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How to perform Due Diligence on Manufacturers

Executing Comprehensive Audits on Both Current & Potential Factories

Presented by:

Greg Chen-Lepkoff, CJ Christenen and Chris Oslebo

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Importance of Manufacturer Relationships

Strong relationships foster collaboration

and long-term success.

The Manufacturer's Role in Quality

A reliable manufacturer ensures

quality and consistency.

Main Goal of Manufacturer Selection

Identify legitimate factories to avoid

middleman pitfalls.

Risks of Inadequate Vetting Processes

Poor vetting can lead to hidden

costs and issues.

Why Due Diligence Matters

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To effectively identify potential manufacturers, utilize reputable sourcing platforms such as Alibaba, 1688, Made-in-China, DHgate, and AliExpress. Cast a wide net to explore diverse suppliers, ensuring to inquire about their product specialization and years of experience in the industry.

Initial Research

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Factories

Factories typically provide immediate, detailed answers regarding materials and production processes, demonstrating a higher level of expertise and transparency. This direct communication is essential for establishing trust and understanding capabilities early in the evaluation process.

Trading Companies

Trading companies often deliver delayed or vague responses, lacking specific details about their production capabilities. This can indicate a lack of direct involvement with manufacturing, making it crucial to ask targeted questions to filter them out.

Distinguishing Factories

from Trading Companies

Identifying Authentic Manufacturers Effectively

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Assessing service quality and timely communication

Quick and clear responses indicate strong service quality.

Understanding product knowledge

In-depth knowledge reflects expertise and competence in production.

Importance of

certifications

Valid certifications ensure compliance with industry standards and regulations.

Examining

factory size

Larger factories typically have greater production capacity and efficiency.

Analyzing communication efficiency

Effective communication suggests reliability and professionalism in partnerships.

Evaluating Responses

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ADVANTAGES

DISADVANTAGES

Quality control can be difficult to manage on your own

Specialize in a few products vs Offering a wide range

Better to work with a group of factories vs just one factory

Low volume ordering makes you less of a priority

Communication challenges, especially with small and medium size factories.

Less supply chain transparency

They only offer new products that they plan to produce, it may not be relevant to the brand needs

Example: IPL Hair Removal Factory also produces Hair Dryers. Now their sending new hair dryers they’re designing to an IPL hair removal brand.

Direct source

Lower price higher MOQs

Collaborate on product creation or product customization

Different size factories have different advantages:

Small

Eager for business

Medium

Better pricing and resources

Large

Extensive resources
High capcity

www.kanarysolutions.com

FACTORIES

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Compliance & Certifications

Compliance with industry standards is essential to avoid legal issues. Proper certifications prevent customs delays and platform bans, ensuring a smoother manufacturing process and product reliability.

Why They Are Crucial for Success

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Engineering & Production

Evaluate the manufacturer’s engineering team for their ability to provide custom solutions and effectively troubleshoot production issues, ensuring transparency and communication throughout the manufacturing process.

Assessing Customization and Troubleshooting Skills

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Test Quality

Assess the quality of materials through rigorous testing.

Labeled Samples

Request all samples to be clearly labeled and organized.

Organized Samples

Ensure samples are presented in a systematic manner.

Sourcing Company

Utilize a sourcing company for verified inspections.

Compare Results

Analyze results across different factories for consistency.

Performance Metrics

Evaluate samples based on performance and durability tests.

A Simple Evaluation Process

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Detailed

Solutions

Evaluate responses for clarity and effectiveness.

Product Defect Scenarios

Present hypothetical issues for evaluation and insight.

Proactive Manufacturers

Identify manufacturers who offer comprehensive solutions.

Testing Solutions

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Time

Outsourcing sourcing saves valuable time, allowing brands to focus on core business functions.

Inspection

Professional inspections maintain product quality and compliance, reducing risks in the supply chain.

Evaluation

It ensures a structured sample evaluation process, leading to more informed decision-making.

Compliance

Ensuring compliance verification helps brands avoid legal issues and customs delays effectively.

Outsourcing

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When assessing potential manufacturers, be vigilant for vague answers about production processes. This can indicate a lack of transparency and may lead to quality control issues. Identifying these red flags early can save time and resources down the line.

Vague

Assurances

Missing

Certifications

Slow

Responses

Inflexibility in

Problem Solving

Red Flags

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Implement structured sample testing for consistent quality

Testing samples ensures reliability and meets your standards.

Contact multiple suppliers for better negotiation results

Engaging various suppliers improves pricing and options.

Verify certifications to ensure compliance and quality

Proper certifications help avoid legal and product issues.

Evaluate capabilities for efficient production solutions

Strong engineering teams can enhance product quality and designs.

Key Takeaways