Supplier Risk Management in Injection Molding: Material Fraud, Delivery Delays, and Contractual Failures
In corporate supply chain management, supplier-related risks have become an increasingly critical pain point. Some suppliers, driven by short-term profit, engage in material fraud, delivery delays, and other behaviors that jeopardize their clients’ interests and cause significant financial loss. For example, one company encountered a supplier who mixed recycled material into ABS+PC resin, directly violating contractual agreements. Another company faced delivery delays from 30 to 45 days, and the supplier even threatened to halt production unless payment was released. In an even more severe case, a supplier secretly added 20% recycled material, causing the final product to fail compliance testing due to excess heavy metals, resulting in a shipment seizure in Europe and losses exceeding 2 million RMB. These insights are drawn from cases encountered by Shibang Plastic Products in the injection molding industry.
The Hidden Risks and Consequences of Material Fraud: From Recycled Resin to 2 Million RMB Loss
Material fraud is highly concealed and difficult to detect, making it a common tactic among opportunistic suppliers. In injection molding projects, some suppliers disguise recycled resin as virgin material, making it nearly indistinguishable from virgin material by visual inspection alone. In one case, despite a contractual promise to use pure ABS+PC virgin resin, third-party testing revealed that 20% recycled material had been mixed into the batch.
The consequences extend far beyond cost discrepancies — material fraud directly threatens product compliance and corporate reputation. In the above example, the recycled content introduced excessive heavy metals, causing the exported products to fail EU compliance testing and be detained by customs. Beyond the 2 million RMB direct loss, the company also suffered a severe trust crisis with its customers. Worse still, the supplier attempted to evade responsibility, leaving the buyer with no legal recourse and further magnifying the risk impact.
The Chain Reaction of Poor Supplier Performance: Delivery Delays and Aggressive Behavior
Beyond material fraud, insufficient supplier fulfillment capability and poor cooperation attitude often trigger chain-reaction risks. During a production scheduling meeting, a purchasing team reported: “The supplier suddenly said the delivery will be delayed by 15 days — the entire production line now has to wait.” In one case, a supplier extended the promised delivery time from 30 to 45 days, disrupting production and even threatening to halt operations unless payment was made earlier. Such behavior reflects weaknesses in the buyer’s supplier selection process — inadequate evaluation of historical delivery performance, insufficient capacity verification, and insufficient ongoing process supervision.
More concerning, delivery issues and material fraud often coexist. The above supplier exhibited all three problems simultaneously: delivery delay, recycled material usage, and aggressive communication — indicating systemic management disorder and a lack of integrity.
Practical Framework: A “Before–During–After” Full-Cycle Supplier Risk Prevention System
To effectively control supplier risk, companies should establish a full-cycle defense mechanism across three phases: pre-qualification, in-process control, and post-incident management. A closed-loop system combining third-party testing, milestone payment control, and dynamic risk alerts significantly reduces risk exposure.
1. Pre-qualification: Strengthen the Supplier Entry Gate
During the supplier selection phase, companies must evaluate supplier capability through historical on-time delivery rates, capacity load analysis, past customer feedback, and other multidimensional data. This helps avoid selecting suppliers with strong verbal promises but weak actual fulfillment.
2. In-process Control: Dual Mechanisms + Dynamic Early Warning
Third-Party Material Testing: Upon receiving raw materials, companies should immediately commission third-party labs (e.g., SGS, CTI) to perform resin composition analysis, heavy metal testing, and other compliance checks as required by product standards. The contract must specify test items, required purity levels (e.g., ABS+PC virgin purity requirements), and clearly state that the supplier bears testing costs. Production should only proceed after test results are confirmed as compliant.
Milestone-Based Payment: Link supplier payments to performance milestones. Common industry reference schemes include:
- Mold Payment Structure: 50% deposit → 40% after T1 trial → 10% after sample approval.
- “55 Model”: 50% deposit → 50% after production passes process inspection and is ready to ship.
Dynamic Early Warning Mechanism: Companies can set early-warning indicators based on production rhythms. Example practices include: delivery delay warning thresholds (e.g., X days), weekly production progress verification, and per-batch material audits for critical indicators such as heavy metal content. If fluctuations exceed thresholds (e.g., Y%), incoming inspections must be paused to prevent cumulative risk.
3. Post-Incident Response: Documentation and Risk Review
When issues arise, companies must retain evidence such as test reports and communication records, clearly identify responsibility, and conduct post-incident review. Lessons learned should be incorporated into updated supplier evaluation standards to prevent repeated mistakes.
Conclusion
The core of supplier risk prevention is establishing rules that constrain behavior. Companies must define material testing standards and milestone payment arrangements in contracts, and use a three-layer control mechanism — testing, payment, and early-warning — to minimize risks such as material fraud and delivery delays. This shifts enterprises from passive reaction to proactive risk prevention.
- Contracts must specify approved third-party testing providers (e.g., SGS, CTI).
- Review supplier on-time delivery rate monthly; if below 80%, initiate reassessment.
- Retain testing reports for at least one year to ensure traceability.
