Paul Midler, at Knowledge@Wharton, introduces the expression "quality fade" to describe,
the deliberate and secret habit of widening profit margins through a reduction in the quality of materials. Importers usually never notice what's happening; downward changes are subtle but progressive. The initial production sample is fine, but with each successive production run, a bit more of the necessary inputs are missing.
('Quality Fade': China's Great Business Challenge, July 25) . Chinese suppliers can pull this off because the fading is done in slow, incremental steps. Buyers may be slow to see it, and once they do, they may be reluctant to make major investments in developing relationships with new suppliers in response to what appear - at any point in time - to be small changes in quality. They may look for less radical fixes. They may engage in wishful thinking.
Dan Harris, a lawyer working in China, agrees that quality fade is common: China Quality Control Darkness Before the Dawn (July 27). Harris always warns his clients about the "fourth shipment":
In our experience, quality fade tends to happen disproportionally on the fourth shipment, probably because it is at this point that the Western importer is feeling comfortable enough with its Chinese manufacturer to place a large order and the Chinese manufacturer is feeling comfortable enough to cut corners.
Harris is optimistic:
Quality fade is a major problem in China. However, the reason why this is happening is not so much so Chinese manufacturers can rake in big margins, it is so they can survive. Many Chinese manufacturers have no margin whatsoever. With currency revaluation, massive competition, tax reform and the end of VAT rebates, huge numbers of Chinese manufacturers are operating at a loss. They are doing the quality fade in a desperate attempt to stay alive for a few more months or years. China is in a desperate situation of pursuit of the absolutely lowest price. China's manufacturers cannot continue this race to the bottom and continue to survive. At some point, they will need to shift to higher quality goods at a higher margin. This shift is already happening in the market as a whole and I have seen individual Chinese companies make this shift as well. Just this month, a client of mine was told by his Chinese supplier that the supplier could not continue to maintain expected quality without a price increase. My client wisely went along with this. I have seen companies fight a price increase when they had to have known there was no way quality could be maintained without it.
He also notes that instances where Chinese suppliers and foreign buyers have successful relationships go underreported. In the current environment, firms where things are working don't tend to see any upside in cooperating with reporters and drawing attention to the fact that they are sourcing out of China.
Harris goes on to discuss what a buyer should do to avoid quality problems, and provides a list of links to other Web commentary on Midler's original post.
Harris followed up today with a commentary on a recent New York Times story by Chang Lee on Mattel's successful efforts to make high-quality toys in China: China Product Outsourcing Done Right (July 30). The key to Mattel's success is "command and control":
"Mattel, and many of the outside analysts, say the key is command and control." Mattel gains this control by owning its manufacturing facilities in China, which the article describes as "a more costly method than using the lowest-bidding local manufacturer."
Mattel still uses outside Chinese manufacturers for some of its components and for materials, but controls their quality by demanding "these outside manufacturers comply with its [Mattel's] safety guidelines" and by analyzing and testing incoming supplies and raw materials...
Harris provides a useful critique of this article. Again, he is ultimately optimistic:
Based on my own experiences with clients that manufacture in China, it is clear to me that those companies that make the effort to secure high quality product from China generally get high quality product from China and those companies that fall short in that effort typically fall short in their results as well.
All three posts are worth reading in full.
It is easy to blame the suppliers greed in cutting corners.It is a fact that such behaviour exists in China as much as in any other country.When we look to reality
that they are a lot of factories deliver goods meeting the expectations of the buyers.So I take all these accusations with a grain of salt.
Many people work as third party contractors or in purchasing offices for the companies that can afford having a sourcing office and QC System.
Can we talk about quality fade of products without talking about fading of quality in quality control system?
The first job of any quality control system is to have due diligence.
If we search the description of due diligence:
Due diligence in Supplier Quality (also known as due care) is the effort made by a QC professional to validate conformance of product provided by the seller to the purchaser. Failure to make this effort may be considered negligence.
The aim of a quality control system is to prevent Quality Fade regardless of the root cause.
If any product reach the destination with quality flaw, the responsability of the system to prevent it comes to those who day after day are involved to detect any discrepancy, prior to shipment.
When the control system fails to deliver products in conformity, we can than talk about Investigative due diligence, involving a general obligation to identify true, root cause for non-compliance to meet a standard or contract requirement.
If we are talking about Quality Fade this fact can only coexist with Quality Control Fade.
The lesson can be learnt from these unfortunate events that Quality Control System should function without lowering the dilligence, that accidents happens even when there is no bad intention.
If I am paid to control the quality in every stage of production it is my duty to make sure that Quality fade can not pass the door of the producer.
It is a matter of choice between prevention and cure.
Posted by: Joe Gariplerden | August 30, 2007 at 11:51 PM
A great well writen post. as a domestic energy assessor in the uk im interested in this for my epc.
Posted by: home inspector | July 11, 2008 at 05:04 PM