What should be in a purchase order (PO) to a Chinese supplier?

I see a lot of small companies buying in China without a purchase order (PO). They simply accept the proforma invoice from the supplier. I think this is dangerous. It shouts inexperienced buyer to the supplier. But
thats not the main problem.
If you write the PO, you control what goes inside the PO. You can write all the information that is
important to you, and refer to other documents that must be complied with by the supplier.
What is the minimum to write in a PO?

Buyer identification, with either the logo or the company name in large characters.

Full contact information of the person who follows the order in the buying organization

Full supplier company information

PO (unique) number, PO date, corresponding PO number of your customer if any.

List of the products with ordered quantity, unit price, and total price.

Most important specifications of each product (do not forget about labeling and packing). If you have
written a product checklist, refer to it on the PO.

Terms of purchase: currency, incoterm, loading port and receiving port (for sea shipments), shipment
date promised by supplier, payment terms, penalty for late shipment. If you have a quality control plan,
refer to it on the PO.

You dont have a PO form?

No problem. Feel free to download this PO template and adapt it to your needs.
Is the PO a contract?
No. If you want a contract that can be enforced in China, you need to work with a lawyer who specializes in
China business.
I have no qualification to write about this, so here is an extract from an article on the China Law Blog:
Small and medium sized businesses often enter into OEM manufacturing transactions with a simple
purchase order. This is a mistake. The purchase order will protect the Chinese manufacturer, not you. Your
protection depends on your securing a written OEM manufacturing agreement with each Chinese
manufacturer with which you deal.

ISO 9000 factory audits for your China suppliers

Factory audits in China and other Asian countries are often (loosely) based on a checklist inspired by
the ISO 9000 series. That means the main part of these audits consists in looking for holes in the factorys
quality system.
Why is this important? Because it directly impacts the factorys reliability (how likely are they to have quality
problems and to miss deadlines?)
Performing such an audit on a small workshop is over-kill. They probably have no system at all, and the
auditors job is over in 20 min.
We have worked on a new template for our audit, and here are the checkpoints related to the quality system:
1. Understanding the Buyers Requirements

Is there a clear list of all desired characteristics of a product, before production starts?

Is it clearly specified in which manner each requirement should be measured/tested?

Are conform samples available to workers in production and QC areas? How accessible are these
samples (photo on production line, sample in hands of QC staff)?

2. Suppliers of Materials / Components

How does the factory evaluate and select material suppliers?

Is there a list of approved suppliers?

How does the factory communicate requirements to its material suppliers? Is it done properly and
accurately?

3. Incoming Quality Control (IQC)

What are the steps followed by the factory when it receives raw materials / components from its
suppliers?

How are materials / components checked against the factorys specifications?

Is any on-site test performed upon reception? Which one(s)?

Do they send samples for tests in external laboratories? How often and for what tests?

How are materials / components stored?

Describe the location (inside/outside/covered) and the way the materials are stored (in bulk/on
racks).

Are materials / components correctly identified? How (sticker/barcode/tag)?

Is the information easily accessible?

Is there a First-In, First-Out (FIFO) system? Or any other stock management system?

Are there QC staff solely dedicated to Incoming QC (IQC)? How many?

Are QC results recorded in a formal report?

4. Organization of In-House Production

Are clear procedures given to each operator, for each job / task (including the QC staff)?

How does the factory verify that each production process is conducted in a satisfactory manner?

How are work-in-process products stored? Are they protected and kept clean?

Are production lots properly identified and traceable throughout the production processes?

Does the factory accept to do pilot runs (very small quantities) for the products it makes for the first
time?

5. in-Process Quality Control (IPQC)

What are the control steps during production?

What proportion of products is checked?

What does the factory do with the data collected (corrective / preventive actions plans)?

What happens to defective products? (repaired / recycled / scrapped)

Are there QC staff solely dedicated to In-Process QC (IPQC)? How many?

Are QC results recorded in a formal report?

6. Subcontracted production

Are materials/components delivered directly to subcontractors? Are they checked?

How does the factory control the work of its subcontractor(s)?

When do they check the subcontractors operations?

Are QC findings recorded in in a formal report?

7. Final Quality Control (FQC)

How are finished products stored?

Does Final QC occur before or after packing is completed?

What proportion of products is checked?

How are inspected samples taken from production line? (by lot, randomly)

If the final inspection based on random checking: It is based on which inspection level, and on which
AQL level?

What happens when non-conformities are detected?

Are there QC staff solely dedicated to Final QC (FQC)? How many?

