Dear readers, hello again! Super good to be back from a week long holiday in China… Today, we’re gonna discuss about the suppliers subcontract.


Before we start, maybe some of you are wondering what suppliers’ subcontract is. Suppliers subcontract is an act done by suppliers, when they attain products that customers order from another suppliers. This usually happens because the deadlines from customer. But… It also can happen to cut costs and due to this reason, it will result an unfavorable condition for us, as a customer. It will affect the quality of the products (we call it quality disaster); we also don’t know whether the goods are manufactured by underage kids or maybe in prison (PR disaster); or that other supplier will learn to make your product and sell it to anybody (IP rights disaster). I strongly believe that you don’t want this to happen to you!

How to prevent it then?

1. Work with the right people

The fact that factory owner’s attitude is extremely important. Make sure that he has integrity in doing his business and won’t take any shortcuts.

2. Know the factory’s capacity regarding your type of product

Make sure that the factory or supplier that you are working with, is capable to manufacture and deliver the products that you need.

3. Don’t compress timelines in an unreasonable manner

Do not compress the production lead times (unless, you can show them how to plan and execute better). If you set a shipment date that can’t be pushed back and you hold production because some approvals are not finalized, you are placing the manufacturer in a position where they have to subcontract.

One useful tool is the production plan. You can request that your suppliers describe in an Excel file how many operators and how many machines will work on your order, for what daily output (if possible at the level of each process step), and for what ETD.

4. Challenge the reasons why they can’t produce faster

It’s an often case when the owner wants to buy the parts from his friends/family. The solution is to double or triple source the parts that have the longest order lead time. Similarly, a simple value stream map exercise can show where the bottlenecks are located in their production.


5. Qualify and develop backup suppliers

Make contact with another suppliers as a backup. This also good for you when you have a choice between 2 suppliers, and you can assess, which one of them will give you the best option.

6. Make use of legal tools

It is common to sign a contract that makes it forbidden to subcontract. If your contract is legally binding in China, and if some other customers don’t have such a contract, the manufacturer might think twice before subcontracting your order.


7. Monitor and enforce

The usage of inspections during production is extremely important for this case! Inspection during production will help you with:

  1. Checking quality and catching issues early
  2. Verifying that all production is taking place in approved facilities
8. Keep an eye on production inputs

A direct use of some suppliers is an opportunity to get information (through these sub-suppliers) on the rate of ordering and the delivery addresses. If you don’t want to manage your supply chain this way, you can do it easily with some labeling/packing materials.

Adopted from Quality Inspection

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