Finding a good factory

Full Packaged Service or Purely Making Only

There are 2 broad categories of factories:

  1. It moves most, if not all, of the risk of doing business to the factory.
  2. It allows retailers to make many products in the same factory which allows them to negotiate better prices.
  3. Large factories are known to be more reliable and less likely to bail on retailers, because they need the large retailers as much as large retailers need them.
  4. Only large factories will pay to be audited for Social Compliance because it costs a lot of money.
  5. Large factories are less likely to break the law or are less likely to be persecuted by the law.
  6. Large factories have bigger accounts at their local bank and can accept L/Cs. (L/Cs allow the factory to borrow money from their bank to pay for raw materials, which therefore lessens the need for factories to ask the buyer for a deposit to cover raw materials. However, after the global financial bubble burst, L/Cs have become unfavorable.)

Social Compliance

You may already know about social compliance from watching the news about factories that collapsed because of poor fire safety code and workers that commit suicide inside their factory.

Fly-by-night and Dead-end Factories

When the cost of entry for building factories is low, you inevitable get a lot of factories whose management doesn’t understand how to operate a factory to survive in the long term.

  1. Is the factory floor busy with other customer’s orders?
  2. Is the factory sitting on goods that haven’t moved in a long time?
  3. Are the workers working or are they idle?
  4. Are the workers working quickly or do they look to be dragging things out?
  5. Are most workers there new (worked for less then 3 months)?
  6. Is the factory building well maintained or falling apart?
  7. Are the machines sitting in dust and cob-webs?
  8. Are the machines too new and appear unused (with original wrapping still attached to some parts)?

Summary

When deciding whether a particular factory is right for you, take the time to get to know the factory and identify whether they fit your needs. Don’t just go for the lowest price.

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Uncle Ming

Uncle Ming

A first generation immigrant with a background in manufacturing in Asia for big and small companies. Always on the go, but currently living in Saigon, Vietnam.