For international manufacturers, the potential for increased profits by accessing Chinese factories and production facilities is enticing. In an ever-shrinking world, with an almost ever-growing global market, any edge that improves the bottom line should be explored. However, many companies around the world remain skittish about entering the Chinese manufacturing community because of perceived poor environmental practices within that industry. However, accessing the services of a professional China expert can allay those fears to a large degree.
It is true that, as China entered the industrial world in the late 1970’s, its standards and practices lagged far behind those of Western Hemisphere industry. Not the least concern to international business was the somewhat cavalier attitude of Chinese factory management toward managing the environmental impact of their operation. As the rest of the world recognized the significance to the whole planet of healthier, sustainable manufacturing processes, China was working to establish its place in the global industrial community. For a long time it appeared that protecting the environment was low on China’s list of priorities.
But that was years ago. In the astonishingly short 35-year period of time since opening its industrial door, China has ramped up its production capacity to accommodate growing international demand, and begun to work in earnest towards bringing its internal standards into comparable compliance with manufacturing standards in other countries. The results have been impressive.
Originally, the answer to the problem appeared to be improved policing of the facilities themselves, as the Chinese began introducing and implementing auditing activity. The audits were used to ensure standards regarding environmental, healthy and safety concerns were in place and functioning. The challenge that was raised almost immediately was that the increased costs for the ‘compliance systems’ and audits eroded the profitability of the contract. Until they didn’t.
Although there is only little empirical evidence available on the ground, taking western hemisphere experiences as a guideline, China also must have noted their other statistics were improving: the number of reported worker injuries falling; production increases as efficiency measures came online; using environmentally safe chemicals reducing the cost for disposal, when compared to the cost of removing more caustic substances. The factory’s attention to environmental, health and safety issues (EHS) must have improved its performance across the board. The larger, multinational corporations would have seen these incremental improvements as a demonstration of the Chinese commitment to become a true partner to the rest of the global industrial community.
At the 2008 Sustainability Conference held in Beijing, Walmart CEO Lee Scott announced Walmart’s intention to make EHS performance a key factor in that retailer’s purchasing decisions regarding supplier factories. Walmart joined other leading manufacturers like Adidas AG, General Electric and H&M Hennes & Mauritz AB in underscoring their growing insistence that quality products must come from quality production facilities. Walmarts’ assertion is no small matter; as of 2012, Walmart’s chain of suppliers in China included more than 20,000 Chinese factories.
Since 2008, China has taken immense strides in bringing its industries up to comparable status with international standards. However, that is still a project in process, and not all factories or supply chain producers are fully engaged. For the international manufacturer seeking to gain access to the field, it remains a challenge to know how to choose the Chinese suppliers and facilities that will provide not just a quality and contractually compliant product, but which also use appropriate, sustainable practices in its construction.
An expert eye and educated voice can provide critical input to international companies investigating the feasibility of investing in the Chinese manufacturing complex. Experience in the sector and a deep comprehension of the complex Chinese manufacturing culture are key aspects brought to the table by a Chinese manufacturing industry professional. Such a professional can provide accurate, relevant and economically beneficial advice and guidance to direct the corporation through the set-up and compliance processes, and get it into production as quickly as possible.
There are thousands of Chinese manufacturers, suppliers, facilities and factories currently producing millions of goods to be sold around the world. The industry exists because it does provide lower production costs. To capture all of the benefits (and avoid most, if not all of the headaches) of that industry, it is advisable and well worth the investment to engage the services of a Chinese Factory Verification expert.
If you would like to know more, you can download a free checklist “New Supplier OnBoarding Checklist” here.
The checkpoints are not only for new suppliers, in fact they should be checked and verified regularly for all suppliers.
This blog was written by Carsten Primdal, an independent consultant who helps businesses that have manufacturing done overseas – especially in China – minimise supply chain risk.Drawing on years of on-the-ground experience and a strong understanding of the cultural and commercial context, Carsten is passionate about helping his clients gain greater control over the risks most companies face knowingly or unknowingly.
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