How Does China Quality Control?

The complications that can arise due to supply chain inadequacies are enough to make your head spin. Here are some critical warning signs you and your company should do everything to avoid.

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Transparency International’s latest Corruption Perception Index places most countries in the Asia Pacific region in the bottom half of their world ranking. Given the prevalence of contract manufacturing in countries like China, India, and Vietnam—all of which scored 40 or less out of a possible 100 points—these results continue to give importers cause for concern.

In fact, high integrity is one of the traits importers most often seek in a quality control (QC) inspector, whether hiring their own staff or an independent inspection firm. But even despite your best efforts at due diligence, corruption can still impact your inspections. Results can vary from receiving defective or otherwise unsellable goods, to losing valued customers and distribution channels when retailers refuse to stock your products.

What does corruption in your QC inspection process look like?
When you hear the word “corruption” you probably think of an overt exchange of money for some favor or special treatment. China’s custom of exchanging red envelopes filled with money, or hóng bāo, is a well-known example. But like many importers, you may not realize that corruption, as seen in the QC industry today, more often takes much subtler forms, including:

  • Transportation – factory management or staff may offer to drive your inspector to or from the inspection site
  • Meals – suppliers may offer to provide free lunch to your inspector, whether on-site or at a nearby restaurant
  • Gifts – suppliers may offer your inspector a gift—often cigarettes, tea or a bottle of wine in China
  • Accommodation – Factory managers may offer to pay for or otherwise provide accommodation
  • Entertainment – it is very common for suppliers in East Asia to treat their customers to an evening out to dinner or a local bar or karaoke (KTV in China)

Extortion on the part of inspectors
Extortion typically occurs when inspectors demand some compensation, or “kickback,” from suppliers in exchange for favorable reports of product quality. The goods produced at a factory may meet your requirements, but an unscrupulous inspector may threaten to submit a report to the contrary, unless your supplier gives them some kind of reward.

What consequences might you face when your inspector’s integrity is compromised?

Perhaps the most obvious and immediate result of integrity issues during the product inspection process is that you will receive an inaccurate report. Integrity issues can affect reporting in several ways, including:

  • Falsely reporting product condition or quality – inspectors might plainly misrepresent their findings of the product in the report they issue you. For example, they might underreport the number of defective units found in the sample.
  • Under-inspecting – most inspections use acceptance sampling, typically following AQL standards, which dictates a specific sample size, the number of pieces from production QC staff pull randomly for inspection. Often you will have agreed with your inspector ahead of time on this sample size (e.g. 125 piece), but your inspector may check fewer pieces than this quantity.
  • Overstating the quantity of finished goods – production and shipping delays are common worries among importers. Inspectors may falsely report that production is on schedule by overstating the number of finished goods they find at the factory.
  • Hiding the factory information – your supplier may not want you to know the true location of their factory, the conditions at that factory or that they are using sub-suppliers.

The main concern with receiving an inaccurate inspection report is that you will likely make decisions about your goods based on false information. This can result in a number of serious consequences.

Negative publicity surrounding labor violations can damage your brand’s reputation, as shown with Ivanka Trump’s brand, which made recent headlines. A safety violation could even result in an industrial disaster like the Rana Plaza collapse in 2013, which resulted in about 1,130 deaths.

Shipping defective or substandard goods
False or inaccurate reporting often leads importers to approve an order for shipping only to find unacceptable quality issues in the finished goods they receive. You may need to pay for costly product rework or other corrective actions that factory staff could easily have performed prior to shipping. Worse yet, you may be forced to discard unsellable goods or send goods to customers tha t don’t meet their expectations.

Missing shipping deadlines
Another consequence of receiving an inaccurate report is delays. Misinformation can lead to confusion and delays as you try to determine when your shipment will be ready to leave the factory. These delays often affect your customers, as you may be unable to meet commitments you’ve made to deliver the goods to them by a certain date.

Violating labor laws or social compliance standards
You may already be familiar with the implications of corruption and extortion in the auditing industry. Factory managers facing an audit to check adherence to brand or retailer compliance standards might attempt to hide violations by bribing the auditor. A similar situation can occur during QC inspection.

Your distributors may choose to cut ties with you if they discover labor violations at your supplier’s facility. Negative publicity surrounding labor violations can damage your brand’s reputation, as shown with Ivanka Trump’s brand, which made recent headlines. A safety violation could even result in an industrial disaster like the Rana Plaza collapse in 2013, which resulted in about 1,130 deaths.

Category Business