QC Failures Start in the Home

Thursday, October 12, 2006 3:05
Comments Off on QC Failures Start in the Home

Last night while chatting with a friend, I was once again reminded of a post I have been meaning to write for a while entitled QC Failures Start at Home.

Quite often posts on QC failures focus on various other blogs (China Law Blog, Diligence China, and others (including us)), are about how to protect yourself through due diligence and contracts from a supplier. However, rarely does the post address the fact that many of the problems associated with supplier relationships go much further than that, and that often many problems could have been avoided had a stronger investment by the buyer been made in the QC process.

Quality control is a process by which (through the process), quality is not only maintained, but hopefully improves over time. That is not to say that a Casio will become a Rolex, but a good quality control process will reduce inefficiencies and identify areas that can be improved upon (sometimes, by complete accident).

However, while many are simply overwhelmed with stories about Chinese suppliers who have not met quality, many simply are unwilling to invest fully in a quality control process when so much is at stake.

In the past month, I have heard the following stories:

  • Distributor of hand tools that placed 3 container order following the successful delivery of samples and negotiating a fair deal. The order was placed by the C.E.O. who knew little about the process of buying from China, and 4 months later his first container was full of unsellable product. The other 2 had yet to arrive….
  • Buyer of marble tops placed a first order while still in country following the successful visits and negotiation of several sites. The first container was delivered on time, and to spec. however, with each following container, the quality was deteriorating measurably due not only to a surely supplier, but also the fact that no inspections were occurring
  • Manufacturer of outdoor seating moved a significant amount of manufacturing to China without any member from home office overseeing the process in China. Several months after the first order was received and installed, the product faded to the point where the entire order had to be replaced.

What all of these cases share in common is that not only were these orders let unsupervised, but the companies did not invest in their quality control processes. Another thing they shared is that they risked losing customers, they lost time, and replacement orders came at a cost of time and money.

Another thing they all share now is a deep mistrust of working with Chinese suppliers, which while understandable, is not 100% justified given they had not put in a quality control process that would allow them to spot problems before (1) they were fully invested financially, (2) they had reached the point of no return time wise, and (3) they lost customers.

With a strong QC process, there is always time and there are always outs, but in each of these, months had been lost and making that up when your customer is waiting to take possession is impossible (unless you have a safety stock larger than the orders in your supply chain).

So what should they have done?

1) In the beginning, a decision should have been made to either put in a local team in-house or find a firm that would represent them.

If order sizes or frequency do not warrant an in country team, then find an agency, consultancy, or other 3rd party that you can trust to represent you. Create terms that tie them to the quality and timeliness of deliveries.

Often times, while a trading company may offer a hirer level of unbiased QC than a manufacturer, payments still occur before shipment…. at that point, the buyer bears the entire financial risk of a bad shipment no matter what a contract may say

2) Take the time to understand the QC process of each supplier and then work that into your home based process. Make sure they are meeting your process, not the other way around.

this process will let you gain a better understand not only where problems may crop up, but also, how a supplier is prepared to deal with such problems.

3) Structure payment terms so that a significant portion of the money is delivered after successful inspection of production samples (samples take off the line in mid-process of order fulfillment) and so that some portion is remitted following final delivery and inspection.

Note: with a China based team or agent, this can occur in China, and Chinese manufacturers will be reluctant to give those terms if shipping outside of China

4) Make frequent site visits, with multiple yearly visits by home based team being made with local team.

You wouldn’t drop your kids off at kindergarten on the first day and come back a year later… of course not…

Visibility is security, and putting eyeballs on a supplier’s operations is the best way to ensure that quality will continue to be met. Multiple trips per order are best, and often times it is here where people get lazy….

5) If language barriers exist, bring your own translators who are impartial. Make sure they have experience in manufacturing environments and have a list of technical terms used in the industry ahead of time. DO NOT rely on a supplier to provide an unbiased translation.

Chinese suppliers are in it for the money, plain and simple… that is no different than any manufacturer anywhere in the world. Your best interests are protected by you, and using your own translators is one of the ways that you protect your interests.

Wrap Up:

Sometimes, while it is more convenient to believe to the contrary, problems do not just occur because a supplier failed to provide a quality product. In fact, in many cases, it is quite often the oppositeā€¦ a proper quality control process was not establish, was not followed through, and risk was not shared properly.

Whether it is moving into the factory or it is just making sure the process, payments, and assessment are known and followed, companies need to invest in the process before the first container is shipped.

If a particular order is too small to warrant an in-house visit, pay a 3rd party. While it is a cost that in hindsight not be needed (if looking order by order), the costs of inspecting each shipment are actually an investment in the construction of an overall process that ensure the ongoing quality, and thus brand of the company.

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