The Factory That Wasn’t There
I was standing in a factory in Pinghu, southeastern China, reviewing a brand’s “improvement plan” when something didn’t add up.
The facility was impressive. All five mandatory insurances, a rarity in the region. Proper PPE distributed and worn. Fire exits clearly marked. Worker contracts in order. This was the kind of place every brand dreams of showing in its audit report.
But as I walked the production floor, something felt off. The machinery was running, but the output didn’t match the order volumes I knew this brand was placing. When I asked about production capacity and line output—basic calculations any experienced buyer should know—the factory manager grew uncomfortable.
Eventually, he admitted the truth: only 20% of production actually happened in this facility. The other 80% subcontracted to small, school-like buildings scattered across the countryside. Everything returned here for final packing, the part the brand’s auditors would see.
It was a show factory.
And it was working exactly as designed.
When I insisted on visiting the real production sites, the manager hesitated. “It’s a three-hour drive,” he said, hoping I wouldn’t go.
I went.
What I found wasn’t pretty: a cramped workshop with poor ventilation, no safety equipment, and a child sitting beside her mother at a sewing machine.
This wasn’t an anomaly. It was a business model.
Many brands were offered a choice: pay full price for production in the compliant facility, or accept a lower price with subcontracting, still with final packing in the clean, audited factory. Most chose the discount.
That moment changed how I think about corporate sustainability. You can’t fix what you can’t see.
The Commercial Cost of Invisibility
Not knowing your supply chain isn’t just an ethics problem. It’s a business risk.
When you don’t know where your products are actually made, you lose control over:
Business continuity.
When your phantom supplier can’t deliver, you have no backup plan. Split orders across hidden facilities and you lose visibility on capacity, quality, and risk. All it takes is one factory fire, one labor strike, or one regulatory shutdown to unravel your supply chain.
Price integrity.
If you’re unknowingly paying for subcontracting to unregistered workshops, you’re not getting a discount. You’re funding opacity.
Reputation.
When journalists expose hidden suppliers, “we didn’t know” isn’t a defense. It’s evidence of negligence.
Regulatory compliance.
With the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU forced labour regulation (FLR) and EU Deforestation Regulation (EUDR) now in force in Europe, visibility isn’t optional. Ignorance has become expensive.
Why Buyers Miss What’s Right in Front of Them
Here’s the most shocking part: Pinghu wasn’t even trying that hard to hide.
The mismatch between order volume and factory capacity was visible to anyone who could do the math. If a brand orders 50,000 units in 30 days, and the facility has 50 machines running single shifts, the numbers don’t work.
But many buyers don’t know the math. They negotiate on price and lead time without understanding what those numbers mean. They visit facilities without knowing what questions to ask or what to measure.
Factories have learned this. The sophisticated ones maintain a compliant “face” for audits while real production happens elsewhere. They’re not necessarily being deceptive; they’re responding to the market.
Brands demand low prices, fast delivery, and clean audits.
Show factories deliver all three.
How Supply Chains Become Invisible
A European fashion brand places an order with Factory A.
The audit is clean. The relationship is solid. The price looks great.
What the brand doesn’t realize is that it has been offered the “subcontracting package.” Factory A keeps 20% of production in-house and sends the rest to smaller, informal workshops such as converted schools, rented homes, and hidden facilities.
When brand representatives visit, they see the packing area: boxes labeled, workers in branded vests, all looking perfect.
The audit goes back to headquarters with a green rating.
Meanwhile, the real production happens far out of sight.
This isn’t rare. It’s routine in regions with high labor costs or tight deadlines.
Every blind spot hides a cost: human, environmental, and commercial.
Tight lead times drive unauthorized subcontracting.
Low prices erode safety and wages.
Late payments delay salaries.
The harm ripples outward until it surfaces as a scandal.
Why I joined Open Supply Hub
This is why I joined the Board of Open Supply Hub.
If we want fair, sustainable, and traceable supply chains, the first step is transparency.Transparency starts with location data.
Open Supply Hub is building a free, open, collaboratively-built map of the world’s production facilities. It’s not hidden behind a paywall. It’s shared infrastructure for everyone: brands, factories, NGOs, investors, and regulators.
What makes this powerful is that it helps expose the layers that are often invisible. Subcontracting networks, secondary processors, upstream farms, and raw-material sites can be traced and connected once they’re mapped. The moment a facility shows up in multiple supply chains, patterns emerge — you start to see who really makes what, where risks concentrate, and where leverage for improvement lies. Open data doesn’t just show where production happens; it reveals the hidden relationships that keep opacity in business.
Why open data matters:
- It’s collaborative, not competitive. Ten brands sourcing from the same factory don’t need ten audits.They need one shared record.
- It’s accessible, not exclusive. Smaller brands and civil society actors can finally participate in the same system of visibility as large corporations.
- It creates accountability through visibility. When everyone can see where things are made, greenwashing becomes harder and improvement gets easier.
With regulations tightening, the ability to see your supply chain is now operational, legal, and existential.
Five Actions You Can Take This Week
- Learn production math.
Know how many units a line can realistically produce per day. When numbers don’t match expectations, ask why. - Visit during production.
Schedule site visits while your orders are being made, not before or after. - Add your facilities to Open Supply Hub.
If you’re a brand, supplier or NGO, contribute your data. Shared visibility benefits everyone. - Ask uncomfortable questions.
“Where does production happen when capacity is full?” “Can we visit during our production window?”
Make transparency safer than concealment. - Review your purchasing practices.
If your pricing model only works with hidden subcontracting, you’re not getting efficiency. You’re buying risk.
Your Turn: A Challenge
What’s one blind spot in your supply chain you’ve been avoiding?
A trusted supplier you’ve never verified? A product you’ve never mapped beyond Tier 1? A pricing model you know is unsustainable?
Shine a light on it this week.
Every journey toward transparency starts with the decision to look.
Join the Movement
Visit Open Supply Hub to:
- Explore the global map of production locations
- Add your suppliers or supply chain data
- Connect with a growing community committed to transparent, accountable supply chains
The factories are out there.
The question is: are you ready to see them?
