I am always surprised by the expectations of some importers regarding the cost of a quality inspection in a Chinese factory.
Some purchasers get to talk about their project for some time, see where we would help them, and finally (nearly as an afterthought) ask for the price. I tell them 295 USD per day of work, and I can nearly hear them thinking “wow these guys are cheap”.
They compare this fee to the costs of professional services in their country, or maybe to the total amount of the order, or to the cost of their best alternative (taking a flight to China). So it sounds really low.
With other buyers, it’s the exact opposite. To them, even ourbasic “no frills, internet booking” service, at 170 USD per product type, seems like a rip off.
They compare it to the salary of most English-speaking staff in China (5,000 rmb), they divide it by 30 days, and they think we make an insane margin. Forget about the main costs of a company that has set up a network in the main regions (training/supervisory/internal control overhead, travel expenses, client communication, taxes in China, etc.).
The first category is ready to pay more for better service and higher reliability. They tend to be medium- or large-scale companies. They are the bread and butter of third-party quality control firms.
They want to make sure they are paying fees within the market band (i.e. not twice as much as their competitors). They are looking for convenience, reliability, and speed, more than a good deal.
I learned that the second category of buyers, unless they absolutely have to, will never accept to pay the market price for quality control inspections. They prefer to pay a cheap “agent” who will not do a professional job (if he does any QC job at all), or to simply roll the dice and let the factory ship out. It is not rational because in the end they are probably worse off — it is psychological.
It will be interesting to see whether the market price for QC inspections in China will be driven down within the next decade. Will constant pressure on costs move the market price from 300USD to 250 USD, for jobs in the main producing areas?
My take is that foreign-owned inspection firms will not decrease prices any more. The RMB will probably be revalued over time, and the inspectors’ salaries aren’t going down.
But this should not the main point of focus for importers. The real question is, how to get organized better, get better advantage of QC inspections, and supplement these inspections with other tools when possible?
UPDATE: we dropped the “no frills” offer. We concluded that it makes no sense to propose inspections without taking time to define a QC checklist.