From my observations, procurement offices and trading companies that are based in China tend to make the same mistakes. In this article I will explain how they should be organized. The traditional organization Some purchasers face the suppliers; Some English-speaking salespeople face customers (or their head office). Apart from a few managers, no one knows the buying AND the selling price. It is the whole point of cutting the organization in two. Downsides of the traditional … [Read more...]
Writing a procedure that is consistent with ISO 9000 standards
Two days ago I wrote that every SME should have written procedures, but how to start? Who should write them? What format to follow? The majority of articles and manuals available focus on large companies. I tried to write advice applicable by most SMEs in the paragraphs below. Who should write procedures? The best practice is usually to select one smart employee who can write in a concise and precise manner. Make it this employee's first priority, and if possible involve a consultant to … [Read more...]
Why every SME should have written procedures
Most small and mid-size companies (be they factories, importers, buying offices, trading companies...) do not have written procedures. A well-written set of procedures that is respected and applied by the whole staff is a tremendous asset for 4 reasons: 1. More reliable processes A well-thought procedure ensures that a quality system is in place (i.e. that the company doesn't ship products that are not satisfactory to customers). That's precisely the objective of the ISO 9000 series of … [Read more...]
What is the “lean” approach to manufacturing, and is it applicable in China?
In 5 building blocks for developing good Chinese suppliers I mentioned that the last step (re-organizing production) was all about lean. But I noticed that a few readers are not familiar with the lean approach to manufacturing. What is the lean approach? It was derived from the Toyota Production System. For historical perspective, see this timeline on the Lean Institute's website. Why it is a great approach to improve a company's competitiveness, cost- and quality-wise? 1. It focuses on … [Read more...]
Advice for ERP implementation by SMEs in China
Last week, The EU Chamber of Commerce in China organized a seminar on the topic of ERP implementation for SMEs. I found it pretty interesting and took some notes: What are the alternatives for an SME? Keeping all the data in Excel spreadsheets. However, it is not adapted for companies with too much complexity (number of products / customers / parts / suppliers / production sites...), Simple ERP programs such as Open ERP and many others, Complex ERP programs such as SAP or … [Read more...]
How a Chinese factory can REALLY improve its quality
Auditing a factory's quality system, and helping them patch the main holes found by the auditor, is helpful. But is it enough? I used to think so. A good quality management system is supposed to stop defects before it is too late. However, I have seen too many Chinese manufacturers get very high scores on a quality audit, and then try to ship batches containing 5-20% of defective goods. Setting up control points relevant to each production step does help, but improving quality takes much … [Read more...]
Production optimization in China. Good luck with that.
As the pressure on costs is getting more intense, many importers wish their suppliers focused on optimizing their production. In most cases, there are no optimization efforts going on. Why is that? 1. A focus on the golden eggs, not on the goose Most factory owners don't intend their kids to take the relay once they retire. They see their business as a risky endeavour that might fail, or might be shut down by the local government, in the not-so-distant future. So they focus on the cash … [Read more...]
Benefits of quality control inspections
The question is, are inspections useless? What are the benefits of quality control inspections, if any? As I mentioned in a previous article, more and more importers are switching their focus from standard QC inspections to improving key suppliers. My opinion is, there are benefits, but they depend on the kind of inspection. Here is Shingo's typology: #1. "Judgement inspection" (prevents shipment of defective batches) Quantify, and if possible sort out, defects. Takes place … [Read more...]
What should factory operators do when defects are found?
A few months ago, I drew a flow chart for buyers to follow when a problem is detected during an in-process inspection. But the very best would be for factory operators themselves to notice defects and to solve the problem immediately, right? I just found an excellent flow chart that addresses this purpose: Source: "Cedar Works" case study, Becoming Lean: Inside Stories of U.S. Manufacturers, edited by Jeffrey Liker. Unfortunately, it only works if line workers are allowed to stop … [Read more...]
How to reduce costs in a factory? The lean approach.
The number one challenge of Chinese suppliers is price, as revealed by a recent survey. Their costs keep rising, but price competition is stronger and stronger. Factory owners spend a lot of time trying to reduce costs. Unfortunately, they tend to focus only on three levers to keep their costs under control: Negotiating down material prices; Limiting salary raises; Pushing the employees to work hard, for long hours. These are actually NOT the main drivers of cost though... … [Read more...]
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