Sourcing is really important for businesses as it affects the business success and profits. But it can turn sour and risky for foreign buyers, especially when manufacturing requirements are not respected, production is delayed or even worthy products are not in good quality.
To avoid these financial risks, a new way is becoming popular: organizing factory tours. These tours help foreigners who are looking to work with Vietnam manufacturers understand how things are made, so they can make better decisions.
This article talks about sourcing problems, how factory tours help, and how to make good money choices in a changing global market.
All you need to know about Financial Risks in Manufacturing
If you consider buying from a manufacturing country such as India, Vietnam or even China. It requires making sure the product specifications and requirements in terms of standards are well understood so the manufacturer and you are on the same page.
Yet, financial risks are often appearing that can hit your pricing predictions, timeline of production and final product result. Indeed, there are a couple of parameter you will need to monitor :
- Quality Issues: One of the primary pitfalls in sourcing is encountering quality problems with the procured goods or delivered services.
- Supply Chain Disruptions: Global supply chains are vulnerable to various disruptions, such as geopolitical conflicts or even pandemic.
- Communication Barriers: Miscommunication can result in misunderstandings, delays, and incorrect expectations. The different cultural and linguistic backgrounds between Europe or even the USA and Vietnam are present.
- Cost Overruns: While sourcing should lead to cost savings, it’s common for companies to experience inaccurate initial cost estimates due to unforeseen expenses or even fluctuating currency exchange rates.
Addressing these challenges proactively ensures competitiveness, stability, and growth in the global business landscape.
Leveraging the power of factory tours to avoid pitfalls
Factory tours hold significant importance within sourcing and supply chain management, which directly presents the operations of suppliers.
These tours provide foreign buyers with an opportunity to directly engage with suppliers, witness their production processes, and evaluate supply chain practices.
Benefits of Factory Tours in Vietnam
Thanks to a factory tour, you can have a closer look at how manufacturers work and what they can do, helping you gain a deep understanding and make smarter choices in shortlisting the right factory to partner with.
You are also able to proceed with an assessment of ethical practices, sustainability measures, and compliance with standards. Indeed, it plays a role in building a strong relationship from the beginning with Vietnamese suppliers or manufacturers. The face-to-face interaction nurtures trust, cooperation, and mutual understanding.
Regarding due diligence, factory tours contribute to identifying vulnerabilities in the production steps, helping you to anticipate further problems and work closely with the manufacturing partner to implement suitable actions.
Insights Offered by Factory Tours
By joining a factory tour, you get a chance to know factories’ facilities and discover the Vietnam landscape of manufacturing, quality control protocols, and the capacities of suppliers. Indeed, Vietnamese manufacturers are having some strength in specific product categories but lack machinery and experience in other industries.
How can such visits optimize your financial strategy ?
Manufacturer visits are mandatory to ensure a full control on your financial strategy as they provide on-the-ground insights.
By witnessing production processes directly, due diligence can be proceeded on the operational quality, standards, best practices inside the facilities for pre quality control.
It also provides a valuable advantage in negotiations. When clients know exactly the situation of the factory, have an insider look, they will be able to discuss terms, payment conditions and benefits to negotiate effectively.
Understand the role of sourcing agencies to help you navigate financial challenges for sourcing.
How to ensure a successful factory tour in Vietnam ?
Thoroughly research the industry before joining a factory tour to make sure this industry has a lot of key players. Proceed with an early sourcing research to understand the market, type of products and what are the key manufacturers in place.
People should understand the industry background in Vietnam, common production processes, and trends prior to organizing any factory visit in Vietnam. You can refer to some of the best sourcing agencies in Vietnam like MoveToAsia.com or SourcingAgentVietnam.com (also called SAV) providing such packages : sourcing research, factory introduction and all-inclusive tours to ensure a seamless and successful sourcing experience in Vietnam. Learn more about the factory tour package of the agency SAV.
Determine what specific insights or information you aim to gather and prepare a list of questions related to your objectives, ensuring a purposeful and productive visit. If you book an all-inclusive factory tour, the agency will coordinate logistics with the factories well in advance and confirm the tour date, duration, accompany of a translator, QC if needed and any specific requirements.
Before booking a factory tour, proceed to a comparison of the sourcing agencies offering such manufacturer visits by considering the reviews or testimonials of clients to ensure the quality and expectations of the tour in your business’s strategy and development.
In general, these factory tours are a crucial asset for sourcing and manufacturing enhancement. They provide insights into supplier operations, aiding in risk assessment and informed decision-making. They also promote transparency as you will be avoiding middle men or intermediates, help you build relationships, and optimize your supply chain efficiency.