Adapted from Abby Jin's original field note on LinkedIn.
A large order can look attractive to a factory and still lose priority to another programme. Capacity decisions are also shaped by payment timing, cash-flow exposure, production risk, customer history and confidence that the buyer will follow through.
The order was large, but the payment profile mattered more
We found the supplier at a trade show. Its product quality and price were suitable, and the buyer's potential volume could have occupied roughly one-third of the factory's capacity. The unresolved issue was payment.
The buyer normally paid a 30% deposit and the remaining 70% against a copy of the bill of lading. The factory required full payment before shipment. After several discussions, both sides reached a staged proposal: the first four containers would be paid before shipment, while future orders could move to 30% deposit and 70% against the bill-of-lading copy.
The factory later said that an intermediary handling an ALDI-related order offered full payment before shipment, so it allocated the capacity elsewhere. To be precise, our understanding was that the order came through an intermediary; this was not presented as a direct relationship between the factory and ALDI. Client, supplier and product identities remain commercially confidential.
Order size did not compensate for the difference in payment security and short-term cash-flow exposure.
Understand the payment terms from the factory's side
A factory may need to buy materials, reserve labour, schedule equipment and reject other work before it receives the final balance. Payment timing therefore affects working capital and the factory's exposure if the buyer delays acceptance or shipment.
A newer buyer with demanding terms can represent more uncertainty than an existing channel offering faster payment. That does not make full prepayment automatically reasonable; it explains why a factory may value lower financial risk even when another order is larger.
- Material deposits and supplier credit required before production starts.
- Length of the production cycle and the amount of capacity reserved.
- Whether finished goods are customised and difficult to resell.
- Buyer history, forecast reliability and speed of approvals.
- The point at which title, shipping documents and payment are released.
Negotiate a path, not only a percentage
Payment terms are easier to discuss when both sides can see how risk changes over time. A first-order structure may be stricter while the factory learns whether the buyer approves promptly, pays as agreed and maintains a realistic forecast. Future terms can be tied to completed orders or other evidence of performance.
The staged proposal in this case followed that logic. It reduced the factory's initial exposure and created a defined route to the buyer's preferred terms. The proposal was commercially workable, but the factory ultimately received a lower-risk alternative for the same capacity.
- Clarify which costs the deposit must cover before production.
- Define inspection, document and shipment-release milestones.
- Put the future payment-term review in writing rather than relying on a general promise.
- Agree what performance or order history is required before terms change.
Treat capacity as something that must be confirmed
A quotation or positive factory meeting does not reserve a production slot. Buyers should confirm the required start date, material lead time, planned output, peak-season constraints and the commercial event that commits the factory to the schedule.
Where timing is critical, document the production window and the consequences of delayed buyer approvals or supplier delivery. Keep a qualified alternative until the first factory has formally accepted the order and key materials are secured.
- Ask what current orders already occupy the relevant line.
- Confirm which payment or document triggers material purchasing.
- Request a milestone plan that connects capacity, output and inspection.
- Do not promise delivery to your market before the production slot is confirmed.
Balance payment protection with supply access
The buyer needs protection against quality, delay and non-performance. The factory needs confidence that it will recover its production cost and receive payment on time. A sustainable agreement addresses both sides rather than treating every negotiation as a contest over deposit percentage.
If the parties cannot align, walking away may be safer than forcing an unstable order into production. The important point is to identify the gap early—before samples, launch dates and customer commitments depend on capacity that has not actually been secured.
Do not treat capacity as available until the specification, payment structure, production window and release controls have all been accepted in writing.