September 2008 Archives

Finally it seems something might be done about packaging in China. As someone who has frequently been frustrated by Chinese candy wrappers that often require the use of teeth to be opened, I was heartened to read that the powers that be have proposed that manufacturers and operators in China should cooperate with consumers to reduce excessive packaging. While encouraging product manufacturers to avoid excessive packaging and offer genuine goods at a fair price to consumers, the proposals also exhort packaging enterprises to conserve resources and develop new materials and technologies that are easy to recycle. The worst offenders in China, according to the China Consumers' Association, are health care products, tea, cosmetics and moon cakes. 

The new packaging proposals in China are in line with ongoing packaging innovations and improvements resulting from the current focus on developing green supply chains and sustainability. Jean Murphy at SupplyChainBrain has outlined how a recent explosion of corporate sustainability initiatives has led to renewed interest in packaging and achieving sustainability goals, and global retailer Wal-Mart has been a prime catalyst for the trend to reduce packaging in the supply chain, utilizing metrics such as greenhouse gas emissions, product-to-package ratios and space utilization to rate suppliers. 

David Busch of Spend Matters has offered some practical insights on how packaging engineering can save money while also helping the environment. He recounts the new designs retailer Costco uses for milk jugs which entail substantial labor, water and fuel savings and also reduce costs for consumers (see also Supply Chain Digest's illustration of the transportation benefits of improved packaging). The doctor at Sourcing Innovation has also proposed package design optimization by which one can attack the packaging category strategically by re-designing packaging materials or by using cheaper substitutions. Optimization of this sort, the doctor feels, will also help you save money and get greener faster.

And for mooncakes there might yet be a solution as well. While describing this distinctly Chinese delicacy as having cockroach-like resisted all attempts at eradication over the years, Imagethief believes a remedy is at hand  for the environmental toll of its excessive packaging, as mooncakes are infinitely recyclable and re-giftable. Shanghai, he writes, has brought the mooncake recycling market to a new level: rather than give physical mooncakes, its common to give a coupon that can be redeemed for mooncakes, so that while approximately four billion tons of mooncakes are gifted every mid-autumn, only about ten pounds are actually consumed.         

So as China's astronauts land on the northern steppes of Inner Mongolia after a historic spacewalk, I could not help but leave the final word in this posting to CCTV.com with its colorful description of the astronauts' diet while in space: 
The number 1 rule for the astronauts' menu is to avoid food that could cause gas. Such foodstuffs may cause stomach ache for the astronauts. And since their spacesuits have a self-circulation system, any gaseous after-effects could affect the air quality for the astronauts.
Yet luckily, 
scientists plan to pack on board traditional snacks from all the country's 56 ethnic groups

So here's to a safe landing, a moonwalk without gas, and a mooncake - without the packaging. 
Talk everywhere is of crisis and panic emanating from the US financial centers. Yet in China, a different yet familiar kind of crisis is playing itself out.  

Because of strict regulation and an overwhelming domestic focus, as FT.com put it, Chinese financial institutions are not overly exposed to US subprime-related assets or firms, yet China's overall economy, with its reliance on exports and with China's substantial dollar-dominated foreign exchange reserves, will inevitably suffer from a slowing US economy. As Wall Street wallows in a bad dream / nightmare, there are indications that China, while not gripped in panic, may be heading for some storm clouds of its own. While the impact of the Olympics is still unclear, industrial production growth plunged to a six-year low of 12.8% in August; car inventories hit a four-year high in June; air traffic has slowed sharply; and electricity output has dropped. While Chinese exports have remained robust, expanding 22% in the first eight months of 2008, the contraction in Europe and the US could make this period the calm before the storm - before Wall Street's bad dream turns into storm clouds over China's exports-dependent economy. In this context it is possible to discern how China's slightly slowing economy could proceed to slowing more rapidly, reaching what Leo Lewis at The Times referred to as a psychological turning point of single-digit growth.
 
