- April 26, 2020
- Posted by: AQI Service
- Categories: E-commerce Business, Product Sourcing
Having good relationships with suppliers means you can expect your supply chain to be effective and efficient. Finding a trustworthy supplier is the prerequisite of maintaining supplier relationship management. Checking and verifying the documents provided by a supplier is required to determine whether a supplier is reliable. There are several reasons why you should check the supplier background of all vendors before buying anything from them.
Supplier Background verification is hugely variable depending on the location, type of business, category of products, etc. Here are some ways to check, verify, validate your supplier given information.
1. Supplier Background Check: Business Documents
Transparency in legal documents of every company must be ensured and maintained periodically. Any manipulation inevitably entails some risk. As a buyer, you should verify the legality of your supplier at the beginning to avoid disruption to the supply chain in the middle.
Let’s discuss the type of documents and how you can scrutinize these papers.
A. Business License:
A business license is legal documents, issued by the authorized institution of local government, allowing individuals or companies to conduct a particular type of business in a specific region.
License is called proof of company existence as well as the capability to trade legally domestically or internationally. Thus, every Chinese supplier has a unique company registration number against their company name. The buyer must ask for this number and verify the registration number, visiting their local central government website, or with the help of any reliable third-party agency before making any deal.
You will find the following information in the license.
A.1 Registered Capital:
The maximum amount of money a company can sell to its shareholders. Generally, the more capital a company holds, the stronger its financial strength is. Nevertheless, It is just a monetary figure. Sometimes the actual capacity of a company differs from its registered capital. A considerable deviation entails some unexpected risks. So it is opined that checking documented figures as well as real data is wise.
A.2 Nature of Business:
The business license is a kind of definite statement that mentions the scope of business. Whether your supplier is a manufacturer or a trader, is clearly stated in the license. If your supplier is a manufacturer, you must check whether they are involved with the production or merely the assembly process. On the contrary, look at the ranges of products that must be written in the license if your supplier is a trader. Another way to sort out original manufacturers that traders are asking for ISO 9001 Certification because only manufacturers have this certificate.
ISO 9001 Scope
As an ISO 9001 certified organization, you will have implemented Quality Management System requirements for all areas of the business, including:
A.3 Value Added Tax (VAT) Number:
Every company has a valid Tax Identification Number issued by the government. If your supplier fails to show such a number, you can easily suspect their business integrity and keep yourself away from doing any business with them.
B. Banking Documents:
All companies usually operate their business against an individual bank account, by whether transactions are made. To keep your money safe, you must examine your supplier’s bank details before making the first transaction against your purchase. What should be checked in banking details? Here are the things you should remember:
B.1 Beneficiary Name:
The name of the Bank Account must be the company name. In case, any discrepancy between the company name and beneficiary name, please get in touch with your supplier and don’t make any payment until things are clarified legally.
B.2 Country Name:
Bank Address i.e., city, country, etc. usually matches with company’s location. Suppliers might have offshore bank accounts or even bank accounts in another country where the headquarters/principles are located.
C. Quality Management System Certificate:
A quality management system (QMS) consists of a set of policies and procedures that are required for standard operation within the organization. You hold the right to review your supplier’s QMS and all certificates that certify the quality of the product as well as the process of your supplier. ISO9001 is one of them.
D. Social Compliance and Environmental Certification:
There are certifications such as ISO 14001 that certify companies doing business following the guidelines set by world-recognized institutions.
2. Supplier Background Check: Product or Compliance Documents
Product compliance is a certainty that a product will meet the regulatory requirements necessary to be available on the market. Manufacturers or distributors must give assurance that their products are appropriately designed and also made in line with the relevant requirements. Following reports prove the authenticity of the supplier declaration.
A. Ingredient Test Report:
Check the lab test report of raw materials from which your supplier is producing the products.
B. Certificate of Analysis (COA):
Check the results in COA whether the level of all factors is within a satisfactory range or anything exceeds the normal range.
C. Product File:
Product catalog, brochure, drawings, etc. are familiar sources of the product’s description. And sellers usually describe products briefly so buyers can know the ins and outs of a particular item. Sometimes you can have an overview of how professional a company is by checking the representation of information about the product in their product brochure.
D. Safety Test Report
Buyers should require manufacturers to test the products for compliance with consumer product safety requirements. especially for electronics, electrical, and children’s products. Based on passing test results, the manufacturer must certify the consumer product as compliant with the applicable consumer product safety requirements in a written or electronic certificate. Certificates are required to accompany the applicable product or shipment of products covered by the certificate.
3. Supplier Background Check: References
Every company usually embed some names of renowned companies on their website as their customer. They advertise their customers’ positive comments on websites, brochures, etc. to catch new customers. Admittedly, it is an exciting source having insights into that company.
However, these references might not always be correct. As a result, it is always recommended to check the authenticity of these references before purchasing. Get in touch with a third-party agency that can come up with a valid recommendation that will guide you in proper supplier selection.
4. Supplier Background Check: Sample and Documents
Experts opine that purchasing from a new Asian supplier should be initiated from collecting samples of your desired product. Once the samples arrive, check the quality of it, run a trial production, and check the quality of outputs. Along with the samples, you might find essential documents by which you can get ideas about products as well as suppliers.
Finally, checking supplier background information is a must before you develop a relationship with any supplier. you should verify and test the documents and sample respectively by your experts or hire any third-party agency renowned worldwide.
Author: AQI Service as a professional quality control service company in China specialized to provide a complete range of quality inspection and testing certification services in China & Asia for global importers, buyers, retailers, and sellers.
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