International Business

Shenzhen Factory Inspection – Making the Best of The World’s Manufacturer

Shenzhen, China may be the biggest city you’ve never heard of lying in the heart of the Pearl River delta, this amazing place is now home to an estimated 30 million people. It’s also part of the world’s largest manufacturing hub in conjunction with Guangzhou (another Chinese mega-city only an hour away from Shenzhen). So if you’re considering outsourcing your production capabilities sooner or later you’re going to spend some time looking at Shenzhen. When you do you’ll be amazed at the amount of choice available to the first time outsourcer, there are hundreds if not thousands of factories in the area and whatever your specialisation you’ll be able to find a host of companies willing to make your products at competitive rates. In fact it can be that overwhelming amount of choice that can cause headaches for you. How do you know if the supplier you are talking to is ethical? How will you work out whether the workforce isn’t made up of child labour? Or whether the materials you specify won’t be substituted for cheap alternatives the moment your back is turned for increased profits for the manufacturer? What seems like boundless opportunity in the first instance can become highly problematic very quickly. The key to great outsourcing is a working relationship that enables honest, clear communication and sets reasonable expectations on both parties that the relationship will be mutually beneficial. China offers some of the world’s best companies, technologically advanced with a combination of low operating costs (thanks in no small part to very low labour costs) and a highly skilled workforce. Much of this workforce is based in or around Shenzhen and many of these companies choose to make the city home. Sadly so do many charlatans and old school “developing nation businessmen” who aren’t so much interested in long-term profits but rather in quick hit “big scores”. It can be very hard to differentiate one from the other, particularly if you have a short timescale to operate in. Barriers to establishing credibility in China hvac repair and service:

  • Language – it’s not an understatement to say that English is very much a minority language in the country. The main tongues are Mandarin and Cantonese, with Mandarin being the most widely spoken. Shenzhen is Guangdong province where the usual language is Cantonese, however owing to the massive immigrant (from other parts of China) population Mandarin speakers are in the majority. Which means you may have to differentiate between both languages in the course of conducting any due diligence.
  • Culture – the Chinese business culture is very different from Western culture, and there’s an enormous amount of middle men trying to earn their crust from the hard work of others. It’s vital to efficient outsourcing to be working directly with a factory, rather than with an agent who may not be able to effectively manage the relationship for you.
  • Lack of formal reporting or referencing – in the West, it’s easy to work out whether a company does what it says it does. You can examine their accounts, their website and a vast array of other data sources and you can take references from other easily validated sources to. In China this is simply not the case, many big companies do not publish accounts, have no or little web and media presence and are reluctant to let anyone talk to their other customers (thanks to a local tradition of visiting factories, cloning their products and stealing all their customers in exchange for small discounts).

So when you begin to consider working with a manufacturer in Shenzhen, you need to approach the process carefully. If you want to manage the process yourself you can; here are a few pointers to bear in mind.

  • Hire a local translator – ideally one who speaks Mandarin, Cantonese and English and get them to accompany you on every factory visit, this means you can ask relevant questions
  • Always visit the manufacturer personally – don’t be convinced by a bag of nice looking samples and a friendly salesman. Middlemen will do everything they can to stop you from visiting the location of production, even though they will insist that they work there.
  • Try and conduct a surprise inspection – once you’ve developed your shortlist go back and “drop in” on the factory unexpectedly if they won’t let you on the premises, it’s quite possible they have something to hide.

However I’d recommend that you consider working with a local inspection team, ideally one with both Western and Chinese staff. They’ll be able to overcome linguistic and cultural barriers, have a better idea of what your supplier’s reputation is really like and unlike translators they tend to be immune from backhanders from factory owners keen to paint a rosier picture of the situation. Also if ethical standards are important to your customers, it’s hard to conduct a social audit in somewhere like Shenzhen by yourself without the skilled and qualified staff to do so. Factory inspection is a vital component of outsourcing to a manufacturer in Shenzhen, it’s important to get it right to ensure your reputation and that your customers continue to receive the products they expect from you.