When sourcing products from companies in Southeast Asia, it can be quite challenging to determine if your supplier is a trading company or a factory. A trading company does not produce goods and they usually source various products from factories instead. Whereas, a factory cuts out the middleman and you go directly to the source.
Factories
People who are interested in importing certain products from Southeast Asia may prefer to cooperate with the factories directly. When you communicate with a factory, you may get better competitive prices and lead times are usually shorter. Communication can also be easier with a factory, especially if you are customising a certain product. You can make any necessary modifications as per your design and ensure they are developing a new model, so that you can stay ahead of the competition.
However, factories usually have a smaller assortment of products and a higher minimum order quantity (MOQ).
Trading companies
There are also many advantages for sourcing your products directly with trading companies. They have usually already built strong existing relationships with multiple factories and they often work with factories that are not large enough to have their own international sales department or export licenses and therefore, they could be more competitive than those you may find online. Trading companies are great for small quantity buyers. They often have product stock on hand and are able to offer lower quantity orders for smaller sized imports.
However, cooperation with a trading company may have longer lead times, as they need to negotiate with both the factory and the importer. Some small trading companies are known for not being reliable and can disappear after you place an order and make payment. As there are many different trading companies, it can be difficult to distinguish between them.
Comparison – trading companies vs. factories
| Strengths | Weaknesses | |
| Factories | Lower prices Shorter lead times Product customisation | Less variety of products Higher MOQ |
| Trading companies | More variety of products Less MOQ | Higher prices Longer lead times |
Audits
Our factory and supplier audits provide you with a detailed analysis of the supplier you have chosen. We look at their individual business model, their strengths and weaknesses and ultimately determine the reliability of them as a company.
The major checklists that should be considered when searching for manufacturers and trading companies are listed below;
Supplier audit checkpoints:
- Company legality information
- Bank information
- Human resources
- Exportation capabilities
- Order management skills
Factory audit checkpoints:
- Background of the manufacturer
- Manpower
- Production capabilities
- The reliability of the machines, facilities and equipment
- Manufacturing processes and production lines
- Quality checking, testing and inspections
- Management capabilities
- Factory environment
Whether you choose to cooperate directly with a factory or a trading company, quality control should always be the key element whilst sourcing. Factory audits and supplier audits are a vital step during the quality control procedure.
- Your supplier should be audited to ensure the compliance to local laws and regulations.
- A third party inspection company will be responsible for quality and will inspect to acceptable quality levels (AQL) and ensure on-time shipments as well.
- Supplier risks and quality related costs can be reduced.
- Ensure an active communication between the importer and supplier, which is favourable for establishing a long-term and healthy business relationship.
About HQTS
With over 25 years of experience in quality assurance; HQTS is ready to help your business build a robust quality assurance process. Our many service locations are prepared to be your one-stop-shop for your inspection needs, Including, factory audits, production monitoring, pre-shipment and sorting inspections and everything in between. Contact us today to find out how we can help you navigate current quality control challenges.