Are QC results recorded in a formal report?

8. Instruments & Machines

How does the factory ensure that measuring instruments are available and correctly used?

Are testing instruments regularly calibrated?

How often are production machines maintained?

Are maintenance records available?

9. Prevention Of Problems

What is the process in case an issue is noticed during the preparation of samples?

What is the process in case an issue is noticed during bulk production?

Does the factory determine the root causes of non-conformities?

What actions are put in place so that they dont occur again?

Do they determine potential non-conformities and take preventive actions?

Important note: this is not the checklist followed when a manufacturer wants to be ISO 9001 certified
(which does not mean much in countries like China). This is the checklist our auditors follow when they help
an importer evaluate the reliability of a potential supplier.

How to check the production status in a factory

One of the purposes of QC inspections is to check the production status. You want to confirm product
quality, but also make sure the manufacturer is not behind schedule.
If youor an inspector you appointedcome after the whole production is completed, all you need to check is
whether the whole quantity is fully completed and whether all is packed. This is important because an
inspection is much more reliable when the whole order is ready.
However, sending an inspector after everything is finished might be too late. And you might find out at the
last moment that your shipment will be 3 weeks late, even though the supplier told you it was on time!
The solution is to proceed with inspections during production. In addition to checking product conformity and
quality, the following points can be checked:
Is the factory aware of the clients specifications?

Check if the factory has full technical specifications from the client.

Check if the factory has a reference sample approved by the client.

Check if there is any open issue not clarified between the factory and the client.

Capacity allotted and key milestones

Check how many lines are working on these products.

Check how many workers per line, and total number of workers on these products.

Check the date of arrival of materials / components.

Check the date of beginning of bulk production.

Check the total production quantity per day.

Check factory-estimated date of total quantity completion.

Check factory-estimated date of shipment.

Check factory-estimated shipment quantity.

In some cases, it is better to prepare a table that shows the quantity of products in each stage (stored inputs
/ past the 1st process / past the 2nd process / packed). It can be detailed reference by reference, color by
color, etc.
In China and other parts of developing Asia, few suppliers take the time to track their production schedule.
They often prefer not to promise anything, and to avoid being held accountable to delays.

How to prepare your QC inspection report template

A few months back, we drew an infographic to show how a random inspection works, but we didnt get into
all the specifics. I regularly get questions from readers who ask me how to report the results.
(Update: we have started offering a reporting set up service click here for more information).
There are many ways to prepare a QC inspection report. But here are a few guidelines to prepare a
document that suits your needs.
A report is usually composed of the following parts:
Conformity to specifications
You probably want the inspector to look at the following aspects of the products:

Components

Assembly

General outlook, colors

Labeling

Packaging & packing

It can look like this (this example counts only 1 checkpoint, but you are encouraged to list up to 10 or 15
points in each sub-part, to be inspected during the job):

What to report?
In my mind, the inspector should only show the non-conformities if he was trained properly and if you trust
him. But thats up to you. Some inspection firms commonly use freelancers that they dont really know, and
they require reporting (and photos) for everything. Up to you!
On-site tests & measurements
This is the place for the checks that take some time, and that are generally performed only on a few
samples:

The tests (to be clearly described, including the equipment to use and the required result)

The measurements of the cartons and of the products (size and weight)

Here is an example of test:

And for the measurements:

Production status
This is where the presented quantity is noted.
Here is a common way of displaying this information:

It is extremely important to know whether the inspector could count the quantity of products (sometimes they
are piled up in bulk), and whether all products were available for sampling (sometimes they are under
packing or repairing).
If the inspection takes place during production, you can add some extra questions to ask the factory: how
many lines are working on my products, when will you get to 50% finished, etc.
Visual defects on the product and the packing
The inspector will look for defects, will place them in the right categories (critical/major/minor), will add the
numbers up, and will compare them to the AQL limits.

This is the most basic part of every QC report, and every inspector knows how to present this. Make sure
you get photos, and a clear description of each defect (if its not obvious on the photos, indicate the size of
each defect and its position on the product).
Appendix: photos
This is the place where you list the photos that you want to see, whether there are problems or not.
A good tip: describe how each photo should be taken (what angle). This way, you can compare the photos
across several inspection reports. Some buyers have noticed an evolution in the manufacturing process
based on this technique.

FINAL RANDOM INSPECTIONS How is quality controlled before shipment?

