Adage #5: Don’t Buy a Car Without Looking Under the Hood

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This one’s simple and doesn’t need a lot of explanation.  I see a lot of companies going to alibaba.com or other websites to find factories and products.  While this works for some people, when you get more complicated, OEM, non commodity items, it’s risky.  You see a lot of brokers, trading companies and “posers” acting like they are the manufacturer.  Problem is, if there ever is an issue these types of companies/structures/people simply fold up shop and you have no recourse.  You have to know who you are dealing with.  There are several independent research/labs/safety companies that can do verifying of your resources for maybe $100-$200.  You need to determine if that is worth it for your business.

So, you find they are legit.  Nothing is better than going there and seeing the plant in person.  But if you can’t do that, make sure you get the factory information, capacity, processes, total equipment, number of workers, years in business and most importantly, clients they have or are servicing.  Nothing feels better than finding your potential factory is certified by Disney, or doing work with Apple or other big clients.  Too many of these types of clients and you run the risk of being a small fish in a big pond.

Real World Example:  My business partner had a friend that asked him to do a check on a factory that quoted a good price on transformers.  He was about to issue a PO for over $200,000 for a major project.  My business partner was in China and was happy to help his friend.  He got to the factory and found it was basically a 1 room shed where they were winding and dipping transformers in resin by hand!  Suffice to say the PO was never issued and a big crisis avoided.

Summary:  You wouldn’t buy an oven without opening the door to inspect.  Even if you don’t know exactly what you’re looking for at least you’re looking for major red flags.

Posted by Joel Buckley
Specialized in product development, sourcing, marketing and branding

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