What should I do after I get a China supplier background check report?
Question
I just received a background investigation report on a China supplier, which contains dozens of pieces of information: industrial and commercial data, shareholder structure, judicial records, operating risk warnings, etc. To be honest, the amount of information is too much, and I don't know how to turn this content into specific purchasing decisions. Is there a method to determine which indicators are decisive and which are just references?
Answers (1)Write Your Answer ↓
It is a very common situation to get a report that is dozens of pages long and not know how to use it. I generally divide the content of a report into three levels:"one-vote veto items","key evaluation items", and "background reference items".
The "one-vote veto" means that if the supplier has this problem, it will never cooperate. For example: the company's status is revoked or cancelled; the company or legal representative is listed as a person subject to breach of trust and there are multiple enforcement cases; serious administrative penalties and illegal penalties occur. If these problems exist, the risk is extremely high, and if quality problems arise subsequently, the money may not be recovered.
The second level is "key evaluation items" that require comprehensive analysis and evaluation. If multiple key projects do not meet expectations, you will choose to abandon cooperation. I generally list the following items as key evaluation items: whether the number of social security contributors is too low, whether the paid-in capital is 0, whether the registered address is an office building or an industrial park (the registered address of intermediate traders is basically an office building, and the manufacturer is generally in an industrial park or a suburb), whether the company name and company address are frequently changed (high-risk behavior), the type and number of judicial cases (if most of them are defendants and are in arrears, cooperate cautiously)
The third level is the "background reference item", which is conducive to selecting outstanding candidates from multiple qualified suppliers. After receiving the background check report, I will focus on these: the number of bids participated in and won bids (which can reflect the activity and strength of the supplier), the number of administrative licenses (which can reflect the company's compliance and stability), the number of qualifications certificates, tax ratings, import and export credit registration and filing; the number of intellectual property rights (if a company has a steady growth in the number of various types of intellectual property rights, it is highly likely that it is a well-running company)
People Also Ask
If there is no problem with the supplier background report, can I directly place an order for cooperation?
It is not recommended to place large orders immediately. The report can only prove that the industrial and commercial information is in compliance and cannot confirm the true production capacity of the factory. It is best to arrange sample testing or on-site factory inspection before finalizing the order.
The investigation report found that the supplier had a record of breach of trust. Can we continue to cooperate?
It depends on the type and severity of breach of trust. If it is a small dispute and has been closed, it can be evaluated carefully; if it is a large amount of arrears and is enforced, it is recommended to change the supplier directly, which is too risky.
After receiving the supplier due diligence report, do you need to review it regularly?
Regular review is needed and it is recommended to check once a year. The business status of the company will change, and new lawsuits or business abnormalities can be discovered early to avoid later payment losses.