Why your factory gets paid in 120 days

Factories wait four months for payment. In contract manufacturing, this is accepted as normal. But Net-120 isn't a processing delay. It's a system — five structural layers stacked on top of a deliberate financial strategy.

The five layers

The spec leaves room. An Engineering Requirements Spec for camera modules runs 40 pages. MTF thresholds, wavefront error budgets, thermal stability ranges. I've seen the question "is MTF ≥ 0.35 at f/0.7 measured at room temperature or across the full operating range?" hold up payment for weeks while engineers on two continents debate intent. Gage R&R studies and correlation protocols exist. They don't prevent this.

Test data doesn't flow automatically everywhere. Top-tier factories sync data to OEM platforms in near real-time. But a significant portion of contract manufacturing — tier-2 and tier-3 shops doing EVT and DVT work — still packages QA data manually. Even with automated transfer, the OEM's quality team often re-formats and cross-references against their internal spec version. That adds days.

The OEM re-verifies. OEMs invest heavily in supplier quality engineers, audits, and on-site inspections. These are real programs. But when a specific lot ships, the OEM's team still re-tests a subset on their own equipment. The factory's QA report is an assertion. It doesn't prove which test bench was used, whether it was calibrated that morning, or whether the sample was random — not with certainty. So they re-test. One to two weeks, duplicating work the factory already did.

Disputes resolve slowly. Master Service Agreements have dispute resolution clauses. The formal process exists. But "exists" and "runs quickly" are different things. A quality dispute still means emails across time zones, re-sampling, sometimes a third-party lab. The MSA says there's a process. The process takes weeks. During that time, the invoice is frozen.

AP is doing its own optimization. Net-45, Net-90, Net-120 — these are treasury policy, not processing delays. OEMs with leverage set long payment terms to improve their days payable outstanding. The factory's cash becomes an interest-free loan.

The stack

Any single layer is manageable. The problem is they're sequential. You can't start the AP clock until the dispute resolves. The dispute can't resolve until re-verification. Re-verification can't start until data transfers. Five sequential delays on top of a deliberately long payment term: 60 to 120 days.

The trade

No technology fixes the power imbalance between a $50B OEM and a $50M factory. But there's a trade worth exploring: what if the OEM could eliminate re-verification costs, SQE travel, and dispute overhead in exchange for faster, verified-data-triggered settlement?

Verified, tamper-proof factory data — with test bench provenance attached — would let the OEM trust the results without re-testing. The factory gets paid in 48 hours instead of 120 days. The OEM gets a cheaper quality process. Neither side is doing the other a favor.

That's what we're working on at Fairbuild. Whether the mechanism is a smart contract or something else matters less than the principle: verified completion should trigger automatic settlement.