Most consumer goods exported from low-cost Asia to Europe and the USA are inspected randomly. For
example, for an order of 8,000 pieces, only 200 samples are selected for inspection. How can an inspector
draw valid conclusions after checking some pieces at random?
Here is how it works.
1. COMMUNICATION OF REQUIREMENTS
The purchaser describes his product: specifications, dimensions, labeling, packaging The more precise
the information, the more you take advantage of the inspection. If possible, an approved sample can be sent
for the inspectors reference.
2. AN INSPECTOR GOES TO THE FACTORY
When? After all production is finished and packed, and about 2 days before the goods leave the factory.
(In most cases, one inspector is enough)
3. QUANTITY VERIFICATION
The cartons are counted, to check if the whole quantity is presented. Then the inspector randomly selects a
few cartons, opens them, and checks their content.
4. RANDOM SELECTION OF SAMPLES

Some samples are taken from each of these cartons, totally randomly. The inspector follows industrystandard statistical rules to ensure his findings are valid.
5. COSMETIC AND WORKMANSHIP CHECK
These samples are checked thoroughly for visual defects. A defect is an imperfection on the product (or its
packaging). The statistical rules provide a maximum number for each type of defect. If there are too many
defects, the inspection is failed.
6. CONFORMITY VERIFICATION
The inspector also checks if the goods presented by the factory correspond to the purchasers
requirements. For example, the products might be too small, in the wrong color, incorrectly labeled, or
insufficiently protected.
7. TESTING IN THE FACTORY
The inspector performs some tests that are specific to the product, with the factorys equipment. Tests vary
according to the nature of the products. A few examples: checking if there is current leakage on an electrical
device; checking if a piece of furniture falls over easily; checking if the export carton is strong enough.
8. REPORT PREPARATION
The inspector issues a report that describes the situation and illustrates it with photos. It documents his
findings about presented quantity, visual defects, conformity to requirements, and on-site tests.
Here is my report. You have the info you need to take a decision(accept or refuse the shipment).

How to check the loading of a container by a factory?

How do you ensure that the factory ships the right kind of product in the right quantity to you, when you
import by full containers? By sending someone on site when they are loading the goods in the container(s).
You might send your employee. Or maybe an agent that you trust enough. Or maybe you want professionals
to do it for you, and you pay for acontainer loading inspection by a third party.
In any case, your representative should at a minimum follow these checkpoints:
The products to ship

Total quantity

Conformity to the buyers requirements

The container

Containers are in good condition, inside and outside

A seal is affixed to close each container, with a unique number

Compulsory photos of the container:

Container seal

Container markings

General condition of the container

The loading process

Number of cartons to be loaded

Expected number of pcs per carton

Numbering of cartons

Pallets size, if applicable

Number of pallets, if applicable

No carton should fall on the ground or be damaged when factory loads the cartons

There can be many other requirements to check. For example, the importer might prepare a loading plan (to
save volume) which will not be respected by most Asian manufacturers, unless an inspector is present.

Re-inspections: the key is to manage corrective actions

This post is about re-inspections following a rejection for quality issues. Not about second inspections that
are booked because the first inspection was impossible to carry out (e.g. because a last-minute problem
delayed all production, and nothing could be checked)
Sometimes re-inspections show the same results as first inspections, suggesting that no corrections were
performed. Why? It can come from both sides:

I saw factories lying to a trading company, doing no real repairing, and just waiting until the importer
has no more time and has to ship out.

But I also saw cases where the information from the purchaser is not clear enough, and no one in
the supply chain knows what to do.

How to avoid such situations? I usually advise my clients to follow a few steps:
Sending guidelines to the supplier
Some importers ask for a re-inspection but do not wonder what it implies in the factory. When a shipment is
rejected, they simply tell their supplier to repair the products and set a re-inspection date. But this is not
enough. If you are a buyer in this situation, what should you do?
First, ask yourself can they really repair these issues? If so, ask them to do it. If not, there are
basically three options:

Let the supplier ship the goods as they are,

Ask the supplier to sort out the bad goods and either re-produce (if there is no minimum order
quantity problem on the materials and if timing allows) or short-ship,

Ask the supplier to sort out the worst goods (according to an exceptional tolerance) and either reproduce or short-ship. (Note that this exceptional tolerance might well become the standard for
future productions, in the factorys mind).

