FinancialWeek

Factors to consider include the source of the manufacturer’s supplies. “If they’re putting wheels on a product, they’re getting the wheels from someone,” Mr. Schoem said. “I want to know who their vendors are, and I want to put it in the contract that they can’t change vendors without getting my okay.”

Companies should test products to be sure they meet specifications, and Mr. Schoem recommended that testing occur at several points in the manufacturing process, including testing components before the product is assembled and testing the final product. Even if the components checked out, the manufacturer could have run out and ended up purchasing similar, but not identical, replacements, he said. “If the end product isn’t tested at least randomly or in some statistically significant way, how do you know what the vendor has done?” Mr. Schoem recommended that companies use independent testing laboratories and noted that a number of U.S. and European companies have operations in China.

-- Alan Schoem