China Factory Management – We asked Kim Pen what’s going on behind the scenes

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Kim Pen

Chinese manufacturers tend to work in mysterious ways. Well, at least that’s what they want you to think. Today we’re happy to publish our interview with Kim Pen, consulting director of CMC in Shenzhen, China. He explains how Chinese manufacturers are managed and tells you how to make an informed supplier selection.

Kim, please tell us about your company and what you do.

I am the consulting director of CMC (China Manufacturing Consultants). We work for importers that want their key suppliers to improve. Most of the time the client’s priority is better quality (less problems). My job is to find a few key issues to focus on and then accompany the factory as they act on these issues. But also to frame the action plan the right way, and get the factory to “buy in”. It is a sad reality that most Chinese manufacturers care only about costs, not about quality.

Why do you think that Chinese suppliers still have such a hard time making improvements on their own and have to rely on external consultants such as CMC?

I see mainly two reasons. First, improvements request creativity and adaptation to situations and problems. All situations are different and applying “theory” from a book is impossible. It is necessary to fully understand the environment, and then to monitor the implementation like a hawk.

Second, Chinese suppliers tend to focus only on “visible” costs (buying cheap materials, keeping salaries under pressure…). Yet this is not what leads to real cost control. Think of an iceberg. The huge invisible side (efficiency, stock control, human resources strategy, preventive maintenance on machines…) has a much greater impact on costs than the visible side.

Assuming that you’re about to place your first order at a supplier, on what factors would you determine the supplier’s reliability?

You can easily see if the supplier manages his daily issues correctly by following this checklist:

  • Is the factory clean?
  • Is there a lot of WIP (work in process) everywhere? (Bad)
  • Are there charts on quality (for example on first pass yield) on the walls?
  • Are basic safety precautions followed on the production floor(s)?
  • Do managers look professional (way of speaking, clothes…)?
  • Is the canteen clean?
  • Are the toilets for production operators clean?
  • These findings will give you a good indication of the manufacturer’s reliability
  • Do not pay any attention to certifications. They are meaningless in China

What can go wrong if an importer selects a “bad” supplier?

The worst is that the buyer receives products that are out of specification, in a way that makes them impossible to use or to resell. Another big problem is products that do not comply with official standards such as CE. Naturally, a lot more can go wrong. The supplier can stop responding after they get the deposit. They can use a pretext and jerk the price up. They can tell you about a delay at the last minute, and in the end ship 3 or 4 weeks late. The list can go on and on.

Most of our readers are small business owners. What kind of supplier would you consider ideal for small businesses importing from China?

If you purchase off-the-shelf products, the choice is wide. You can compare the suppliers on price, check if they can deliver on the level of quality you expect, inspect before shipment, and you should be fine. If you need to invest time (and probably money) to develop a custom-made design, you need to be much more picky. You need to spend much more time screening and qualifying the candidates.

This is a tough question. But the size definitely matters. One danger for small buyers is to work with a big manufacturer that doesn’t care about small orders. In this case, there might be long delays and the order might be subcontracted (quality risks). The opposite situation is equally dangerous. Very small manufacturers tend to be totally disorganized. Prices are usually good, but quality is the last of their concerns.

A major issue for most small importing businesses is the high MOQ requirement. Is there any way to lower the MOQ without having the supplier backing out?

Sure, there are ways to reduce the MOQs required by the supplier. Usually the best way is to buy standard products and/or standard components and to require very limited product customization. It also helps to understand the process and reduce the costs of changing from one SKU to the other. For example, in PP extrusion dark colors are more difficult to clean. For a dark color the factory typically needs to waste 150 kilograms of PP just to clean the machine. For a light color 75 kilograms are sufficient.

Do small manufacturers have any advantages compared to larger manufacturers?

Sure, they typically offer lower prices and better re-activity. However, quality is often the small factory’s weakness. My best advice to help them is to provide samples that illustrate what is and is not acceptable. Some buyers spend days writing standards and specifications and pass these thick documents to the supplier – they are usually not read.

While a lot of issues certainly can be blamed on the supplier, there are also situations where the buyer provides unclear or incorrect instructions to his suppliers. What can importers do better in order to avoid quality issues that occur due to misunderstandings?

Be pragmatic. As I wrote above, make sure the right people (in production, and in the QC department) have “not good” (NG) samples and “OK” samples.It is also important to take the time to explain to the factory’s managers why defects impact the salability or usability of the product. Chances are, they have no idea how quality is perceived in your country.

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