Asia manufacturing lawyersPretty much every week or so in 2017, our China lawyers would get emails from companies asking us one of the following:

  • Can you recommend a good Chinese factory for me that makes ___________?
  • I am about to sign a contract with XYZ Chinese company. Can you please tell me what you know about them or at least whether they are legitimate?
  • How can I find a good Chinese factory that makes _____________?

In the last 3-4 months a slew of people have been asking our international manufacturing lawyers the following questions:

  • Should I be making my _________ products in China, Thailand, Vietnam or the Philippines?
  • Can you recommend a good factory in Thailand, Vietnam or the Philippines that makes _______?
  • How can I find a good factory in Thailand/Vietnam/the Philippines that makes __________?
  • Should I have a factory in Thailand/Vietnam/the Philippines make my products for my company or should I build my own factory in one of these countries?

These are all tough questions and I thought about them today after reading How To Get a List of “Good Chinese Factories”? by Renaud Anjoran over at the Quality Inspection Blog. Renaud starts his post by noting how “hardly a week goes by without someone asking me for contacts of “good factories.” Renaud and his company have been helping Western companies find and work with Chinese factories for well over a decade and yet he cannot answer this question and he gives the following as his reasons why:

  1. Confidentiality. Renaud’s company promises confidentiality to its clients and it therefore cannot share with other companies what they have learned by working with a client.
  2. Absence of bias. Renaud’s company audits and inspects factories on behalf of its clients and he worries about losing objectivity by recommending factories.
  3. There is no such thing as a “good factory in the absolute.” Renaud notes that what is a good supplier for one company may not be a good supplier for another company.

As a law firm, our perspective is different but similar and I will explain our position by answering the two lists of questions I set forth above:

  1. Can you recommend a good Chinese factory for me that makes _________? Just like Renaud, we do not know who is good at making XYZ product even if we literally just got off the phone with a client who told us how happy they are with their XYZ product manufacturer. Renaud is 100% right to say that a factory good for one company might not be good for another company. Renaud gives as an example a company that does a great job manufacturing for Apple because Apple is its best customer, but does a less than great job manufacturing for its smaller customers of which it cares far less. I have to admit that I wince whenever a client of ours says that “I know XYZ is a great manufacturer because they make the widgets for ABC company, which everyone knows makes the best widgets in our industry.” I’m tempted to say, “well yeah but it’s also possible that they are making the best widgets only because they are charging double what anyone else is charging and because ABC company stations ten quality control people at the XYZ factory 24/7 and does this make sense for you?
  2. I am about to sign a contract with XYZ Chinese company. Can you please tell me what you know about them or at least whether you think they are legitimate? Not unless you pay us to conduct due diligence on them. We are not going to put ourselves and another company at risk by just venturing a guess on a Chinese company.
  3. How can I find a good Chinese factory that makes ABC products? Answering this question is going to depend on countless variables. What do you mean by a good Chinese company? Are you looking for a company that makes ABC products that you can buy off their shelves? See Chinese Proprietary Product Purchase Terms. Are you looking for a company that makes ABC products that you can modify slightly to make your own? Are you looking for a company that will work with you in developing your own ABC products? See China Product Development: What You NEED To Know. How concerned are you with pricing? How concerned are you about quality? See China Manufacturing and How to Prevent Quality Problems Are you looking for a Chinese company that will not compete with you? See Your China Factory as your Toughest Competitor. What sorts of quantities are we talking about? Are you willing to pay a China manufacturing expert to help you find this factory? Are you going to want this China manufacturing expert to help you negotiate the contract manufacturing terms for you? Is anyone at your company fluent in Mandarin such that it makes sense for your company to do this search on its own? Does anyone at your company have extensive experience in outsourcing product manufacturing to China? I could go on and on, but the above should be enough to convince you that there is no one answer to this question either.
  4. Should I be making my ABC products in China, Thailand, Vietnam or the Philippines? This is a extremely important and complex question, to which the answer will depend on a whole host of factors that will be peculiar to your product(s) and to your company. We can give you the names of Asia manufacturing consultants with experience with this question but for us to do so, I should tell you that they will charge a minimum of $3500 to get started on this and in the end it will almost certainly cost you considerably more than that. If you are willing to pay this sort of money, we will make the connections.
  5. Can you recommend a good factory in Thailand, Vietnam or the Philippines that makes ABC? No, for the same reasons mentioned above as to why we cannot do that for China.
  6. How can I find a good factory in Thailand/Vietnam/the Philippines that makes ABC? The fact that you are asking me this question makes me think that you need expert help on this.We can give you the names of Asia manufacturing consultants with experience with this question but for us to do so, I should tell you that they will charge a minimum of $3500 to get started on this and in the end it will almost certainly cost you considerably more than that. If you are willing to pay this sort of money, we will make the connections.
  7. Should I have a factory in Thailand/Vietnam/the Philippines make my products for my company or should I build my own factory in one of these countries? This is an extremely important and complex question, to which the answer will depend on a whole host of factors that will be peculiar to your product(s) and to your company. We can give you the names of Asia manufacturing consultants with experience with this question but for us to do so, I should tell you that they will charge a minimum of $3500 to get started on this and in the end it will almost certainly cost you considerably more than that. If you are willing to pay this sort of money, we will make the connections.

The Bottom Line: Choosing the right country and manufacturer (be it you or a third party manufacturer) is both important and complicated. It is not something that can or should be determined via a five minute conversation with an international lawyer; it should usually be done by working with manufacturing experts that know the country or countries that might make sense for your industry and your company.

 

 

 

Apple works with a famous contract manufacturer (everyone has heard of them). The products they make for Apple are truly first class — in the millions of pieces, with very fast ramp up and pretty close to zero defect.

Well, that same manufacturer also produces batches (for other customers) that would not be acceptable for sale in Walmart or Testco, and sometimes even cheats on components. I know it because we have detected these issues while looking out for the interests of a client.

How is that possible? Well, on the one hand Apple’s business is something they value. And, perhaps more important, Apple spends a lot of efforts validating their production & testing processes before launching mass production, not to mention all their monitoring all along production.

If, on the other hand, an unknown buyer comes in the picture, gives them a 50,000 USD order, and patiently waits for delivery, they might be disappointed. A second- (or third-) rate team will work on your order, and totally different business rules will apply.

A small buyer, in that situation, is actually better off finding and vetting an unknown manufacturer that accepts to sign a balanced contract. Since there is no particular confidence in that manufacturer, the buyer takes precautions. Trust but make sure to verify.