I finished reading Mr. China by Tim Clissold and I found it quite interesting. It is the story of an investment fund that lost hundreds of millions of dollars in China in the 1990s. The author describes in great details the traps his company fell into and what solutions they found. At that time, the only form of investment that was allowed was doing joint ventures with Chinese partners. But some comments are also useful for importers trying to resolve a conflict with a Chinese … [Read more...]
Preparing a list of quality defects for QC inspectors
During a product inspection, one of the main tasks is looking for defects on samples, categorizing them (critical/major/minor), and reporting them. The maximum number of defects that is allowed is based on the AQL, which has to be set by the customer (or by an authority defined by the customer) prior to inspection. Why? I see two reasons: It removes some subjectivity from the inspection process (subjectivity opens the door for corruption). It helps the suppliers understand the … [Read more...]
Chinese suppliers and subcontracting
I just came across an interesting post ("6 conversations and a couple of cultural lessons") on the SRI blog. In the last paragraphs, David Dayton evokes the sub-contracting habits of Chinese manufacturers: Chinese factories ALWAYS sub work out to other factories. (And no, I’m not exaggerating. Always is the right word.) But they never do QC. I have not, in 7 years, ever had a factory do QC before they accepted product from a factory that they’ve sub’d work out to. They always act so surprised … [Read more...]
Lack of quality control: impact on consumers
The general shareholders meeting at Carrefour (2nd largest retailer in the world) recently took place. Many newspapers wrote about the complaint from a small shareholder, speaking in public to the CEO (see this article from Le Monde, 10th paragraph). My translation: Last week I bought a pack of strawberries for 1 euro: I got diarrhea! I bought coffee from Costa Rica: I got diarrhea! I bought some socks in 46/48 size, but after washing they shrank down to size 38, which is my wife's size! You … [Read more...]
How can importers renew their product line regularly?
A few weeks ago, I was asked what a small importer can do to "keep his pipeline full". Many importers of general consumer goods need to renew their products regularly, for many reasons. But how to get new product ideas and develop them on the cheap? Here is what I wrote back: Plan long in advance, start development with your suppliers, and then place orders in function of your sales forecasts. Be careful, many small shipments are good for keeping some cash in your hands, but they … [Read more...]
Garment inspections: assessing the conformity of measurements
Earlier this week I was with a client, during one of their China trips. They import garments, and one of the most important criteria is the respect of size charts. If measurements are out of tolerances, the garments might be uncomfortable... or even unwearable. One supplier was asking "if some samples are inside the tolerance, and others are out of the tolerance, how do you decide if the order is not acceptable?" It is a good question. After thinking about it for some time, I see two ways … [Read more...]
Who is responsible for China quality problems?
In a recent post, I was wondering whether many importers calculated the fully-burdened cost of imports. Today, I came upon an interesting article on Knowledge@Wharton (Can China Meet the Quality Challenge?) where Mr. Pinney, from BCG Shanghai office, explains the roots of this situation: "They have a procurement mentality and focus purely on price negotiation, and it's an arm's-length transaction," he says. Because their expectations are based on their experiences with home-country suppliers, … [Read more...]
Are Chinese courts unreliable?
Most companies buying in China don't take the precaution to write a contract with their suppliers. Even when large sums are at stake. The common perception is that going to a Chinese court is a long and expensive process, for a highly unpredictable result. But are Chinese courts' judgments truly unpredictable? Or do they follow a logic on their own? The China Law Blog just wrote a very interesting post entitled China Sex, Mistresses, And Improper Payments, And What They Mean For Your China … [Read more...]
Western importers in China, forced to compromise on quality
I am reading Poorly Made In China, and it is a real treat. Paul Midler, the author, does a great job at analyzing the psychology of oversea buyers. He gives examples where the importer got himself locked into a relationship with a given factory. The manufacturer could feel it, and took advantage of it to raise prices... and, at the same time, reduce its cost by degrading quality. Each time the buyer protested, the supplier just pushed back. Here are two extracts that detail the mechanism at … [Read more...]
What is the fully-burdened cost of imports?
In Hot, Flat and Crowded, I read that the exact cost of oil delivered by air-borne tanker to the US military stations in Irak is... $42 per gallon. Here are the elements to add up: Commodity price of oil + cost of delivery + cost of protection along the way + cost of casualties from transportation. The total is the fully-burdened cost (or total cost of ownership). This calculation convinced the army to work on improving energy efficiency (e.g. improving thermal insulation of air-conditioned … [Read more...]