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2 Important Lessons From CHINESE Companies Seeking Higher Quality.

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Supplier ManagementRecently I had interesting conversations with a few buyers, who work in Chinese companies, and who need to buy local products that satisfy a high standard.

How do they do? Are personal relationships (“guanxi”) key? Absolutely not.

Here are two examples.

1. A Chinese trading company that arranges manufacturing of phone accessories, as a licensee, for a VERY high-end British company.

How high is their standard? No defect must be visible — it’s as simple as that.

So, how does that trading company find manufacturers?

  • They start with about 30 potential manufacturers that might be able to raise their quality standard up to the right level.
  • They work on a first prototype, give feedback, and eliminate 10-15 candidates.
  • They work on a pilot run of 100 pieces, give feedback, and only 1-3 potential suppliers stay in the race.
  • Then the British company is shown the pilot run, and they might choose to approve none of the candidates. Hopefully 1 or 2 are approved.
  • During production, an inspector is stationed full time in the factory.

The pilot run is the time the factory really understands how high the buyer’s requirements really are. At that time, many factories drop the ball.

Another interesting fact: contracts are very important (IP rights ownership, NDA, and so on). But one could say that, to a large extent, the need for contracts is driven by the British licensor.

2. Foxconn (actually a taiwanese company, but is it that different?) purchases components in China

One of Foxconn’s employees explained to me that they want to avoid discussions when a problem is found. They don’t want suppliers to look for a loophole and escape their responsibilities.

So they write detailed specifications and enforceable contracts. And, again, an inspector is stationed full time in the supplier’s factory for the duration of each production run.

As a result, many factories don’t want to work with Foxconn. They are aware that they will get in trouble if they fail to meet the specs. At least Chinese suppliers are not always over-optimistic!

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Comments

  2. The trading company’s selection process is pretty close to what we do upfront for all industrial products sourcing. This is the only way. There is always at least one company that can make the product. And when you have one, you can find three. But the art is to find them amont all those that really are unable to do it, in spite of their claim
    I like the Foxconn story. The people who really know are adamant not find excuses for supplier and work professionally. Of course, they have purchasing power and volume. But the first step is to know what you want, spell it out and document it and then fight for it like Foxconn seems to do.