Detecting Unauthorized Subcontracting in Cross Border Supply Chains
Detect unauthorized subcontracting by reconciling raw material mass balance against electrical draw telemetry and conducting unannounced floor tooling audits.
Primary Facility Verification
Meaning
Supplier due diligence processes confirm that a manufacturing site possesses the necessary infrastructure and equipment to fulfill a specific contract. This primary facility verification prevents the practice of a licensed factory accepting an order and then secretly outsourcing the work to an unvetted workshop. Auditors visit the site to map the production flow and confirm that the machinery matches the requirements of the technical drawings.
Operational Capacity
Measurements of the available floor space and the number of active production lines determine the maximum output of the factory. During primary facility verification, the auditor reviews the power bills and water usage records to ensure they are consistent with the reported volume of work. This analysis identifies factories that are acting as fronts for other producers rather than performing the manufacturing themselves.
Compliance Check
Inspections of the business license and environmental permits ensure that the site is operating legally under local regulations. The primary facility verification includes a review of social insurance payments and safety certifications to mitigate the risk of a sudden government shutdown. Factories that fail to meet these basic legal requirements are often excluded from the supply chains of international brands to avoid reputational and legal risks.
Subcontracting Limit
Contractual clauses often prohibit the transfer of production to other sites without the express written consent of the buyer. This primary facility verification provides a baseline for ongoing monitoring to ensure that all goods are produced at the approved location. If an audit reveals that components are being brought in from an external source, the buyer may have the right to terminate the agreement and seek damages for breach of the quality control protocols.