Second, list the steps that should be followed by the manufacturer. Below is an example, based on an
email I sent to a supplier recently:
The shipment is refused, because of [XYZ problem reported by the inspector]. Please confirm your
understanding.
Please tell the factory to follow this procedure:

Open all the cartons,

Check 100% of the pieces, sort out the pieces that are out of tolerance,

Tell us the proportions of good pieces and bad pieces,

Repair what can be repaired, and reproduce what cannot be repaired (only if you still have enough
materials on hand),

Send us photos of several products, before and after repairing,

If certain quality issues cannot be repaired, please tell us immediately,

We need to have shipped out the products by 5 Feb., so the re-inspection has to take place on 1
Feb. at the latest,

You need to present 100% fully packed when the inspector arrives. If the shipment quantity is
smaller than the order quantity, please let us know in advance.

This way, an importer can easily spot some red flags, even from 10,000 miles away. If the proportion of
defective products is 20% on the 1st inspection report but only 3% according to the suppliers sorting job,
obviously there is a problem!! In such a situation, the only sensible thing to do is to send somebody in the
factory to show them physically what is acceptable and what is not
If a trading company is involved in the transaction, the importer should not hesitate to ask them for their
internal QC reports. In most cases, with local trading companies, inspections (when they do take place) are
very light and unreliable. But it can get better with pressure from the buyer and the perspective of an
independent inspection coming up soon.
A buyer is also advised to systematically ask for a corrective action plan whenever re-work is necessary.
Changes in inspection scope
During a re-inspection, the inspector should not proceed like the first time.
Some changes are obvious:

Ask for 100% packed instead of just 80% (to avoid the temptation of hiding some defective
products),

Follow at least a normal level (since level I is not adapted to re-inspections following a rejection for
quality issues).

But then, should the checkpoints be the same? I dont think so.
Lets take an example: all is fine except for the weight of the saucepans (the issue: 50% of samples are
found below the 5% tolerance). During the re-inspection the inspector does not need to check colors or
shipping marks with the same attentionhe should spend at least 60% of his time weighing randomlyselected samples.
All the QC firm needs to do is ask the importer to confirm what points are fine and dont need to be rechecked. Unfortunately, some inspection providers dont do it systematically, simply because of a lack of
follow-up. What they do is follow the flow: they let the buyer communicate (or not) with the supplier, and they
just set a date and send an inspector with the same checklist as the first time. If there is a need for a third
inspection because the second one was useless, its good for them (more fees to get paid)

I observed this phenomenon in particular with inspection companies that ask their clients to book
inspections online. The client is only asked to click on re-inspect, and the checklist sent to the inspector is
exactly similar. Without adequate hand-holding from the QC firm, there can be three perverse effects:
1.

The checklist is similar, so the inspector does not spend much more time on the problems that
caused refusal,

2.

The amount of work is similar, even though only 1 or 2 points need to be checked, so 2 inspectors
might be sent where 1 would be enough,

3.

Often, multiple discrepancies are shown in the first inspection report, but only 1 or 2 are really
serious problems. If the buyer does not communicate this clearly in written, the supplier does not even
know what to focus on. And the corrections are not as effective as they should.

How to avoid all these headaches in the first place

Sending an inspector just before shipment is a little late. At that point, getting rid of non-conformities causes
a lot of trouble in the factory, and some unexpected delays for the buyer. But there is a better way.
Sending an inspector during production is usually enough to catch issues early. In this case, the buyer has
time to ask for corrective issues, and avoids last-minute surprises. In-process inspections are a powerful
tool that can avoid both quality problems and shipment delays.

Procedure if a problem is detected during an in-process inspection

Two years ago, I drew a flow chart to guide importers in case a final QC inspection was failed.
But the best is to detect problems during an in-process inspection (before the products are finished).
At this stage, if an issue is caught by an inspector, there are 2 objectives:
1.

2.

To make sure the same problem wont be present on the pieces that will go through that same
process later;
To make sure the pieces that already bear this problem are dealt with in the right way.

So I drew another flow chart, specifically for in-process inspections:

What do you think? Anything to add to this procedure?

Procedure for dealing with failed inspections

Quality inspections are only a way to collect information, and present it in a way that allows the buyer to take
a decision. Last month I wrote a post about the case where the buyer refuses the products and asks for
rework. In that article (re-inspections and corrective actions), I explained what to do:
1.

Analyze the situation and send clear guidelines to the supplier,

2.

If necessary, change the scope of the inspection.

But I keep explaining this over and over to my clients. So I drew a flow chart that can be used as a
procedure for dealing with failed inspections:

A few notes, for using this flow chart with highest effectiveness:

The buyer should anticipate all these steps (can it be repaired? if not, what to do?), and then
communicate with the supplier accordingly.

