China Procurement and Managing China Buying Quality and Profitability

The race towards out-sourcing is the race towards increasing profitability and reductions in costs of operation. It is a good approach taken in the wrong context with lots of quality disconnections with the importance of managing your overseas suppliers’ quality.

 

This approach increases the distance between the buyer and the maker. Highly productive quality activities localized in the management of local suppliers’ manufacturing quality are eliminated by the company. The management of quality is then shifted to the local China office in China and manned with employees with the least experience in the management of out-sourced suppliers.

 

Consequently, our customers end up with surprised associated costs related to production and quality anagement when production is transplanted to factories which they don’t own, manage or collaborate with intimately. These costs escalate when they discover rather late that their local China staff, or Asian staff or their wn expatriates’ employees cannot relate to the issues of manufacturing in different unfamiliar manufacturing environments.

 

All these have a serious impact on the profitability of out-sourcing your production.

 

So when it comes to managing suppliers’ quality in China or Asia, I chose to ask my clients to tabulate the costs of concern to them before marching into the supplier’s factory to fix these problems.

Prevention and Cure of problems caused by suppliers can be classified as:

• Customer returns – because we failed to detect manufacturing and components problems.

 

• Rejects – upon arrival because these failed to meet the original sample and manufacturing specification conformances and requirements.

 

• Rework – simply because the rejects were too expensive to send back, or must be fixed to reduce manufacturing downtime.

 

• Recalls –simply because we failed to do some of the above and saving costs on supplier testing.

 

• Inspection costs –simply because we did not add in an independent uncorrupted inspection team in the beginning to detect quality issues in the factory.

 

China suppliers are moving targets. China is itself a moving industrializing target. It is better to Plan to Succeed than Plan to fail with caution in outsourcing.

 

Posted by: Derrick Goh, Business Partner,
Accumatrix Business Technologies, Systems and Methods.