Over the past 20 years, an entire industry has appeared in China to offer quality inspection services. It was a response to the lack of reliability of most suppliers, as well as their refusal to take responsibility for problems found after shipment.
But I am wondering if the inspection market is still growing.
Long-term trend of the third-party QC inspection market
Phase 1:
Some large companies start buying directly. Quality control firms like Bureau Veritas or Intertek hire thousands of inspectors to cope with the demand from large retailers (and the importers who sell to these retailers).
Phase 2:
This trend gains speed. The growth of the inspection market is explosive, as more buyers find out that buying directly in China is pretty risky.
The market price goes down. For example, Asia Inspection offers a flat price below 300 USD for even the smallest clients, and is quickly imitated by tens of new entrants.
Phase 3:
In their rush to respond to demand, third-party QC firms seriously lack imagination. Some importers become frustrated with final inspections:
- When problems are discovered, it is too late; when no problem is found, it is useless,
- The only way to find problems earlier is to inspect during production, which means doubling the QC budget.
Hundreds of companies are essentially offering the same service. A handful (ProQC, InTouch) try to offer a better service than Bureau Veritas or Intertek. Many competitors are cheaper, and sometimes better, than Asia Inspection and SGS.
All this competition focuses attention on price. Some buyers accept a lower reliability, if they can slash their QC budget by 40%. They hire their own inspectors, or they work with cheap Chinese inspection companies.
The increased pricing pressure seems to indicate that the market has matured, and is about to decline. Maybe I am wrong, but the signals are here.
Phase 4:
More and more purchasers decide that inspections are not the best response in all cases. They explore new options to reduce their QC budget — for example supplier self inspection.
For example, by adapting the quality control plan to each type of supplier, as I proposed here.
- For the good suppliers, skip-lot QC is enough,
- For the new or worst suppliers, it is essential to invest more attention at the beginning of the production cycle:
What do you think?
I think this industry will continue to grow, albeit slowly, until A) China’s legal system implements reforms B) factories realize that they can capture that additional QC margin by implementing more sophisticated quality inspection protocols themselves. If you only take a static economic snapshot now, Europe’s imports are dead and the US is sluggish, but Latin America, Asia, and Africa still have lots of markets and lots of clueless buyers, so factories can still use their tricks for another 5-10 years, which is how long it would take to reform the legal system anyways….
Yes… certain things are slowly changing — not only the legal system, but also the level of reliability of factories.
The standard, inspection-only, companies will have more difficulties to find clients in the future, some of the reasons are listed above. One has to adapt and provide a better service and support the customer in a wider range of activities like R&D, defect analysis, audits, even training the supplier’s staff to some extent, i.e. providing a more individual service, dedicated to the requirements of the client and providing more value.
I fully agree.
Price war between the inspection houses, bribery issues among factories, auditors & inspectors, unreliable inspection & audit reports, being the most critical issues in this field. The demand of inspections and audits still very strong in Asia, per the request from those respective brands and retailers.
Bribery in Chinese inspectors is very high . This problem doesn’t occur with western inspectors
I wonder how large the market actually is ? Are there any sources on how many inspectors are working/employed in china and how many inspections are actually performed per month/year ?
I don’t know any such source of information. There are thousands of QC inspectors in China.
There is plenty of companies offering quality inspection services, it is pretty normal considering the big names as SGS is not 100% efficient. What I think is getting harder to get are companies specialized on inspecting certain type of products. For example, I’m being looking for building materials inspectors for a while and nobody seems to have a good system for this family of products. Another difficulty I had (still have) is to find laboratories. Since now I can not contact any laboratory for an anti-mite test. So I think there is plenty of market for more companies.
Diana, you hit the nail on the head.
To use Chris Anderson’s words, everyone focuses on the short head, but few companies pursue the long tail.