In the best case scenario, the supplier communicates the percentages of (1) the pieces that are
classified as fine after the sorting job, and (2) the proportion of pieces that are not acceptable but that
can be reworked.

For very sensitive production runs, the buyer can send an inspector to check the reliability of the
sorting job and the effectiveness of the repair job.

The factorys incentive is to sort out quickly the biggest issues and repair them grossly to be a little
closer to the standard (cha bu duo). The worst for them is to short-ship or reproduce because it
means materials were wasted (and it generally costs much more than labor).

Troubleshooting process in a Chinese factory

I have been to Chinese factories a few times for solving problems. In one case, the factory pretended the
goods really couldnt be made as intended by the importer (that was true). In another case, the QC inspector

found many defective goods that seemed to come from the same issue, production was still running, and
the manufacturer was incapable of finding a solution.
I recently read about the steps usually followed in the Toyota group for solving a problem, and I think it is a
very valuable approach. Make sure you come back to this page when you have some on-the-ground
troubleshooting to do!
1. Identify the problem
What is causing a problem? How bad is it? What are the consequences (delays, scrap, poor quality)?
The problem is certainly hurting the manufacturer financially in one way or another. Remind them about it, to
get some buy-in on their side. Youll need their patience as you go through the next steps.
2. Clarify the problem
Go on site and see what happens:

First, make sure you know what should be happening if all were running fine

Second, see what is actually happening, and identify what goes wrong

Look for the point of cause, and observe it

It is important to be disciplined and to follow this process. Looking for the point of cause (i.e. where things
go wrong and cause the problem) can take hours, but it s time well spent.
3. Investigate causes

What is the direct cause of the problem?

Launch a 5-why investigation, until you get to a cause that, if addressed, will prevent recurrence of
the problem.

Spend time until you full understand what is going on. Get the factory technicians suggestions, but only
after you have observed the process first hand.
Again, most of the factorys employees will try to come up with solutions, and will be tempted to skip this
step. It is a mistake. Solutions are obvious if you are very familiar with a problem, so spend time to
understand the situation first.
4. Test countermeasures

Address the root cause, by changing only one factor at a time (to keep cause & effect relationships
clear)

Test new approaches until the problem stops

This is the time to implement solutions and to test them. Again, if you have followed the first 3 steps
meticulously, this should be easy and obvious.
5. Follow up

Confirm the problem is solved for good

Make the countermeasure part of the standard operating procedure

If the manufacturer is not well organized, chances are that you will have to train the operators (not just in the
day shift!) to do their job correctly. Troubleshooting is done, but is never really over in China

Use corrective actions plans to ensure effective repairing

You have placed orders with a Chinese supplier, you have appointed an inspection company, and they found
some issues that need to be fixed before shipment. Sounds familiar?
Should you simply tell your supplier to re-work the products, and send an inspector again once its all
done? This hands-off strategy is chosen by many importers, who reason that their supplier is responsible for
a finished product and should find appropriate ways to deliver it.
However, in some cases the re-inspection report shows the same issues (not effectively repaired) or entirely
new issues (caused by poor rework). There can be several reasons for this, and here is the list of the most
frequent ones:

Miscommunication between the salesperson you contact and the technicians in the factory.
Inapropriate measures taken for repairing, either mistakenly or consciously (to same money and
time).
The refused products actually cannot be repaired properly, and have to be re-produced.

If you are in one of these situations, you will waste time and might argue with your supplier for nothing. But
there is a way to dramatically increase the chances of effective repairing.

What is a corrective action plan?

The buyer (or its appointed inspection company) can require the supplier to fill out a form called a
corrective action plan, or CAPA (for corrective action/preventive action). Here is a simple example, based
on root cause analysis:

After the supplier has filled it out, a quality engineer working for the buyer analyzes it (he can confirm it,
refuse it, ask for more information, or propose other solutions).
Benefits of using a corrective action plan

The supplier is forced to think of the root cause for the problems found, and communicate with the
factory technicians. If they do their job correctly, they will be in the right frame of mind to find the most
effective method of repairing. They might do several tests to validate a method; buyers are advised to
ask for photos (or even short videos) showing such tests and their results.

If the factory does not want to do any rework, a sharp buyer should feel it right away: in that case the
descriptions tend to be sketchy and unclear If the document is sent back at all!

Another advantage is that it is a written document. The supplier has no excuse for not taking the
necessary steps to prevent the same issues on the following batches.

Asking the supplier to fill out a document costs nothing.

