As a small business looking for high-quality Chinese products, you immediately consider the main characteristic of a good manufacturer is their output capability. Most people who are looking to source products independently and without in-country assistance will consider this and nothing else when looking into particular manufacturers. There is an inherent bias in using this as the single metric of evaluation, but it can be satisfactory in determining the manufacturing capacity within the supply chain. It is important to realize the manufacturing capacity is only one of six indicators Sourcing Nova and its purchasing agents use for making a decision on a particular manufacturer of your selected products.
It is important to recognize that the term manufacturing capacity is vague as it relates to product sourcing. It is possible for a manufacturer to increase production artificially over a short term with new equipment, labor arrangement or having labor work overtime. None of these are sustainable over a long period.
If this is the only metric we adopt for your product manufacturer, then we lose focus on our plan for you and your business, leading to incorrect conclusions about the products. Our purchasing agents use a standard method of comprehensive evaluation when looking at a potential manufacturer. Specifically, they are looking at three particular criteria: the production capacity as a whole, production equipment and human resources. Evaluating these three objectively provides an accurate capacity assessment over a period of time instead of a short term solution.
Production capacity of the manufacturer must take into account the specifics of the product itself. Each product manufactured in China has different raw materials, production situation and labor force – three variables that are very hard to measure.
As an example, some manufacturers may use a five day a week and two shifts a day schedule with raw materials within a relatively short distance from the factory. Other factories may use their monthly output of a set number of units, 5,000 as an example, to calculate their production capacity.
Why production capacity assessment matters
There are times when raw materials are in abundance, the logistics are solid and manufacturers can deliver within the previously agreed time. Smaller production factories may require extra time even with the factors all in place for the products. Sufficient production capacity is absolute, or the buyer will have empty shelves and out of stock notifications.
It should be noted that the production capacity can be effectively improved in the short term by working overtime or adding new equipment. But working overtime is an emergency method and is not sustainable. We need to make a more comprehensive assessment.
It is these repeated procurement requirements that a purchasing agent can use to determine capacity, but there are two other factors that must be considered. These include the current production capacity and the future capacity probability based on historical production. This means purchasing agents should take the following criteria into strong consideration before selecting a manufacturer for your products:
- The maximum production output per work cycle given standard circumstances.
- Whether or not the current production limit is accelerated or underloaded. Additionally, is the capacity reasonable, providing continuous output for established customers and can the manufacturer accept additional orders from new customers.
- Given this increased demand, can the manufacturer increase the production capacity to meet the needs of the new customers.
- Check the production capacity based on the proportion made for the manufacturer’s main customer base compared to the new customer’s requirements, and what the proportions will be for this new customer.
The equipment is an absolute requirement. The purchasing agent needs to be certain that the manufacturer’s current equipment will be adequate for the new customer. The purchasing agent will consider the customer’s raw material base, specifications of the specific product and technical requirements. This way, the purchasing agent will be assured the selected manufacturer will be able to meet the requirements of the customer. Additionally, the purchasing agent will evaluate the following:
Does the manufacturer have the appropriate machinery to make the desired products. The agent will also inquire what the contingency plans are in case of down time, and how the manufacturer will manage during this down time.
The purchasing agent will review the current machinery as well. Specifically checking to see how old the machines are, any software used to run the machines, are the machines well maintained with regular maintenance and if there is an issue, how will this affect the product delivery for the customer.
Are the machines safely laid out, and are there plans for accidents?
What is the manufacturer’s current management structure and system? Is there a direct chain of command between the labor and management?
A thorough review of the software systems used in production. Does the manufacturer have recent copies of CAD, computer-aided design, CAM, computer-aided manufacturing and FMS, flexible manufacturing systems? If these are older and out of date, are there plans for upgrades within a reasonable time frame?
Employee and labor standards
Does the manufacturer have regulations for health and safety of the employees? What are the plans in case of an employee accident.
Human resources is a vital part of the entire manufacturer’s structure, and quality human resources will protect the current and future states of the manufacturer. The purchasing agent should carefully review not only the factory’s machinery and software but also the human element – the labor. Specifically:
How many of the employees are new compared to the more experienced? What about the management? Are they also experienced within the industry, or are they new?
Appropriate use of labor
Are the employees strategically used and accounted for? Are there a number of idle and ill-placed employees and management?
The purchasing agent will carefully review the names, titles, amount and degree of education, work history and experience of the management team.
Does the manufacturer have training for management personnel and labor.
Manufacturer incentive programs
Does the manufacture have incentives and a spirit program in place for the labor? Are there rewards or incentives for quality and amount production? What about regular and punctual attendance?
Employee turnover and retention rates
The purchasing agent will look carefully at these two metrics. Does the manufacturer have an ample employee base, a solid retention and influx of applications? Are these in line with other manufacturers within the same industry?
Does the labor have a positive outlook on work and the company in general? Does the labor genuinely care about the customer and their specific needs?
Does the management have a positive corporate culture structure? Is there adequate attention given to and recognition of employees?
The indicators listed so far are standard and should be considered as fundamental for the manufacturing industry in China as a whole. The purchasing agent will also check and review the following:
This is a very simple standard metric. A factory of 10,000 square meters (108,000 square feet) has a better production capacity than a factory manufacturing similar products with a factory floor of 1,000 square meters (10,800 square feet).
As your sourcing agent performs checks in manufacturers, warehouses are equally important. Is the warehouse full of old and defective products stored up with the hope of reusing or recycling at some point? If so, this is an issue with quality management.
Undelivered products means there is less space for the products we will source on your behalf. Additionally, if the warehouse lacks forklifts and pallet moving equipment, there will be delays in shipping because of moving products around from one location to the other within the warehouse.
Lastly, is the warehouse tidy and in good shape? A busy warehouse may be cluttered but still neat. There should be no obvious issues with cleanliness, safety issues and potential hazards.
The manufacturer’s production capacity is exceptionally important to your success. If any of the above areas are lacking to any degree, the quality, quantity and safe shipment of your products can be compromised. This is why you can trust Sourcing Nova and our team of purchasing agents, as we have already visited and inspected a large number of manufacturers in various industrial clusters across China. We already have excellent manufacturers in mind for most products.
Is there a product you have in mind that we can help you source, produce and ship? Let us know in a comment below. We will be sure to get back to you in short order.