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Contract Manufacturing in China

 

Contract Manufacturing in China is a decision taken by thousands of companies in recent years. China has become the “factory of the world”. Hundreds of thousands of foreign companies have decided to move production to China and hire local companies that manufacture all kinds of products, at competitive prices, which are then sold on world markets. The relationships between the foreign company and the Chinese manufacturer are governed through a contract known in China as OEM Manufacturing Contract.

But when a foreign company hires a Chinese manufacturer must ensure that the products they produce will meet the agreed quality criteria. Here are five keys to minimizing risks in relationships with Chinese manufacturers:

Detailed Documents

The number one key to quality when working with factories in China is documentation. Having bi-lingual, detailed, factory agreed upon checklists in place that document an item’s specifications and the criteria for inspecting the product before shipment, is essential to controlling product quality. This type of documentation takes time and hard work to create, but putting such processes in place is the first and most important step in avoiding quality problems Checklists should describe in detail for: packaging, defect classification, size, functionality, etc.

Factory presence

Having a presence at the factory ensures that both factory staff and management really know the foreign company. Either through a 3rd quality control company or your own staff, ensure that you are being represented at the factory in person on a regular basis and that the factory clearly connects your presence there with your production.

Inspection

Perform regular product inspections (either with your staff or a via 3rd party), not only on the final product shipment, but also during production. Ensure these inspections are consistent and based on clear inspection criteria. Always review the inspection results with factory management and their own Quality Control team.

Keep Approved Samples

Some say that a picture is worth a thousand words, but a sample is worth a thousand headaches! Items often get revised and modified several times in the sourcing process, and then again after production begins. Keeping an approved sample in your office, and also one in the factory that can be used to verify the production product by the Quality Control and is essential in seeing eye to eye with your Chinese suppliers.

When a foreign company hires a Chinese manufacturer must ensure that the products they produce will meet the agreed quality criteria

OEM Manufacturing Contract

Finally, a well-drafted contract -known in China as OEM Manufacturing Contract– is also a key. Chinese companies, like companies everywhere, do not relish being sued. A good contract means incorporates the key quality requirements and also sets up the Chinese company for liability for failing to meet those requirements.
It is advisable to put a provision in the OEM Manufacturing Contract (which should be written in a bilingual version English-Chinese for better enforcement in China against the manufacturer) mandating that the Chinese manufacturer cannot subcontract out the manufacturing.

To obtain the OEM Manufacturing Contract for China, click here.

About Olegario Llamazares

Economista, director de Global Marketing Strategies y socio fundador del portal Globalnegotiator. Está especializado en negocios internacionales con un énfasis en comercio exterior, marketing y negociación internacional. Tiene su residencia en Madrid, España.Economist, managing director of Global Marketing Strategies and founding partner of the website Global Negotiator. He specializes in international business with an emphasis on trade, marketing and negotiation.

  • Claire Piccinno

    Interesting article and glad to read you also mention the importance of performing regular product inspections at different stage of the production level. If contracting a third party company for those inspections, it is highly recommended to check if it is AQSIQ licensed : http://english.aqsiq.gov.cn/. 🙂

  • Olegario Llamazares

    Yes, when manufacturing in China is very important to have a local
    contact – usually a purchasing agent or inspection company – that regularly visits
    the factory of our supplier to ensure they are complying with the conditions of
    the contract and make also a pre-shipment inspection prior to make any payment
    to the Chinese manufacturer.

  • When begin product production first of all clear the base, quality quantity and product need inspections.well blog writing is help full.

  • Joe Smith

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  • Asia Quality Control

    Thank you for mentioning 3rd party inspection for local presence and quality control operations! We can be your local unbiased agent to make your manufacturing operations more smooth in China and Asia 🙂

    If you are unsure about your supplier, we can also perform supplier audits for you. It will allow you to know who he is, how is his factory and if he is able to handle your production.

    If you would like more information about such services, feel free to contact us, Asia Quality Control, or visit our website: http://asiaqualitycontrol.com