels of the organization.
Although difficult to see from the onset, over your relationship with your perspective supplier you can begin to ask yourself questions such as:
- Is your supplier acting in your best interest?
- Does your supplier carry themselves with integrity in all actions?
- Are they receptive to third party involvement?
- How do they deliver bad news? Where does the accountability lie?
By answering these types of questions, you will be able to get a much better idea about how this supplier conducts business and how willing they will be to stand by their word.
4 – Communication Capability: How responsive is your supplier? Are they proficient in English?
It is important that you also evaluate your prospective suppliers on their communication ability. You will want to have a firm idea on how timely this potential supplier can answer your questions, concerns or opportunities. For example, if an issue arises in production how soon would they be able to let you know?
In addition, you will want to have a strong idea as to the English proficiency of your factory contact(s). Does this supplier have staff in place with the ability to communicate clearly without confusion to their English counterparts? Does your prospective supplier have English writing workers on staff who would be able to translate or draft documents in dual language?
It seems apparent that communication is a foundational block to offshore manufacturing success. From our experience, many western purchasers are often left in the dark, or misled by their supplier counterparts (either intentional or unintentional). As far as we are concerned, this is an unacceptable business relationship to be part of, and one you should try to avoid from the onset.
5 – Attitude
The last area that we thoroughly evaluate is the attitude of the organization in question. While being somewhat subjective, by asking yourself some of the following questions you can begin to have a good idea as to if this supplier is a good fit for you:
- Is your supplier willing to get you the answers that you require? Or do they disregard your requests?
- Does your prospective supplier ensure that the service they’re providing is to the best of their ability? Are they responsive if you request more?
- How interested is your prospective supplier in doing business with you? Do you feel like a priority or an after thought for them?
By answering these types of questions, you can gather an accurate idea as to how this supplier is likely to engage with your business. How attentive they will be to ensure your needs are met, and ultimately how likely your relationship is to be a success as a result.
When looking domestically or abroad to narrow down potential suppliers, look at their experience with market and product considered, their quality focus, how open and honest they are, their ability to communicate effectively and if they have a positive attitude towards your organization.
All the attributes mentioned align with our organizational needs and operating style – this likely may not be the case for everyone… and that is okay!
What is important is to understand your organizations core values, and qualify potential suppliers based on that. By following this simple rule, you will give yourself and your supply chain the best chance to prosper over the long-term.
As always if you or your team requires any assistance with the mentioned assessments, we are happy to assist or advise.