In this Pro-Series episode we invited Heather Williams - Founder & CEO of Sourcing Playground. She's an ex buyer turned tech-founder looking to reduce fashion brands' social & environmental impact.
Nov 16 2019
After a long, careful search, you have finally found a new supplier who is in line with your requirements in terms of product quality, pricing, location and is seemingly easy to work with. Great! That's a solid initial step, and while it's safe to say that the majority of suppliers are honest, it's still important to conduct a detailed inspection to ensure you're not working with the exception.
This post will cover-
- → Thorough research on potential suppliers
- → Audit reports / Certification
- → References
- → Payment terms
- → Inspections
Be sure to follow these 5 tips when vetting your suppliers:
1. Conduct thorough research on potential suppliers
Don't get into uncomfortable situations because you missed important information before you decided to work with them. When a potential supplier contacts you, take the time to dig a little deeper and cross these items of your checklist:
✔️ Examine their website in detail.
✔️ Does it feature products similar to yours?
✔️ Watch out for bad English.
✔️ If you can identify an address, check if it fits the supplier's information. For example, a 500-machine factory, will not have an address like "Room 501, XYZ Building."
✔️ Do they have a working phone number? Call to verify it's real.
✔️ Look them up on Google.
Check if they are a member of a B2B website and the date they joined. Most websites usually provide this information. We're not suggesting to avoid suppliers that have been members for a short time but do check that there is a logical correlation between the time the supplier has been a member and its legitimacy.
2. Audit reports / Certification.
Many buyers, especially the large brands and retailers, will request that their new suppliers to go through an onsite audit to ensure they can meet the buyer's requirements. Usually, an audit will check and verify the company information, product, employee information and check that they match what the buyer is looking for.
Ask your supplier if they have been audited before, and if you can check the audit reports. A serious supplier will make these available to you. However, if it's the case that another brand has paid for this report, the supplier might not be able to share the information for confidentiality reasons.
Concerning audit reports, please note:
• Not all suppliers have been audited by a buyer before. So, a lack of reports is not necessarily a red flag. These audits are usually only done by larger buyers.
• If the supplier does send you an audit report, check that the name on the report matches the supplier. This includes address, telephone number, website, etc. It's not uncommon for some less ethical suppliers to "borrow" a report from a friend at another factory. We have come across these cases before.
• If the factory name on the audit is different from the supplier you're dealing with, this isn't always a red flag. Suppliers do often work with other companies. However, do request a signed letter (on letter headed paper) from the factory confirming that they work with your supplier. There shouldn't be any issues for your supplier to produce this.
• In some cases, the audit report might show discrepancies, such as addresses. Take the date of the report into account. The supplier might have moved premises. Again, do not be afraid to question something if it doesn't add up or you are unsure.
Some type of industry / internationally recognized Certification is also a good sign when considering a supplier.
Some important certifications include: GOTS WRAP OEKO-TEX BCI
Ask your supplier if they are certified by any of these agencies. It's crucial to verify the Certification with the respective agency.
You can look up the supplier's certification on Sourcing Playground, where we check and verify suppliers to make sure they have up to date, valid Certification.
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Ask your supplier for references from previous or current buyers. Usually, suppliers do not like to share this type of information for confidentiality reasons and they are afraid of negative references but don't hesitate to try.
In truth, most orders (even the good ones) will have some kind of problem, whether it's big or small. The supplier knows that if you ask a previous or current buyer, it's likely that they will dish out if they experienced any issues.
It's always a good idea to ask for references, but not necessarily a red flag if the supplier refuses to provide them, or claims that this information is confidential.
4. Payment terms.
One of the best ways you can protect yourself from a scam is by adhering to clear payment terms. These should state that the supplier does not get paid until the job is complete. One of the safest options here is a Letter of Credit.
Some suppliers do not like using letters of credit for a number of reasons:
• The supplier does not receive any payments until the conditions of the LC (letter of credit) are fulfilled.
• There are increased costs associated with LCs, but these are relatively negligible.
• LC's have a definite delivery date, as well as an expiry date.
• Legitimate suppliers will often have reasons for not accepting LCs - However, these can be negotiated.
• If the supplier states they will not accept the increased bank charges, you can offer to accept half the cost.
• If the supplier is concerned, they will not meet the delivery date stated in the LC, you can offer to extend this. Etc.
A scammer will never accept an LC under any circumstance. They will demand 100% payment upfront.
Never accept this, even for a verified, legitimate supplier, or a high deposit, such as 50%.
The safest payment methods are Letters of Credit or a reputable escrow service.
Another way to verify that your supplier is legitimate is to use a third-party inspection agency, such as Intertek or SGS. For a fee they will send an inspector to your supplier's premises to check that everything is in order.
• They check business licenses, whether the supplier meets the required legal requirements of the country/region, any social compliance certificates and other certifications.
• They will then present the findings in a report that includes photos. The report will generally indicate where the supplier meets the above-mentioned requirements and where they do not.
• The report will not make any recommendations. At the end of the day you still have to decide if you will work with the supplier.
In our experience, scamming is the exception to the rule. The vast majority of suppliers want to engage in an honest, mutually beneficial business.
To connect with verified clothing manufacturers, check out Sourcing Playground.
The online sourcing platform for brands to connect with verified & more sustainable manufacturers.
About the author
Heather Williams is the Founder & CEO of Sourcing Playground. She's an ex buyer turned tech-founder looking to reduce fashion brands' social & environmental impact.
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