Profit Minded

Global Trading Tips: The Fivefold Path to Quality Control

Global Quality

For businesses that outsource their manufacturing to overseas suppliers, quality control is critical to success. Outsourcing, though, is not a level playing field. When the world's most valuable company, Apple, has an axe to grind on QC, CEO Tim Cook can jet in, don a white coat and demand a tour of the factory. In a recent interview with Bloomberg Businessweek, Cook revealed that Apple and its supplier work so closely that employees from Cupertino regularly bunk in Chinese factory dorms.

If you're a small business you'll never wield Apple's level of influence—putting eyeballs and clipboards on the factory floor at every stage of the production process takes time and money that few SMEs can spare. But there are measures available, short of moving into a dorm room in China, that can help ensure the products that roll off the assembly line meet your standards and those of your customers. Here are five tips for getting what you pay for, without paying a lot to do so:

1. ASK FOR SAMPLES. Unless your products are very high value, a trial shipment is an affordable way to personally test production quality prior to signing a manufacturing agreement. If you're ordering a custom product, make sure you're very clear about the specifications and ask for photos to be e-mailed to you before the samples are sent. While you might be wary of committing too much money to samples, bear in mind that the more you order the better a benchmark of quality and consistency they'll give you—and don't forget they might be useful to you when testing the market locally with partners and customers.

2. PAY A VISIT. If the samples are good, you might be ready to place your first order. But before you do, consider first the long-term value of a (tax-deductible) business trip to visit your supplier in person. This is a great time to evaluate your partner's strengths and weaknesses in terms of order size, stock levels, custom production abilities and so on—all of which have the potential to affect quality as the size and scope of your business evolves. It's also your chance to see the factory in action—to observe, for example, whether checkers on the assembly line report possible problems to the production manager (a man who might not want to hear about problems if he has quotas to hit) or to a separate quality control manager. If you can't visit in person try to Skype with the supplier and ask for documentation of their QC process. Just because you're not getting on a plane doesn’t mean you can't look your counterpart in the eyes and begin building some trust.

3. GET AN AUDIT. In any factory there's a risk a sales manager will make promises the production manager can't meet. The best way to ensure a supplier is capable of delivering the quality of goods you're expecting is to have their factory audited. While a basic check costs as little as a few hundred dollars, a full factory audit—including checks on QC processes by an inspector with a trained eye—could cost up to $1,500. That may turn out to be the best money you ever spent, but if an audit is beyond your means you could try to piggy back someone else's. When you ordered a sample or visited the factory you went from being just another inquiry to a genuine potential new customer. At that point you have the factory's attention, so ask if you can see copies of any recent audits.

Just remember that a refusal doesn't automatically mean the supplier has something to hide. "Asking for a report if perfectly acceptable, but they might not provide it," says Andrew Reich, founder of Shenzhen-based InTouch Services, a provider of quality control services for overseas buyers and the author of the Qualitywars blog. "There's a Catch-22. A factory that's professional enough to have been audited by a third party on behalf of a client like Disney or Target is likely also professional enough that they wouldn't just send another client's report to you."

If you can't get hold of an audit, look for other ways to do due diligence. "Treat the factory like an employee and you're hiring them," says Reich. As well as product samples, ask the factory to send photos of their facilities, check whether they have ISO certification (with the ISO 9000 standard most relevant) and ask for client references. Not all contracts are confidential so the supplier should be able to put you in touch with at least a couple of their customers. Ask them specifically about quality control. Were they happy with the finished products? Did they run into any problems with the way the factory and its QC process was run?

4. CONDUCT AN INSPECTION. Quality control is an industry in itself with inspectors you can hire who will provide checks before, during and after the production cycle, along with lab testing for hazardous materials. International trading website Alibaba.com offers affordable third-party inspection services, but if you only pay for one check, make it the final random inspection. Contracts often specify a 30% deposit with the 70% balance payable upon a satisfactory pre-shipment inspection—so this is usually your moment to reject the goods if they are not up to scratch.

Your inspector will conduct a random check of the finished goods, unpacking, handling and using products just as your customers would. This ensures you're not only getting what you paid for but also that there are no critical defects or safety issues that would prevent the goods from being imported or sold in your home country. Check with your inspector if they will cover labelling requirements, too. Since the introduction of the Consumer Product Safety Improvement Act in 2008, all products heading for the U.S. are subject to stringent label disclosures. Failing to meet these requirements is a common mistake made by China manufacturers.

5. GIVE FEEDBACK. If the goods you ordered pass muster with the inspection company but the quality isn't all you hoped for, let the factory know and gauge their response. When dealing over the Internet with a Chinese factory, too many small businesses write off disappointments in silence. This is where your personal relationship comes in. Remember the factory is a business just like you, so understanding their motivation is the key to working with them to improve quality—or making the call to find a new supplier. "Even if they’re a good factory they might not be interested in your business. You might be a small client and they're a huge factory, or vice versa," says Reich. "It's all about the fit."

By Stuart Whitmore, originally published by Alizila

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