Understanding the cost of quality inspections in China
I am always surprised by the expectations of some importers regarding the cost of quality inspections in a Chinese factory.
Some importers get to talk about their project for some time, see where we would help them, and finally (almost as an afterthought) ask: “How much does a quality inspection in China cost?”
I say “299 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.
Breaking down how much quality inspections cost
1 man-day of work (which is sufficient for a good number of random inspections) costs 299 USD.
Travel expenses might apply, on top of the cost of labor, if the factory is far away from the closest importer. Let’s take 3 typical examples:
- If the trip is only 60 km, it is included in the price.
- If the trip is 120 km, an extra 50 USD might be charged.
- If the trip is 400 km, an extra man-day might be charged (at half price) and an extra 100 USD might apply.
(Exact costs are quoted on a case-by-case basis, depending on transportation options available. Contact us at Sofeast if you’d like to discuss quality inspections now.)
With other buyers, it’s the exact opposite. In their minds, even 100 USD would be a rip-off.
They compare it to the salary of a typical English-speaking employee in China (6,000 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 to factories, client communication, taxes and social security, etc.
The first category is ready to pay more for better service and higher reliability. They tend to be medium- or large-scale companies, or they have developed their own product and getting all the details rights is what helps them charge a premium. They allow quality assurance firms like ours (Sofeast) to exist.
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 ‘great 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 roll the dice and let the factory ship out. In some cases, if they work with a ‘sourcing agent‘ who spends 20 min looking at a few products and taking a few photos, it is already plenty.
Is it rational? Not always. Are they worse off? Sometimes. If they buy off-the-shelf products that are purely decorative (or to be given away as part of a marketing campaign), that might make sense!
What is our conclusion, knowing all this?
Our main target is companies who have developed their own product. In the QA department, we help them get better organized, specify what their QC checklist is, and take better advantage of QC inspections.
And those buyers who always look for the best deal? We let them choose the cheapest suppliers and run the highest risks. They are not a part of our client base … We are just not a good fit.
Editor’s note – this post was originally published in 2010 and has been updated with up-to-date information in April 2019.