Dealing With China’s ‘Quality Fade’

Paul Midler, Forbes.com, 07.26.2007-

Recent media reports detailing a series of quality problems with Chinese-made exports–pet food tainted with prohibited chemicals, toys covered with lead paint and tires that fall apart at high speed–have understandably alarmed the American public and resulted in a number of international product recalls.

But supply chain professionals not directly affected by these recalls remain unusually calm. “Everything will be all right,” said one U.S. importer on a buying mission to China. “As the country continues to develop, the quality of its products will naturally rise.”

It’s the sort of comment that sounds logical, but is not necessarily true. Quality does not always rise over time, as China’s own history shows.

At the end of the 19th century, the West rushed to buy China’s beautiful silk products. Demand quickly expanded, and new players moved into the market. As competition intensified, manufacturers began to cut corners on quality, and silk products out of China soon gained a reputation as inferior goods.

By the beginning of the 20th century, traders were already looking elsewhere, and Japan, which had been building a reputation for delivering a more consistently high-quality product, became an attractive alternative. By 1930, Japan was exporting twice as much silk as China.

One of the problems facing China is that manufacturers continue to engage in a practice I call “quality fade.” This is 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.

What is maddening to importers is that quality fade often occurs in the last place an importer thinks to check. One American company had been importing a line of health and beauty care products for over a year when the cardboard boxes that held its product suddenly started collapsing under their own weight. There was no logical explanation for the collapse except quality fade, and the supplier in this case blamed subsuppliers for replacing an acceptable cardboard box with ones that were inferior.

The Case Of The Missing Aluminum

Some quality issues are not all that serious, but others are downright frightening. One of the most disturbing examples I have encountered while working in China involved the manufacture and importation of aluminum systems used to construct high-rise commercial buildings. These are the systems that support tons of concrete as it is being poured, and their general stability is critical.

The American company that designed and patented the system engineered all key components. It knew exactly how much each part was supposed to weigh, and yet the level of engineering sophistication did not stop the supplier from making a unilateral decision to reduce the specifications. When the “production error” was caught, one aluminum part was found to be weighing less than 90% of its intended weight.

Where did the missing aluminum go? Into the factory owner’s pocket as a cost saving. The only thing passed on to the customer was an increase in product risk. Quality fade is like the straw that broke the camel’s back–only in reverse. Suppliers push the limit by taking more and more out of the equation until they are caught, or until disaster strikes. (…… more details from Forbes)

Paul Midler is the founder and president of China Advantage, a services firm that provides outsourcing and supply chain management to U.S. and European companies. He has been involved with China for more than 15 years, and in the course of his manufacturing career, has had dealings with thousands of Chinese factories.