The limits of this tool

An importer with no knowledge about production will not be able to make full use of the corrective
action plan, simply because nobody will be able to confirm the suppliers suggestions. In this case, the
supplier might invoke some obscure technical reasontrue or notand confuse the buyer.

When the importer is assisted by a quality control firm, chances are better to validate an effective
plan. However, most QC firms inspect all kinds of consumer goods, and their local engineers probably
have no deep knowledge about the factorys processes and the materials that go into your product.

The most effective procedure is to send an engineer in the factory during the repairing work. She will
record the actions undertaken and will check their result.

Overall, though, I think all buyers should include this tool in their buying procedure. Unacceptable quality?
Please fill out the corrective action plan, and well book a re-inspection at your cost.

How to conduct a product quality inspection in a China factory (Checklist)

If you let a Chinese supplier ship the goods out without inspecting them, and if you discover quality
problems after delivery in your country, is there anything you can do? For most importers, the reply is
no.

Chances are, by that time you have already paid the supplier in full. And there is little hope of
getting any of your cash back. You might be offered a discount on a future order, but do you
still want to work with such a supplier?

What can you do with the defective products? If you sell them in a distribution channel that
does not make exceptions to its quality standard, you might as well have to take a trip to the
local dump.

Reproducing the same goods in another factory might take a long time. In the meantime, what
do you tell your customers (especially if they are the ones who found out about these quality
issues)?

In a nutshell, the quality inspector is the last defense of the customer!

If the size of your orders does not justify the cost of at least one inspection before shipment, you need
to mitigate your risks in any way you can - for example, by always working with the same reliable
manufacturer, and by keeping some stock in your warehouse at all time (in case a shipment needs to
be scrapped).

2. At what stage should you check production quality?

It depends on the major risks you identify:

If the main risk is that your supplier purchases substandard materials (or components), it is
wise to check them as soon as they are delivered (and before production starts).

If you know that a particular process step is the most likely cause of failure, you should check
the way that step is conducted.

If you are not sure about what type of problem might appear in production, checking the first
batch of finished products is a good way to catch problems before they become widespread and to ensure corrective actions are taken.

If you feel relatively confident about the factory's quality standard, but you still want an
inspection of the quantity, product quality and functionality, and packing, a final random
inspection (a few days before shipment) is the right choice. I do not advise to wait until the end
of production if you are dealing with an untested or unstable supplier.

The two most common types of inspections are:

1. The final random inspection, because it is the only time when samples can be picked at random
and when most of the bulk is packed.
2. The inspection of the first finished products, to catch issues as early as possible.

But when do the first finished products appear?

It really depends on the organization of production:

In a traditional batch and queue production system, your products are kept in an unfinished
process during most of the cycle, often for several weeks. They go all together through one
operation, then they wait, then they go through another one, and so on. Depending on the
type of processes your order needs to go through, the first finished pieces might appear after
three weeks, and the whole order might be packed a few days later!

In a system where products flow more easily from one process step to the next, some
products are completed much earlier. An inspection of the first finished products is well suited
for this situation, while the previous case calls for a final random inspection only.

3. Checking production status

3.1 If production is under way
You might want to ask these questions:

How many lines are working on these products?

How many workers per line, and total number of workers on these products?

When were the last materials / components delivered?

Has bulk production started? When?

When did/will bulk production start to run at full speed?

How many pieces are processed every day?

When does the factory estimate that 50 percent of the quantity will be completed?

When does the factory estimate that 100 percent of the quantity will be fully packed?

When does the factory estimate that the order will be shipped out?

Will the full quantity be shipped out?

3.2 If production is in an advanced stage

If you come for a final inspection, you need to put pressure on the manufacturer to present all the
products (or at least 80 percent of them) fully packed. Above a certain order quantity, this is the only
way for you to count the pieces. And this is important because you want to pick samples from the
entire production run - you do not want 30 percent of the goods to be hidden in a back room!
Important note: if some products are packed and others are waiting to be packed, make sure to pick
both unpacked and packed samples - ideally in the same proportions as the total batch.
4. Checking product and packing specifications
4.1 Preparing the checklist

Now is the time to make use of the product specification sheet that, hopefully, you have prepared
before production started.
Before inspection, you simply need to paste the checkpoints and requirements (from the specification
sheet) into the columns on the left of the inspection template. And, during the inspection, you enter
findings on the right (in the white column).
This information coming from the product specification sheet...

