Tag Archives: Sourcing in China

Chinese Drywall and Working with Chinese Suppliers

Stories like this one are popping up all over the media. People move into a lovely new tract home, bought at a good price, and a year or two later…toxic drywall starts poisoning the occupants and affecting the structure of the building.

I’m not a legal expert, so I’m not going to offer a legal opinion. What I will say is this: Somewhere along the supply chain, someone bought drywall that wasn’t made according to code. Whether the manufacture of toxic drywall on the Chinese side was a purposeful violation of standards for building materials, an unfortunate oversight, or just plain incompetence, somebody in the US, probably several people, sourced and approved the purchase of that drywall.

My guess is that these people had absolutely no idea what they were getting into. They may have hesitated at first and then caved to the pressure to provide materials at lower costs. They may have seen $$ signs in their eyes and gone for it with glee. Who knows what the motivation was? What they probably didn’t realize is that when you source overseas, you have got to be very, very careful about your QC process. You might order one shipment that looks perfect but, six months later, turns out to be defective. You might order a shipment that arrives in perfect order, but the next shipment might be bad. You may think you have the leverage you need to prevent you from getting cheated, only to find out that your definition of leverage is very different from your Chinese partner’s definition.

There are tremendous cost advantages to sourcing overseas, and there are many fine, ethical Chinese suppliers. But in the end, you’re buying something from a country that you probably don’t understand, and from people that you don’t understand. You CANNOT take it for granted that everything will be in order. You have got to put airtight QC/QA procedures in place for every shipment. If that means you have to send a consultant, or hire one in China, to inspect the factory, the materials used, and the finished product for every single shipment, then that’s what you do.

If you don’t do that, then you get to face a bunch of angry homeowners whose lives your poor purchasing practices have destroyed.

Leave a comment

Filed under Business, China, Sourcing in China

More on Chinese Food Safety

I’ve already written about Chinese food safety, explaining that Chinese manufacturing as a whole is going through growing pains that have a devastating effect on its victims.

Corporate China will eventually come around and do things right, but not before killing more people and losing much of its market for food products around the world.

This article gets it right. China’s business ethics environment needs to grow up, and fast. What many of those who are so keen to do business in China don’t realize is that, in many ways and in many parts of its vast territory, China is still the wild West.

There are many, many advantages to doing business with the Chinese, but if you don’t know what you’re doing, please get competent advice from someone you trust who does know what he/she is doing in greater China.

Leave a comment

Filed under Business, China

US Consumer Concerns About Chinese Food Safety

This is too juicy to pass up writing about. Trader Joe’s, a very successful retail food chain based in California, has pulled all Chinese-made food products from its shelves.

Click here for a brief news item from AFP: US store chain cuts sales of food from China

From the article:

US grocery chain Trader Joe’s said Monday it would stop selling food imported from China due to customers’ concerns about the products’ safety.

“Our customers have voiced concerns about products from this region and we have listened,” Trader Joe’s spokeswoman Alison Mochizuki said in a statement.

“All single ingredient food items sourced from mainland China sre scheduled to be out of our stores by April 1,” she said.

What this means is that (1) if an ingredient for a food product is sourced from China, that food product may still be sold in Trader Joe’s and (2) Trader Joe’s may eventually sell foods that are made entirely in China sometime in the future.

This is the very definition of “growing pains,” folks. The same sort of process occurred in Taiwan, thirty or forty years ago. Here’s how it works:

Stage One: A developing country offers competitive advantages in labor costs and manufacturing speed. Many first world countries switch their manufacturing to this country.

Stage Two: The developing country’s factory owners achieve some success, and then through a combination of penny-pinching greed, lack of foresight and vision, and general lack of understanding of what the foreign market demands, start sending product with quality problems. In the case of products like foods, toys, and tires, this is downright dangerous. Consumers in the first world country react, the media plays up the problems, and the flow of orders starts to dry up as buyers look elsewhere, maybe paying a bit more.

Stage Three: The government of the developing country realizes that if something isn’t done to reign in these factory bosses, the country’s export manufacturing business is going to go to hell in a handbasket. They clamp down on dangerous practices, enforcing compliance with safety regulations.

Stage Four: The developing country recovers its export market, and continues to develop its technology and safety measures.

The interesting question here is, with enforcement in China so haphazard and hit-and-miss, will China successfully get through Stage Three to Stage Four? Several efforts have already been made to crack down on abusers, but in China, where the emperor is far away, the subjects often do what they want.

Bottom Line: If you are sourcing your products from China, you’d damned well better be on the ground, or hire someone trustworthy to be on the ground, watching your suppliers like a hawk. There are many fantastic suppliers in China, but many are still learning how to deal with your standards.

6 Comments

Filed under Business, China, Sourcing

Factories in Taiwan (and China)

I saw this news item about factory closings in Taiwan a few days ago. From the article:

Statistics compiled by the Ministry of Economics Ministry show that in the first 10 months of this year, 2,419 factories closed down — a 60 percent increase over the same period of 2006.

These factories are closing because (1) the businesses they are in are unable to compete with factories in China, Vietnam, Thailand and (2) some of the bosses are closing up shop to move their operations to China.

I don’t know how many of these factories fall into the second category, but I do know that Taiwan’s economy, like the economies of several other developed nations, continues to transform itself from a manufacturing-oriented economy to a high-tech and services oriented economy.

If you’re thinking of sourcing in greater China, my advice is this: Some items are better sourced in Taiwan; some are better sourced in China. You’d do well to check with a consultant before you embark on a sourcing mission to either place. There are several factors to consider, and potential advantages and disadvantages to both places.

1 Comment

Filed under Business, Economics, Sourcing, Taiwan