Quality Control: Size Matters
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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