• Quality Issues in China: Planning for the Worst Case Scenario

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    Quality Issues in China

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    Quality issues, especially when outsourcing to manufacturers in developing countries, are certain to occur. It’s never are matter of ‘if’ you’ll eventually need to deal with them, but when, and how severe they’ll be. In this Q&A, Renaud Anjoran, explains what importers must know about quality issues, and what can be done to limit them in the first place, but also how situations involving severe defects can be managed – before it’s too late.

    Before we begin, how do you define a quality issue?

    Simply put, there is a quality issue when the product is not up to the standard required by the customer. There are several types of quality issues, but we can boil them down to two categories:

    1. Nonconformity: for example the fabric used for an entire batch of T-shirts is in the wrong color. Or the measurements are wrong because some pieces were cut too small. Or the packing is wrong and the T-shirts are delivered with wrinkles.

    2. Inconsistency: for example, most tablet PCs in a batch is fine, but 10% have a serious display issue. It includes aesthetic issues (scratches, dent marks…), functionality issues (product doesn’t work), etc.

    There’s no simple answer to this question, but what steps can be taken by Start ups and SMEs to prevent quality issues from occurring in the first place?

    By far the most important step is to work with the right type of supplier. If the factory is the right size for your orders, is interested in your business, has a proper quality system and a solid understanding of your requirements, you run better chances than most importers. Then it is a matter of following the right steps in the right sequence:

    1. Specifying your product & packaging requirements in a very clear and detailed manner, including potential defects and their classification
    2. Giving clear feedback on pre-production and top-of-production samples
    3. Ensuring the sub-suppliers of critical components/materials are properly selected, instructed, and monitored
    4. Checking quality early in the manufacturing cycle and catching issues (if any) early
    5. Checking again later in production; if the production cycle is slow, the next time can be before shipment.

    Unfortunately, there is no silver bullet. Importers need to fire a lot of “lead bullets” and in the end things should work out fine most of the time.

    That’s right. It’s not a matter of if there’ll be quality issues, but the degree of severity. Clearly, the latter also affects how the situation shall be resolved. How do you recommend buyers handle the occurrence of minor quality issues?

    Buyers need to know what their distribution channel can and cannot accept. For example, you can be relatively tolerant if you sell in your own shops (because your retail staff can withdraw defective items before customers see them). But you need to be strict if you deliver the goods directly into Amazon’s warehouses or if you supply a high-end retail chain.

    You need to define what is a critical defect (might hurt a user, or reject in an entire shipment being rejected by Customs), a major defect (a customer would not be able/willing to use the product), and a minor defect (imperfection that still allows the customer to use the product).

    If 50% of the items have a minor defect, and you estimate that half of those will be noticed by the customer, it is less than ideal and the batch should be rejected from a quality standpoint. But you might take a business decision and let it ship out exceptionally, if there is no time to re-work the goods.

    Beware, though. The factory will remember that it was acceptable. Even if you had them sign that it was “exceptional”. You will want to see more than nice words in an email to be convinced that this situation won’t happen again in the future. A re-training of key production & QC operators, or different settings on a certain piece of equipment, might be in order.

    Right, and how shall major quality issues be managed?

    Major issues are quite different. This is what triggers returns from customers, complaints in high numbers, and loss of reputation in the marketplace. You need to highlight how important it is to stick to your tolerances when explaining your quality standard to the factory.

    If serious issues are found in a proportion that is not acceptable, the factory must be pushed to sort them out and then either re-work or discard them.

    What you want to avoid is the position where you have to either ship now or cancel the order. That’s a very common strategy employed by Chinese suppliers. They say they will re-work the goods, they do basically nothing, and they wait for you to send an inspector again… This game take place until the buyer has to ship.

    What importers need to do instead is to provide feedback to the factory about the quality DURING production. Especially for new suppliers, or existing suppliers that make a new product.

    When it comes to compensations, is it realistic to expect money refunds, or is it more efficient to settle for something else?

    Don’t count on refunds. It just doesn’t happen for small or even midsize buyers. What you need is proper handling of corrections on the present batch (so that it can be shipped out and sold as intended) and corrective actions to address the root of problems (for this you need to have an understanding of their production process, or involve consultants).

    Ok, but sending the products back to the production line takes quite a bit of time. As such, buyers should simply ‘plan for the worst’ and take a potential 2nd production run into consideration?

    Yes, buyers should plan for the worst with new suppliers. They should be ready to walk away from an order and refuse shipment, even if they deposited 30% of the amount. One good strategy is to keep more stock than you need, or to groom a back up supplier.

    Once you have a history with a supplier and you keep monitoring them, you can take calculated risks. Maybe you keep less stock, or you rely only on them for certain products. But this makes no sense when you try a new supplier.

    Last question. Do you have any story to share when you managed to resolve a serious situation?

    Most importers don’t realize that sometimes it is necessary to become very “hands on”. I’d like to illustrate this with the story of an importer of consumer electronics that was complaining about a poor finishing on the casings. The problem was obviously not coming from the assembly factory, but from the paint factory.

    We went there and the source of the issue was very simple: the casings were exposed to lots of dirt and grease before powder coating was applied. They moved some of their operations in a cleaner room, they started to wear gloves, and all of a sudden most issues disappeared. If we had just listened to their excuses (“the type of paint is not good, we will try another one”), the problem would never have been resolved.

    To get back to my earlier advice, selecting or at least verifying the sub-suppliers that have a strong impact on final product quality is extremely important. The degree of vertical integration is low in most Chinese factories, especially if they count less than 1,000 employees.

    About Renaud Anjoran

    Renaud Anjoran is the founder of a quality assurance agency that helps foreign buyers reduce the risks of sourcing in China. To accelerate and simplify the flow of information, Renaud’s team has developed a mobile application for quality inspections.

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