...is pasted this way in the product inspection report:

4.2 Notes about the template

Sampling, by default, is 5 pieces in the template you can download at the top of this article.
But you should feel free to adjust this number. If all the products get off the same mold, you
might want to measure only 1 piece. If there is more variation due to a hand-making process,
or if a checkpoint is particularly important, do not hesitate to increase the sample size.

This template is applicable for checking one type of product. If there are several items, you will
need to make adjustments in the format.

4.3 The procedure to follow

The number of cartons to pick up should be at least the square root of the total number of
cartons in the order. Example: at least 8 cartons if there is a total of 50 cartons.

The inspector must select export cartons from different parts of the pile -- from the top, from
the bottom, from the sides, and from the center.

Once the cartons are opened, start by taking a few pieces (it depends on the sampling you
chose for the product and packing inspection). Make sure you take these pieces from the top,
middle, and bottom of the cartons.

Keep the cartons near you, if possible. You will need to draw more pieces for the next part of
the inspection.

5. Checking visual defects

5.1 Checking more samples
After checking a few cartons and a few pieces in detail, you need to check more products visually.
You will look for aesthetic defects (for example, stains, scratches, poor alignment), but you should
also run quick tests (for example, plugging in an electrical product and switching it on/off, or stretching
the stitching of a garment).
You should only select a few "quick tests" to check on all samples. Actually, you will need to make a
trade off. Conducting many tests (or a few time-consuming tests) on the whole sample size might take
you a lot of time. But if you do not run any test on the whole sample size, you might miss some quality
issues.
5.2 Following industry-standard statistical rules
I strongly advise to draw a representative sample by following industry-standard statistical rules (MILSTD 105E or commercial equivalents ANSI/ASQC Z1.4, ISO2859).
These rules will give you two pieces of information:

How many samples you should pick up from cartons and check visually.

What the limits in the number of defects (beyond which the inspection is failed) are.

5.3 How many samples to check this way?

For simplicity, let us say you follow the same settings as 90 percent of importers of consumer goods:

Inspection level II in normal severity

AQL limits of 0 for critical defects, 2.5% for major defects, and 4.0% for minor defects.

There are two statistical charts that you need to be familiar with:
1. First table: Sample size code letters

Let us assume that the order quantity is comprised between 3,201 pieces and 10,000 pieces. The
code letter is "L".
2. Second table: Single sampling plans for level II inspection (normal severity)

Your code letter is "L", so you will have to draw 200 pieces randomly from the total lot size.
And here are the limits -- the products are accepted if NOT A SINGLE critical defect AND NO MORE
than 10 major defects AND NO MORE than 14 minor defects are found.

INSPECTION CHECKLIST

This is an inspection checklist for the average purchaser who has a few notions
about how a factory is run but has no specific training or experience in quality
and manufacturing management.
CMC's Kim Pen (a veteran factory general manager) assisted with many of these benchmarks during our
client factory audits.
1. The basics that all buyers should look at
Whatever your main goal is, there are certain things you should look at carefully.
1.1 Objective evaluations

The number of operators, and the number of production lines/cells

The capacity, in number of pieces per day, of one production line/cell (for the type of product you
would purchase)

The main process steps, and products being made during your visit

The main market: Export vs. domestic, main export market, quality standard of 2 or 3 major
customers (look at the products, their labeling and carton marks)

1.2 Subjective evaluations

Motivation of top managers when you describe your project

Understanding of your demands/requirements by managers and technicians

Focus of the factory: High volume at a low cost, or high quality, or constant development of new
products?

2. Ability to control quality

The way to check a manufacturer will be totally different depending on their size and their internal
organization.
2.1 If the factory is pretty small and is not structured
They probably have no quality system in place. If the operators check their work and if the owner (or his
wife) supervises everything, they do not need a quality system at this point.
In most cases, you will need to make a subjective call. My advice is to sit down and check about 50 finished
products that have passed final QC and were classified as good. If you find 20 percent of pieces with a
visual defect, your decision is easy.
I would add that the motivation of the owner is probably the most determining criterion, in such a situation.
2.2 If the factory has a quality system

Does the factory communicate requirements to its suppliers on its POs (or other documents)? Are
these requirements clearly listed?

Are incoming QC results recorded in a formal report?

Are clear procedures given to each operator and to the QC staff for each job?

Are conform samples available to workers in production and QC areas?

Are in-process QC results recorded in a formal report?

Does final QC occur before or after packing is completed?

What proportion of products is checked during final QC?

Are there QC staff dedicated solely to final QC? How many? Do they only do QC, or also a finishing
operation at the same time?

