Defects in Products from China - Ignorance, Incompetence, Fraud

By Jonathan Friedman, PhD on 24 February 2017


Some of the world's best products are made in China, yet the country is associated with cheap, low-quality goods. Contract Manufacturer's make bad units for only three reasons fraud, incompetence, ignorance. Control over these factors is the difference between awesome and awful output.

China is not known for quality products…

Some of the world’s best products are made in China (IBM, Apple, IKEA, Prada, Black & Decker, et al. ad infin.), yet the country is most commonly associated with cheap, low-quality goods.

A British firm, Interbrand Consultancy surveyed 700 trading companies in the UK about their perceptions of Chinese contract manufacturers and concluded the following:

Perceptions of Chinese contract manufacturers

The difference between the typical brand contracting in China and Apple is the effort they expend to manage their contract partners. This effort directly manifests in the quality of the factory output.

The 3 horsemen of the apocalypse

Contract Manufacturer’s make bad units for only three reasons (this is not unique to China, but it’s my area of interest): fraud, incompetence, ignorance.

Fortunately, these causes are in order of decreasing severity and increasing frequency.

Fraud

Fraud, specifically that perpetrated consistently by vendors, is the extreme minority of cases as it’s difficult to maintain sufficient trade volume to keep such an operation in business. The best defense against it is to ensure a direct factory relationship (failing that, a stable trading-company-to-factory relationship) and medium-to-high volume capacity at that factory. At these scales and equipment costs it is economically infeasible to maintain majority fraud operations. Such productions are too large to fly under the radar and too diverse in customer base to avoid backlash and/or government police action. Fraudulent operations by a vendor threaten the legitimate business of competitors so look there for allies if you need to get the government involved in an incident.

Incompetence

Incompetence is exponentially more common, but also relatively easy to identify. At the base level, factory performance is generally static as it’s related to experience, equipment, training, and management, more so than to more dynamic factors such as number of employees and who’s on the line at any particular moment.

You can identify competent factories through site visits, audit history, trade history, government records, and export financials (export credit system is unique to China). None of this is particularly difficult to accomplish, but can take substantial time and requires access to records and “boots on the ground.” A short-cut, of course, is to ask someone knowledgable that you trust about their experience with a particular vendor – a tactic that we’ve used to particular success as it leverages the due diligence of the other party.

Ignorance

This is the crux of most problems and often it is the brand’s fault, not the factory’s. Brand’s employ designers and engineers who are trained to think in terms of specifications, but factories think in terms of procedures. There are an infinite number of ways to map specifications to procedures. If the brand relies on the factory to do this work, then it cannot be certain of the outcome.

Even if you construct the procedures correctly, you may still encounter substantial difficulty with compliance. This is a typical assembly line. Note the pieces of paper (sometimes laminated) over the workers’ heads (pink arrows).

They look like this:

These are called Standard Operating Procedure (SOP) Documents. They contain the work instructions for each station on the assembly line. The tiny block of text to the right of the photo is the list of steps to perform. They are rather intricate and detailed in this example and contain multiple actions for each SOP page.

Now go back to the factory photo above and count the number of workers you see in the photo verifying their work against these checklists as they go about their duties. Hint? The answer is zero. It’s not ergonomic, interesting, or consequential for workers to use this form of process control.

Better process controls eliminate ignorance

Considering the factory photo again, how would you verify that a change communicated to the factory was implemented… and implemented correctly? What is the likely outcome during the initial period after the change? What happens if the workforce includes new workers who were not present during initial (or re-) training?

If you can manage production procedure and compliance you will get strong factory performance, so it’s very important that you observe factory operations, review the SOP’s deployed on the workshop floor, and understand how worker training is being conducted. All of these things require some form of presence.

The most expensive form of presence is to go to the factory. This has a high opportunity cost, may be inconvenient or uncomfortable, and is difficult to maintain over time. Site visits are almost always necessary, but extended stays can be avoided with monitoring technology, 3rd party representatives, and even setting up a local office with employees (high overhead, complexity, cost).

Bottom line

Good products come from good design multiplied by good process control during manufacturing. Every brand pays attention to design. Don’t forget to pay attention to process.


Sources

  1. 英国的Interbrand Consultancy. “700全球专业人士.” Research Report.