Reconcile materials supplied to a Chinese factory
Keep a batch ledger linking checked receipts, production issues, returns, scrap and remaining stock to finished goods. Reconcile physical quantities before agreeing loss charges or closing the order, and investigate unexplained differences. Local checks can be coordinated by Cambridge China Bridge.
Agree the ledger before sending materials
Agree material codes, descriptions, revisions, batch references and units of measurement. Record who supplied each material and where it will be stored. Keep buyer-supplied stock identifiable and agree who may authorise production issues, transfers, substitutions and disposal. For responsibilities between suppliers and the assembler, use managing multiple Chinese factories.
Set a reconciliation cut-off and appoint someone at the factory to maintain the ledger. Agree expected consumption from the approved BOM or process sheet, separating material incorporated into products from setup losses, testing and other consumption. Agree how excess losses will be investigated and charged before production starts.
Confirm what the factory actually receives
Match each delivery to the dispatch record, then count, weigh or measure the material using the agreed method. Record actual quantity, batch, condition and storage location. For weight-based records, distinguish material weight from packaging weight. Photograph damaged packaging and discrepancies, and obtain a receipt acknowledged by the factory.
Separate received quantity from accepted quantity. Identify rejected or quarantined material and record whether it will be returned, replaced or released after checks. Keep delivery shortages visible rather than recording the supplier's dispatch quantity as factory stock. Use supplier batch traceability for the wider batch-record arrangements.
Record issues, returns and scrap as they happen
For each production issue, record the material batch, quantity, work order, date and receiving production area. Record unused material returned to stores separately. Transfers to another factory or subcontractor need matching dispatch and receipt records so stock does not disappear between locations.
Separate recoverable offcuts, reusable rejects, irrecoverable scrap and material consumed by the process. Record quantity, cause, work order and supporting evidence. Agree who approves disposal or sale and how any scrap proceeds are credited. Do not accept a general wastage allowance as proof of actual loss; manufacturing yield versus unit price explains the related buying decision.
Reconcile stock and finished goods separately
At the cut-off, pause movements or record them separately while stock is counted. Opening stock plus actual receipts should reconcile to closing raw stock, material in unfinished goods, material in finished goods, recorded consumption or scrap, and outward returns or transfers. Use mutually exclusive categories. Quarantined stock still on site belongs in closing stock, with its status shown.
For each work order, subtract returns to stores from production issues, then compare net issues with material accounted for in accepted goods, rejected goods, unfinished work and recorded losses. Calculate expected material in finished goods using the approved BOM and actual output, in consistent units. Record rejected output before splitting its material into recoverable stock or scrap, so it is not counted again.
Show the unexplained difference explicitly. Check unit conversions, duplicate issues, unrecorded returns, batch mixing, changed specifications and movements around the cut-off. Match accepted output to goods shipped and goods still held at the factory. Require evidence and an agreed correction rather than adjusting scrap to force the ledger to balance.
Close balances and hand over the evidence
Obtain a closing statement with counted balances, locations, condition, photographs and unresolved differences. Agree whether unused stock is held for another order, returned, transferred or disposed of. Record the instruction and subsequent evidence. Keep scrap credits, replacement costs and disputed losses separate from processing charges, and follow the agreed payment terms.
Give your customs agent the material purchase records and allocation to the imported batches. HMRC guidance says materials supplied free or at reduced cost, incorporated in imported goods or consumed in their production, are included in customs valuation where their value is not already included. Ask the agent to check the allocation against what goes into customs value. Cambridge China Bridge's staff in China can coordinate receipt checks, stock counts and discrepancy follow-up.
Frequently asked questions
How do I prove a Chinese factory received my materials?
Obtain an acknowledged receipt showing measured quantity, batch, condition and location. Compare it with dispatch records and retain photographs and discrepancy notes.
How much factory scrap should I accept?
Agree expected losses for the material and process before production. Ask for measured scrap and cause records, then investigate departures from the agreed basis.
How do I reconcile materials with finished goods?
Compare net production issues with BOM-based material in actual output, unfinished work and recorded losses. Reconcile factory stock separately and show unexplained differences.
What happens to unused materials at the factory?
Count and identify the balance, then agree storage for another order, return, transfer or disposal. Keep written instructions and evidence of the completed movement.