The Chief Asia Inspector Blog

10 Tips for Quality Sourcing from Asia

Whatever the type of goods, there are some tips that each Importer should keep in mind while importing from China or greater Asia.

At AsiaInspection, we visit 25,000 factories every year. This enables us to formulate these “10 tips for Quality Sourcing from Asia”, that we believe can prove particularly valuable should you deal with Asian vendors:

1. To find suppliers in Asia, do use the Internet (Alibaba.com, Made-in-China.com, GlobalSources.com etc…) and attend Sourcing Tradeshows involving Asian exhibitors..
2. Perform an Audit before making your final choice of vendor in order to validate manufacturing capabilities.
3. Ask the factory for a reference sample along with the quotation (the sample is usually free and you pay for the courier fee between the country of origin and the destination country).
4. Make sure your needs and specifications are well understood, using written comments, pictures and drawings.
5. Provide your vendor with detailed specifications and clarify your expected level of quality by giving acceptance levels for possible defects.
6. Perform an on-site Quality Inspection systematically before shipment (PSI). It is recommended to perform an earlier Inspection to avoid last-minute surprises (DUPRO).
7. Make sure you comply with the standards / directives applicable to your product (REACH, RoHS, CPSIA etc…), by asking your supplier to have a sample of the product tested and certified by an accredited laboratory.
8. Plan things well in advance and take at least 1 week buffer on the Expected Time Arrival (ETA).
9. It is good to physically meet with your vendor and spend time with them, in order to strengthen the business relationship through personal bridges.
10. Never take the explanation for a “no / impossible” without challenging it…

Paying the cost of unsafe imports

Interesting opinion article in the Mercury News, written by professors of law at University of California - Berkely.

2 of their opinions made me react :

1. First on the FDA implementation in China :

"Several weeks ago, for example, the Food and Drug Administration opened its first office in Beijing. This is a fine idea, but how will the eight employees working at the FDA's China facility inspect even a meaningful fraction of the $321 billion worth of goods imported from that country each year?"

I can only agree.. Though this FDA move is a clear improvement in the collaboration at state levels between the US and China on the products quality and safety issues, it is only symbolic in my opinion, and won't have much concrete consequences...

2. Then, our 2 professors have an interesting proposal :

"Where U.S. regulators expect a threat to consumer protection from foreign goods and services (because, for example, foreign regulatory structures are ineffective), they should increase the penalties for dangerous products levied on domestic companies involved in the importation and sale of the goods."

This is an interesting one, and I agree that there is much to be done at a legislative level in western countries to impose stricter supply chains to local companies. However, I would add that it is important to understand the supply chain itself, and who should hold the highest liability when unsafe imports are put on western markets.

My point is that it is easy to blame it on the Importer - often a SME - when he is only repercuting the cost pressure he gets from the final distributor (big retail groups) on his own Chinese or Asian suppliers. Ultimately, the real decision makers on the quality of imported goods are often big corporate retailers, who won't deal direct with Chinese factories, and who transfer the liability and risk of importing to smaller specialists importers.

So who should pay when something goes wrong ? And, more importantly, who should pay to make sure everything goes right (by implementing for ex. systematic quality controls at the source) ?

The price of quality

Following a recall from 2006 (see the details from the U.S. Consumer Product Safety Commission) , Reebok has just been fined a record US$ 1 Million for their violation of the US Federal Hazardous Substances Act.

The facts are pretty well known (a 4 year old kid died of lead poisoning after swallowing a made-in-china bracelet given away by Reebok), and the manufacturer's efforts to "fix" the issue (a 500,000+ pieces recall), communicate on it and prevent it from happening again seem real.

What is interesting here is that it sets a speaking example of the cost of non-quality (US$1 M for the fine, plus the cost of the worldwide recall, plus the purchase cost of 500,000 bracelets - probably around US$ 500,000). We are talking about a financial loss for Reebok of at least US$ 2 M I believe (and I am not counting the brand image damage).

I guess it makes the relatively small investment for setting up proper quality controls in China worth it...

Total Recall

The list of recalled made-in-Asia products keeps getting longer and longer…

It seems no one is safe anymore: to name only a few , your kids may damage their brain or become comatose when playing with their favorite toys, you can ingest poisonous chemicals while brushing your teeth should you observe basic hygiene rules, or die after eating your daily portion should you be a pet...

You might also learn that your kids’ clothes were actually manufactured by Indian children, some as young as 10.

For more of these pleasant stories, you can consult the US Consumer Product Safety Commission here  (for all products) or here (for toys only), the US Food and Drug Administration here, or the EU recalls list here...

Should we put all the blame on Asian suppliers and stop doing business with them ?

I don't think so; these stories are only a strong reminder that international trade is risky - and that you can not pressure for lower prices on one hand, and not watch out for the quality on the other hand. Finding the balance is what makes it difficult - but this is also where importers can bring value to their clients !

Don't mess up with Quality in China...

These past weeks have seen a number of stories unveiled about quality issues on China productions, mainly on the food & drugs industries - and recently in the Toys industry.
There are stories about this bun maker using cardboards found on the streets in his products, the counterfeit drinking water sold in Beijing, or the infamous use of antifreeze chemicals inside toothpaste...
Finally, these last days, Dora the Explorer returned home, with Mattel announcing a recall for 1.5 million toys made in China (containing excessive lead levels).

The matter is getting very concerning for the Chinese government. The execution of the the ex-Food & Drugs Administration chief Zheng Xiaoyu, after being convicted for bribery charges (he took about 6,5 million RMB to let defective drugs get SFDA approval, ultimately causing the death of at least a dozen patients) will certainly not be enough to restore the reputation of the "made in China".

