A visit to a vendor with a lot of red flags

I have been working with a bag vendor over the past several months on a project for a customer of mine.  This is a vendor I met back in May at the Canton Fair.  When I first met them they told me that they owned the FTY where the bags were made and I have been working under that assumption since May.  There were doubts in my mind but as I have not been able to visit them until recently I gave them the benefit of the doubt. “Trust but verify” as Ronald Regan once said about the USSR.  The same can be said when doing business in China. 

 The samples this vendor (hereafter referred to as Vendor A) has done for my customer have been approved by her at prices that are acceptable to her. My customer was prepared to give Vendor A an order but I suggested that I first go have a look at their office and factory when I was in China for the Canton Fair.  And that is what I did accordingly.  Unfortunately, what I found was not as Vendor A had led me to believe.  I first visited the Vendor A’s office on the outskirts of Guangzhou. The office was much smaller than I had expected based on their large and very sleek booth at the Canton Fair. There were only 4-5 employees and the name of the company was not even stenciled on the door – as it was on several other doors on the same floor. This was strange and I realized either it was a short-term rental or Vendor A did not want to pay for the stencil ( indicating cost-sensitivity which would not be good for my customer). RED FLAG # 1  While in the office we discussed a sample that Vendor A was working on for my customer. My customer requires YKK zippers for this bag because she has had problems with the zippers breaking on her bags. Her bags retail at an exclusive price point that demands a quality zipper. Vendor A showed me a YKK zipper and told me it would be 22 RMB. I was a little questioning especially because he showed me the zipper only and not the “YKK” puller. RED FLAG # 2 

After the office visit we went to lunch and then I was taken to two factories, a big factory and a small factory, The big factory was used for large QTY orders and the small factory for small QTY orders. This is SOP in China manufacturing. Companies that do not own their own factories or have just a small factory will often contract with a big factory for big orders. This is a very practical arrangement because big factories do not want small orders and small factories do not have the capacity for large orders. I had suspicions as soon as we walked in the gate of the small factory and I met “Ms. Yang.”  She was introduced to me as the FTY manager but when I asked her for a name card – to see if the name of  Vendor A was on it – she said she did not have one, adding that she had used them all up.  People just don’t get caught without business cards in China, especially “managers” of factories.  It simply does not happen. RED FLAG # 3.   During my visit Vendor A and I sat down with Ms. Yang to discuss the design on some bags and Ms. Yang started to discuss the YKK  zipper with Vendor A, unaware that we had just discussed it in his office. She told him (in Mandarin) that the zipper had cost her 8 RMB but she was not sure if it was a real YKK  zipper or not ! RED FLAG # 4. Vendor A was visibly embarrassed by this and sought to move the discussion in another direction.  On my way out I took a photo of the factory’s business license and when I looked at it closely while we were in the car heading to the second factory I noticed that Ms. Yangs name was listed as the principle investor/owner of the FTY. RED FLAG # 5.

When we arrived at the big FTY I was impressed with how large and how busy it was. There were bags in production in every workshop and I did not see an idle sewing machine ( there must have been 100 machines in the building I was in). The sample room resembled a bee hive. Since there were a lot of orders on the factory floor, I asked Vendor A to tell me about some of the orders, including customers and PO QTYs. He didn’t seem able to say anything at all. RED FLAG # 6 I then asked him to show me some of his company hang tags as I know well that FTYs usually have lots of hang tags lying around. He explained that there were no Vendor A tags or labels because all of the bags were being made for customers using their own hangtags. Yet all Vendor A had to do was to go to the sample room to get a tag (because factories of course mark samples with their own tags) RED FLAG # 7. I also took pics of a production board and all the “customers” listed were Chinese. RED FLAG # 8. I thought this was all very strange and at that point I had pretty much decided that Vendor A did not, in fact, own this FTY, or the other FTY we had visited. I should also mention that while we were on-site there were absolutely no pleasantries exchanged between Vendor A and workers or factory personnel. It was as if we were not even visible.  This seemed highly unnatural. RED FLAG # 9. If he did indeed own the FTY certainly Vendor A would have checked up on some orders or introduced me to some key staff members. When I asked to meet the manager of the FTY I was told that it being a Saturday, he was not there. RED FLAG # 10.

Later that evening Vendor A dropped me off at my hotel. I went upstairs to collect my notes discouraged that I would not have good news for my customer but glad that I had done DD for her and perhaps saved her thousands of dollars. The moral of the story: never give a vendor an order unless you have visited them first.

Back to the drawing board on this project.


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