Are final QC results recorded in a formal report?

Is the first-pass yield displayed on a wall, and tracked day-by-day and line-by-line?

Are numbers and details of customer complaints displayed on a wall?

Important notes
Do not simply ask questions and say, "OK, thanks" when they show you a piece of paper written in Chinese.
Ask to see the records written on one line of your choice, for a production that is going on.
And remember, if they do not have any records, you should assume that they do not check anything!
3. Ability to control costs in the long term
I advise to look at many different aspects of the factory.
3.1 Overhead costs

Number of professional managers

Standing of factory building, and number of empty floors in the factory building

Recent investments in expensive machinery

How many of these expensive machines are idle? Is it because of poor maintenance, or because of
low production volume?

3.2 Quality system

You should still check the quality system (see previous part), because a high rate of defective products
necessitates some re-working or discarding, and costs a lot of money.
In the long term, the buyer ends up paying for quality issues, even if they are contained at the factory level.
3.3 Maintenance

Is equipment failure down time calculated?

Are there checklists for maintenance? Do they seem to be followed?

3.4 Visual control

Is the number of pieces per labor hour displayed on a wall, and tracked day-by-day?

Is the amount of scrapped material displayed on a wall, and tracked day-by-day?

Is the total unit cost displayed on a wall, and tracked day-by-day?

3.5 Degree of "lean-ness"

If you see a lot of inventory kept before production and kept between each production step, you are
observing a traditional (batch-and-queue) system. In other words, it is very "un-lean".
I placed this criterion at the end, even though it is the most important factor in determining costs, because
less than 1 percent of factories in China are truly lean.
4. Production speed
4.1 Organization

Before a new production is launched, are some jigs/tools prepared by the engineering department?

Is pre-production inventory well organized?

Is work-in-process inventory stored in a predictable way, or do people need to look around to find
what they need?

What is the lead-time to get all the components necessary to launch production?

4.2 Planning

Is production organized as a continuous flow, without any work-in-process inventory visible in the
workshop? (best)

Is there a kanban system? (very good)

Is there a production planning, with details for each workshop, and updated every day? (good)

Is there no production planning at all? (worst)

4.3 Flexibility

Is there a list of approved subcontractors who can take over part of the job? For which process
steps?

Is there a power generator?

4.4 Maintenance

Is equipment failure down time calculated?

Are there checklists for maintenance? Do they seem to be followed?

4.5 Visual control

Is the proportion of on-time shipments displayed on a wall, and updated at least weekly?

Is the time to make one piece, from start to finish, displayed on a wall, and updated daily?

4.6 Degree of "lean-ness"

In a factory, certain physical laws cannot be ignored. For example, Little's law: cycle time = work-inprocess / production speed at the bottleneck.
So, if you see a lot of inventory between each production step, production tends to be messy and to spread
over several weeks. More inventory lying around means longer manufacturing cycles.
5. Social compliance
5.1 Fire prevention

Are there enough fire extinguishers (in workshops, dormitories)? Are they accessible, and up to
date?

Are there enough emergency exits? Is it possible to lock them? Are they used as storage areas?

5.2 Worker protection

Do workers have appropriate personal protective equipment (gloves, masks, glasses, safety boots)?

Are there enough first-aid kits? Are they available and full?

5.3 Environmental policy

Does production generate a lot of waste? Is this waste treated?

Has the factory invested in energy-efficient equipment?

5.4 Working hours

Does the factory respect Chinese law of 44 hours a week with maximum overtime of 3 hours a day?

Important notes
Less than 1 percent of Chinese factories respect this law. And, though it is illegal, it is not unethical per se,
since most workers insist to work longer hours and earn more money.
If you see that operators get paid by the piece, you can assume the law is not followed, whatever managers
tell you and whatever papers they show you.
5.5 Child labor

Look at the list of employees, and check if all are at least 16 years old.

Select 2 young employees at random, and ask to see their ID cards.

5.6 Other

Labor contracts: Ask to see the labor contracts of 2 workers selected at random. Chinese law
requires each employee to sign a labor contract.

Management-worker relations: Do the operators get nervous when you watch them?

6. Engineering capabilities

What is the number of designers? Designers who can read and write English?

What is the number of engineers? Engineers solely dedicated to new developments? Engineers
solely dedicated to new developments who can read & write English?

What software do they use?

Ask for examples of complex new product developments they successfully completed recently, in
collaboration with overseas customers.

Ask questions about the IP rights of these new developments. Does the supplier understand that
they cannot sell these products to other customers?