Figures given by the Herald Tribune sound scary : 23,000 cases uncovered of fake or low-quality food between December & May, only 81% of the food tested in a nationwide survey up to safety standards (improving from 78% the year before),

Chinese government was prompt to react, with the implementation of guarantee seals from the Quarantine administration on all food exported items in next September, the tightening of drugs approval procedures, or the implementation of a daily reporting system on food safety.

The risk that these stories hamper the long expected restoration of the Chinese leadership with the coming Beijing Olympics in August 2008, while the world will be watching closely, is high.

I can't help but insist on the importance of the Quality Inspections on-site, as much for every importer buying from China, as for the manufacters themselves who are willing to establish their reputation and improve.

Attention all buyers !

I heard rumors these last days saying China was going to cut tax rebates granted to local exporters on a wide range of goods... Today for the first time I read something official here on the matter.

This is big (bad?) news !

From 1st of July (that is, in about 10 days), we are very likely to see Chinese suppliers react drastically and raise their selling prices to maintain profits - apparently we are talking about 5 to 10% increases on some products (clothes, shoes...), which will have a clear impact for AsiaInspection's clients !

So the Chief's tip of the day to all importers would be to hurry and push for shipments before the end of June !

Direct from the Hong Kong fair !

Completing my previous posts on Canton fair, here is a word from the Hong Kong Electronic & Components fair, where AsiaInspection is exhibiting this year for the first time (after having exhibited at other HK fairs the previous years).

The fair is organized by Globalsources, the leading online platform "connecting global buyers and suppliers", who by the way happens to have the same graphical chart than AI (red, black & grey)!

It takes place at AsiaWorld Expo, a new exhibition center opened in 2006 in Hong Kong, built conveniently near the International Airport and offering an additional 70,000 sqm space for exhibitions to relieve the "old" HK Convention Center located on the Hong Kong island.

After more than 10 years visiting these Asian fairs I am still dazzled by the atmosphere you feel there, and how these events make you sense, in a very tangible way, the 10% economic growth of China !

Quick-fire backfire

                                                  

It is debatable what the EU is trying to do by imposing quick-fire textile quotas on China, now that the restrictive Multi-Fibre Agreement is no more. According to this Guardian article, if it wanted more jobs at home, it is likely to fail.  If it was also trying to look out for its own little guys - developing countries such as Morocco and Tunisia - I would suggest that it is likely to fail in that too. Who looks like the big winner, the guy making all the sweaters now that the dragon’s claws have been ever so slightly dulled? Not the weak or vulnerable, but instead: that other racy Asian economy - India.

AsiaInspection’s tours have shot up like a lunar rocket in India: we made eight times our usual number of inspections there this year. Not that China seems to be suffering too much (at this stage); inspections there have increased threefold.

If you imagine the Asian economies are rising like dough (go on, do it just for a moment), it’s funny how if someone tries to squash a bit back into its pan, another bit puffs out somewhere else. In fact, it seems that all the EU has managed to do is irritate their own importers, retailers and inflation rates. Whoops!

La zone d’ombre de la corruption

L’article suivant sur la corruption en Chine n’est pas dénué d’intérêt. Notez que selon ce qui y est dit, le phénomène serait plus courant lorsque des fonctionnaires de l’administration sont impliqués (pour une surprise, ça c’est une surprise !). Certains actes relèvent évidemment de malversations. Mais à quel moment pouvons-nous dire que la simple politesse ou l’hospitalité deviennent inconfortables ?

Les entreprises de contrôle qualité sont parfois confrontées à des situations de corruption. Lorsque les fournisseurs demandent aux inspecteurs de fermer les yeux en échange d’argent ou de cadeaux, par exemple. Bien évidemment, il existe toujours une zone d’ombre. Y a-t-il corruption lorsqu’une usine envoie un véhicule pour passer prendre l’inspecteur ? Ma société répond par l’affirmative.

Nous demandons à nos inspecteurs de ne jamais rien accepter de l’usine qu’ils auditent, qu’il s’agisse d’un repas, d’une course en taxi ou d’un trajet en voiture. Nous leur allouons bien sûr le budget nécessaire pour couvrir leurs dépenses. Nous signifions également très clairement aux usines que nous n’avons aucun pouvoir de décision, la décision finale étant toujours prise par le client, et non par nous. Nous sommes leurs yeux dans l’usine. Nous avons par ailleurs d’autres secrets en interne qui permettent de protéger nos inspecteurs de divers types de pressions malhonnêtes – ces procédés pèsent peut-être sur le portefeuille mais ils ont le mérite d’être efficaces.

Ce n’est pas en offrant des pots-de-vin à nos inspecteurs que les fournisseurs audités auront l’assurance d’obtenir l’aval des clients. En outre, nous gardons un œil sur nos inspecteurs en organisant des audits internes impromptus au cours de missions d’inspection. Nous disposons également d’une base de données qui nous permet d’avoir accès aux résultats établis par les inspecteurs à la suite d’un audit et d’identifier les bons, et les mauvais, inspecteurs. Leur travail est évalué par des superviseurs chargés de noter les éventuelles bizarreries constatées ou de rechercher les informations qui n’apparaissent pas comme elles le devraient dans les rapports des inspecteurs. Enfin, c’est évident, nous payons bien nos inspecteurs, nous les traitons bien et nous faisons en sorte qu’ils soient fiers du travail qu’ils accomplissent.

Sébastien Breteau

Who's paying for your discount?

Following on from my last post, contrary to the conspiracy theorists, most multinational companies do take public opinion to heart and pay close attention to their supply chains, rather than wasting energy on “cover ups”!

Note Apple’s acknowledgement (albeit after a fairly responsible bit of reporting brought the problem to light) that some workers at its iPod factory were working more than 60 hours per week. This is common practice in China – hell, it’s common practice on Wall Street – but it breached the company’s own code of conduct.