Successfully accessing the Chinese manufacturing sector is a careful balance between keeping costs low and product quality high. Offshore manufacturing is usually considerably cheaper than sourcing the work in the home country, but it includes risks of reduction in quality that could eventually result in the reduction of reputation. Even when prototypes and first runs look great, there is a possibility that quality will fade over time, as the manufacturing facility seeks its own reductions in costs. Known as “quality fade” this phenomenon can occur frequently if off-shore corporations are lax in their oversight and quality review processes.
The signs of quality fade are usually very subtle. Fabrics and materials might change in texture, colour or structure, indicating use of a lesser quality material, rather than the higher quality material specified in the contract. Furniture finishes may have different colours, or be applied in less quantity than specified, resulting in chips, scratches and dents. These changes can occur over many batches, through weeks and months. Without careful oversight on each batch, international producers may find their brand name is being tarnished incrementally over time.
In more serious cases, quality fade can cause product failures that result in consumer safety concerns. The trend towards globalization of supply chains means thousands of products are being manufactured in facilities where quality control and quality standards are less than consistent. Accessing foreign manufacturing facilities and suppliers (in any country) creates challenges for international corporations. The decision to craft their own supplies or purchase from another supplier (outsourcing) raises a question of supply quality. Sourcing materials and supplies from multiple suppliers increases the odds of receiving insufficient materials. Determining to use a facility in another country rather than in the home country (off-shoring) raises concerns about production values.
A 2014 Elsevier study indicates that corporations which routinely implement supply chains that use outsourced materials and off-shore production facilities are more likely to suffer product recalls than those who don’t. Usually in an effort to save money, these strategies sometimes have unintended consequences, such as increased exposure to quality risks resulting from reduced control and visibility in the supply chain. A big part of the challenge is that, within these scenarios, increased numbers of hands touch the products as they move across the supply chain nodes and international boundaries. The complexity of the system erodes the capacity of local management to properly oversee the process from start to finish. The study did find that use of outsourced materials tended to cause more product recalls than off-shoring production, insofar as the producer had little or no control the quality of the outsourced parts and supplies.
When failures do occur, they can be catastrophic to the international manufacturer. Customer satisfaction can fade; reliability and practical use of the product can be affected, and fines, injuries and death are all possible, depending on the nature of the failure and the injuries suffered. In the end, the international producer will be held responsible for damages, even if they weren’t aware that product quality had faded, or that the product was no longer in conformance with its internal standards.
Accordingly, quality assurance programs are critical to ensuring that all off-shore manufacturing facilities, including those in China, maintain consistent, high-quality standards as required by the manufacturing agreement, over time and through all contracts. The best quality assurance practices are regularly performed by qualified, well-trained staff and provide verifiable written reports regarding facility compliance. Not all Chinese factories are prepared to implement or cooperate with a quality-assurance program. International producers should avoid the challenges of product quality fade, reputation loss and possible product recall by carefully vetting their offshore production facility. Quality goods will come from factories that demonstrate their capacity to maintain high-quality production standards over the course of the business relationship.
If you would like to know more, you can download a free report “8 Problems Businesses face when sourcing from China here.
https://vantagecompliance.com/8-problems-businesses-face-when-sourcing-goods-from-china-bg/
This blog was written by Carsten Primdal, an independent consultant who helps businesses that have manufacturing done overseas – especially in China – to 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 to gain greater control over the risks most companies face knowingly or unknowingly.
Questions? Concerns? If you are considering buying from Chinese factories and would like more information, please feel free to contact us to see what Vantage Compliance can do for you.
I can be reached at carsten@vantagecompliance.com or on (+61) 413 089 020
