14 Ultimate Ways To Run Background Checks For Chemical Suppliers
Above is the most thorough background checklist for all chemical suppliers in China. You want to make sure your supplier is reliable, please read on. We will break down each point one by one below.
1. Business License
Any company should get their business license to do business. In this basic license, you can see a lot of useful info, the address, starting year, the legal representative, the registered capital, etc. If your supplier doesn’t have a business license, think twice before you work with them.
2. Registered and Paid-in capitial
You can see the registered capital amount on the business license, but what you can’t see is the real-paid capital. Registered capital doesn’t mean everything, the real deal is registered capital is fully fulfilled. For example, if one company is registered by 10 million CNY, the paid-in capital is only 0.001 million, something is definitely not right.
3. Founded year
The earlier the company was founded, the more reliable it is. There are tons of companies closed for bankruptcy every year. The survival rate of a-five-year-old company is 7% for all enteprises in China. If one company can survive fierce market competition for many years, at least you have the company name you can ask around. If the company is too new, very few people in the same trade know them.
4. Company size
By company size we mean the suppliers’ office area, the number of people working there, whether they have their own office bullding. Though it doesn’t mean they are trustworthy, at least to have their own building is better than lease one office of others, right?
5. Insured Staff Number
Since you see the number of workers in the office and workshops, how many of them have social inssurance? Remember The number of inssured staff are regular employee number, not the number you see at your first sight. If your supplier’s website says they have 1000 employees, but their inssured staff number is only 400, you may want to pay more attention.
6. Current suppliers
It brings you no harm to ask your suppliers about their suppliers.Check if they have stable supply chain, what contigency plans they have in case their main supplier can not deliver. This is very important. If they are sourcing from trust-worthy manufacturers you know, they are more reliable.
7. Current customers
If your supplier is already working with many customers in your country, it doesn’t hurt for you to ask around if their customers are satisfied with them right? If they don’t have any in your own country, what about customers from other countries that can vouch for them?
8. Yearly Turnovers
This is something not all your suppliers want to share with you. If they are willing to share with you, see if you can get details for recent 5 years. Once you have this data, compare the data to see if the margin and turnover is getting bigger each year. If it is the other way, pay close attention.
9. Lawsuit/dispute/court notice
It is important to check if your suppliers are entangled in any lawsuits. If they are not, good. If they are, pay attention to their identity. Being the defendant or plaintiff is very different. If you see your suppliers are always sued for not paying their own suppliers, it is a red alert for your suppliers’ credibility. If your suppliers have many lawsuits against them from their former employees due to work injury etc, it means your suppliers’ relations with their employees are in a tension. The tension won’t be a good thing to maintain a stable production supply.
10. Credibility records
If you supplier is on the blacklist of poor credibility, you better not work with them.
11. Equity relationships
If your supplier is wholly-owned by very famous or big companies, it means they have a nice background, their mother company vouches for them.
12. Trade marks registered
If your suppliers have very famous trade marks registered, it means they have good social reputation. It is a bonus for their credibility.
13. Administrative punishment
Administrative punishments can be from Tax Bureau, Construction bureau, Safety bureau, or EPA(Environment Protection Agency). If your supplier was fined by Tax Bureau, it is a minus for their credibility. If your supplier was punished 1 or 2 times lightly by EPA, stay calm. At least it means your supplier is a real chemical manufacturer.
In the past few years, many chemical manufacturers, including well-known companies, were fined by EPA, some small chemical factories were even closed for not meeting EPA’s correction requirements.
Please note, 1~2 punishments of a small fine is not a big problem. If they were fined over 5~6 times, it is not good.
14. Credit deficiency records
If your supplier has Credit defciency records and they were subject to law enforcement of paying others, you better be careful if you still decide to work with them.
To sum it up, those 14 points about the chemical supplier are necessary for a basic company background check. In the next post, we will share how to run background checks for chemical manufacturers.