Although the slowdown in the US and Europe will harm China's exports, in another view, Western consumers might only increase their demand for cheaper, Chinese-made goods. Speakers at this year's Trans-Pacific Maritime Asia conference (h/t 3PLwire) uniformly agreed that, despite the current weak global economy, China will remain the supplier of choice for manufactured products. Jonathan Beard, MD of GHK Hong Kong Ltd., noted that exports through China ports rose 13% in the first half of 2008, and other speakers lauded China's established manufacturing relationships, supply chain infrastructure, port infrastructure and political stability: even in these times China is a safe bet and will remain so.       

Yet if China sourcing seems set in theory to emerge unscathed from the current financial crisis, what of the reputation for quality and safety concerns associated with products made in China? The Made in China brand has once more been enveloped in crisis with the ongoing milk powder scandal. The fallout has generated vigorous online debate in which some Chinese netizens even called for a boycott of all products made in China, and China Youth Daily columnist Liu Yibin (h/t China Media Project) suggested that the best medicine for enterprises lacking conscience would be to simply allow them to die. Yet for those who do quality control for a living in China, its less of a crisis than merely business as usual. At the Silk Road blog, David Dayton writes:
As the milk powder scandal shows, out in the trenches, over the past year, nothing’s really changed...We still have the same issues with factories not meeting agreed upon standards, not understanding those standards in the first place, substituting cheaper domestic products in place of more expensive imported ones, using uncontrolled sub-suppliers, working rejected product back into approved stock, and of course purposeful and natural quality fade issues.

And Dayton is not hopeful of seeing any changes soon. He's not holding his breath, at least not until the next crisis. 
The Guangdong Bureau of Quality and Technical Supervision has released a special audit of DVD player manufacturers in the province in which only 39.2% of small and medium-sized manufacturers were found to pass quality spot checks. Yet large-scale manufacturers in Guangdong which, as the Bureau put it, produce relatively reliable quality products, scored a full 100% pass rate. In a similar fashion, smaller foreign companies also struggle with quality issues in China. The presence needed on the ground and the overall effort required for QC and due diligence makes for a formidable challenge. Reuters recently reported on a small number of German firms who, in response to quality concerns, are swimming against the tide and leaving China. One of these is toymaker Steiff, which originally outsourced around a fifth of its production in 2003 yet have had to reject a cumbersome number of toys made in China, some of which Managing Director Martin Frechen described as looking like they have been run over by a car. The stark quality divide between large and smaller companies seems to be a corollary of a fundamental trend with quality in China: Size is integral to every aspect of the process - the bigger the better.  

Steiff MD Frechen attributed the problems with quality to the high staff turnover in Chinese factories which meant staff received insufficient training, yet he also thought Steiff's typical orders of around 500 lots were too small to reap cost advantages in factories accustomed to mass production. For all its high-profile product quality problems associated with China last year, Mattel - the world's largest toy maker - has stood by its Chinese partners and improved quality checks, yet quality control is difficult to implement for smaller companies without a substantial presence in China. The problem for small companies in China with an emphasis on quality, as Volker Treier, chief economist of the German Chambers of Industry and Commerce, mentioned in the Reuters article, is when they have to jump into cold water and see if they can swim without the resources for proper research.    

So how can small companies keep themselves from drowning in cold water with quality concerns in China? Ultimately they will have to trust someone to do their QC for them. The Quality Wars blog (h/t China Law Blog) has weighed in on the choices available for foreign manufacturers between doing their own QC with an employee in China or hiring an outside QC service provider. While a local employee will generally be cheaper and may have access to local knowledge and networks, they may also be exposed to being bribed by the factory to pass unacceptable goods. Outsourcing QC to a third company, however, will put QC in the hands of a dedicated company that specializes in checking products and factories in Asia. 

Ultimately, in China, the best option is QC=BIG.

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