Interesting article here on corruption in China – note that the article says it’s most common where government officials are involved (surprise, surprise). Some actions are obviously corrupt, but when does mere politeness or hospitality become uncomfortable?
Quality control companies can face bribery issues such as suppliers promising money or gifts to inspectors for closing their eyes. Of course, there is always a grey zone. For example, is it corruption when a factory sends a car to pick up the inspector? My company says yes.
Our inspectors are told never to accept a lift, a cab or a meal from the factory they are auditing. Obviously, we provide them with a budget to cover these expenses. Also, we make it very clear to factories that we don’t have any decision-making power as the final decision is always made by the client and not by us – we are their eyes in the factory. Other internal secrets help shield our inspectors from various types of corrupting pressures – these processes may be hard on the wallet but they’re very effective.
Bribing our inspector is not a guarantee that the client will approve the production. Secondly, we watch the watchers – we organize unannounced internal audits during inspections, and we can track inspection results by inspectors on our database, which allows us to identify good and bad inspectors. The work is assessed by supervisors who will note any curious findings or missing information on inspectors’ reports. And finally, and most obviously, we pay and treat our inspectors well, and give them pride in what they do.
This slickly made ad lampoon attributed to French satirical TV show Les Guignols is doing the internet rounds (and here), suggesting Nike factory conditions in Asia leave something to be desired, to put it mildly.
Several points:
• Horror stories do deserve exposure. But beware: there are plenty of non-altruistic reasons why like to people start throwing dirt around, even if it doesn’t stick (e.g. über-brand Apple is facing the ignominy of answering the question “Are iPods really evil as people believe?” - read more here).
• But in my experience – which includes inspecting literally hundreds of Chinese factories per year – the majority of Chinese factories aren’t any less (or more) pleasant than factories elsewhere. The news is not all bad! For light-hearted confirmation, for example, click here.
• Overall, factory conditions in China have vastly improved over the last decade – in part due to a labor shortage. As I have pointed out before, workers who are in demand have power.
• Implying that “made in China” necessarily means “made in Sweatshop” is false and counterproductive to improving factory conditions. How? Duped “ethical buyers” who buy the stereotype may just avoid anything China-made instead of learning to discern between one Chinese manufacturer and another. The key - of course - is to have keen eyes and ears on the ground (which is of course our expertise).
Could this barbed video just be a case of Gallic jealousy about the success of China (and of Nike – i.e. a fabulously successful American company)? I believe China Law Blog may have said something on the subject not so long ago!
A recent Fortune magazine article highlights a big problem plaguing outsourcing – a problem known as the “ghost shift” or the “third shift”. 
Companies licensed to produce a fixed quantity of goods – sports shoes or whatever – deliberately produce more (during this unauthorized “third” or “ghost” shift), then quietly sell the surplus illegally for their own profit. Dead easy really given that the proprietary information is originally handed over on a silver platter, as part of a legit deal… meaning that the “counterfeits” are that in name only, being made to virtually the same specs.
What’s the solution when you’re oceans away from your “trusted producer”? Nothing is 100% guaranteed, but some steps are rather effective:
#1 Conduct due diligence: before you sign any contact investigate your supply chain, your manufacturing companies and their supply chains thoroughly – interview as many other clients as possible.
#2 Maintain monitoring: Fortune mentions that shoe giant New Balance - badly burnt in the past - writes tough audit clauses into contracts, and enforces them. It even uses encrypted security tags to monitor how many shoes are being manufactured.
#3 As far as possible, minimize the incentives for the company to start selling your goods "off the back of a truck": treat them well both personally and financially, and emphasize the potential for your relationship to be long-term - so long as nothing jeopardizes it…
It's not foolproof, but might just make a wolf-in-sheep's-clothing think twice before getting his factory to run in the dead of night... Especially if he knows you're watching.
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