Lessons from China’s Quality Fade Episodes

(Written by Milind Mohile)

Recent buzz about Chinese made drywall in US follows a progression of quality issues with material sourced from India’s north-eastern neighbor. After past issues with chemically tainted pet-food, aluminium-deficient structural elements, lead-painted toys, low-quality tires and melamine-mixed milk, this new event cause more concern with outsourcing professionals like Paul Midler. I will use recent interview of Midler by NDA’s Vembu as a platform to learn few lessons from China’s troubles in international market as global supplier.

Let’s assume for a moment that, continuous troubles with quality of made-in-China goods will lead retailers to look elsewhere for alternate sourcing. In that scenario, let’s see what major challenges Indian manufacturers will face if they want to increase their share of global supply at the expense of Chinese suppliers.

Challenge: Diminishing patience of retailers

For longest time retailers in developed nations (US) has been rationalizing lack of quality of material sourced from developing countries (China) on various seemingly logical, but unacceptable reasons. In future this is not guaranteed… in fact global suppliers must assume that in future, stricter punitive actions will become part of contract terms for ensuring desired quality. If and when US and other big consumers get rid of their dependence (or should I call addiction?) of made-in-China goods, they will make sure that they don’t get trapped in another such sole-sourcing situation. And, that they will have ability to actually walk out of the deal if they don’t get quality products.
Manufacturing strategy going forward >>> No Gimmicks, Play Fair.

Challenge: Own your products

Suppliers to global marketplace must embrace and own their products. They should be proud of their quality. That’s the level of confidence required in one’s own capabilities to give confidence to retailers buying these products. Also, retailers may be more open in future about their sourcing partner. So, unlike many Chinese factories, future supplier factories may not be invisible under some false “trade secret” pretext.
This type of ownership will come by treating quality as an ally and not a burden. Currently retailers rely heavily on self-regulation on supplier side. Instead of trying to win contract merely based on lowest cost, offer ingenious solution to provide quality products at best price. Guarantee confidence in quality along with product. Investment in government regulated testing facilities to supervise quality of all exported goods will go a long way in instilling confidence to foreign retailers. Even partial involvement of local/central government bodies in providing such third-party endorsement will elevate confidence level.
Manufacturing strategy going forward >>> Embrace Quality.

Challenge: Lead times
This is biggest challenge of all. This is where China beats hell out of any competition. They have superior infrastructure and supply chain to supply at best possible cycle times. What other manufacturer lacks in infrastructure, it needs to make up with manufacturing excellence to achieve that cycle time. There is absolutely no other way around this challenge. Only excellence in manufacturing and logistic practices will bring Indian manufacturer on level playing field with global manufacturing giants like China.
Manufacturing strategy going forward >>> EXCEL in Manufacturing & Logistics.

This is tall order to address and this should be next “5-year plan” for any manufacturer who wants to make its mark in global market. Let’s now see some of the advantages

Indian manufacturers have.

Advantage: No history of “bad quality supplier” status

Unlike China (and, yes even Japan… can you imagine?), India doesn’t have tainted history of being a global supplier of low quality material. India’s quality brand will get “neutral’ rating as a worst case scenario, if not better.

Advantage: Democratic business process

On a grand scheme of things, democratic process works in India. Effect of politics on business future is more predictable. It can have a long term vision and need not worry about government’s whims. So, Indian factory owners are less myopic than their Chinese counterparts.

Advantage: Carrot-and-stick approach

By-product of democratic business process is that along with proverbial carrot, there also exists a stick to penalize bad business practices. And, by this, I mean that government does not give extra-large carrot to setup factory-cities or to get foreign demands or to meet those demands at any cost. Private enterprises are left to their own devices to get market share and keep it.

Exploiting these advantages while working on the challenges listed above should be part of strategy for global aspirants. And, it not just applies to suppliers to global retailers, but also to local operations to global companies.