Summary
Quality has been the greatest challenge to buyers in China since the process began its stellar growth in the 80's. The consumer now 'reads the carton' and is better informed than ever before. There is mistrust of imports from developing countries, exacerbated by recalls such as experienced by Mattel, which attract disproportionate attention, in terms of levels of global trade. Buyers need to have extra vigilance as volumes start to recover and cost cutting measures that may have been implemented.
Analysis
The tools to minimize risk of quality issues exist, and the processes are cost effective. Increasing pressure on costs and capacity, forces buyers to move out of areas where infrastructure and support services are well established. This is an evolutionary process. Service providers who exist to support quality, should be used in preference to in house quality if international standards are to be the aim. Truly independent audit trails are needed. These are a relatively small cost of product at origin, and should be viewed as an insurance premium.
Consumers started to 'read the packaging' on foodstuffs for the first time 5 or 6 years ago, and this practise is spreading to be a habit, which can only be a good development, as we become aware of what we are consuming, and the impact we are having as a result of its consumption.
It would be impossible, given the growth in China's export outputs, that quality problems did not exist. While cases such as Mattel's are of concern, the quality issue in relation to exporting from any developing economy has been around since the growth in the 80's. With all the infrastructure available to control quality at source, it is surprising that something of this magnitude should get through the control process. However, as anyone who works with these countries knows, it happens, and while Mattel have to be ultimately responsible, there will be lessons to be learned by all China/low cost country buyers.
The consumer pays for the assurances ultimately, but the actual cost of providing these is minimal. The cost of quality control is a very small percentage of the retail value of imports. The cost of shipping and delivery to stores by far exceeds the cost of independent quality control.
While criticism could be levied at the cause of these recalls, there are many more which occur with the plethora of smaller transactions, which do not get any attention. Buyers in this sector should have a responsibility to ensure independent quality control is applied to their production resources in developing countries, these being of the highest professional level and independent specialists. The cost factor is not an issue here.
The trends to move production to lower and lower cost areas exacerbates the risk of problems of this type, as a result of the infrastructure in the surrounding areas being less developed in terms of laboratories and capacity. The responsibility exists with buyers and service providers to ensure that such infrastructure is in place.
If it is not, this will be further proof that the market is a far more effective strategic monitor of imports, than say, tarrifs or restrictions. The consumer is increasingly aware of the impact on the environment, and will vote for this by spending accordingly, creating a new value for manufacturers to strive for and renewed interest in domestic manufacturing.
China and other low cost countries will remain a challenge for attaining consistent and acceptable levels of quality, and any quality recall draws attention to the risk of distant, stretched supply chains, and the real cost of the savings that consumers have now come to expect. Buyers everywhere need to review the impact that higher volumes will start to have on their low cost supply chain's and the ability and capacity to respond. China based factories were quite ruthless in cutting costs as the reality of the recession became clear. Now as volumes start to recover, capacity in essential support services needs to be rebuilt, and retrained.
