Tuesday, June 18, 2024

Product Quality Perceptions of Chinese SMEs and the Best Option to Buy Quality Products from China

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I have 55 years of experience as a designer of electronic products for professional use. I have been manufacturing these with the best quality possible for our Indian and European customers. I have also been a buyer of components and equipment in bulk during my ten years with the government in Delhi as chairman of Electronics Commission and managing ET&T, central government’s trading company. Quality has been my prime concern, and I have managed to imbibe quality as a work culture of the organisations I have worked for and its deployment in production and customer service.

I have had a chance to take a close look at China’s SME sector when, in 2008, I travelled to China and visited 231 SME companies in seven urban production hubs in China, and personally interviewed them. This was part of a project for India-China Economic and Cultural Council to study the growth and success of China’s SME sector and identify reasons for their spectacular growth. During my visit, quality of Chinese products was the major aspect of the study.

What is quality
In the course of almost six decades in an engineering career, I found that manufacturers have varied perceptions about quality of what they deliver. Most of them relate to delivering quality that customers demand. Most, therefore think of quality as something that meets or exceeds customer’s expectations. Others think that, even in a more limited sense, quality means ‘meeting what customer will accept.’

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More conscious ones think of quality as delivering more than customers would want by making continuous improvements in their manufacturing and business processes. They anticipate what customers would want and work towards giving the best value for the price realised and add to the customer value.

Some define quality as doing the right thing, in a right way, with the right people. Some are more abstract, they believe that quality is about meeting or exceeding the expectations of clients, employees and the related community.

Workers in an electronics factory in Shenzhen, China (Image courtesy: wikimedia.org/wikipedia/commons)
Workers in an electronics factory in Shenzhen, China (Image courtesy: wikimedia.org/wikipedia/commons)

Then, of course, there is ISO certification that demands having in place the minimum level of quality systems, management processes and operational discipline. An ISO label becomes necessary to qualify as a supplier in India. Mid-size SMEs, who attend quality seminars, talk of Kaizen, Six Sigma, Taguchi, Quality Circles, TQM and other quality religions to evolve all-inclusive quality culture. In China’s SMEs, this is not very common, though.

In 1982, I was first exposed to the Chinese manufacturing sector when APLAB, of which I am a founding member, started exporting large quantities of test equipment like oscilloscopes to China. We were the only company in India to export electronic products to China.

Chinese manufacturing was in a mess as far as quality was concerned. Then, Deng Xiaoping dramatically changed the course of China’s industry via EPZs, as in Taiwan and South Korea. A huge number of western corporations moved their manufacturing to China since they could repatriate all their profits outside of China. Deng, thus, created a training ground for Chinese workers and engineers. They got trained to produce goods with high quality standards as demanded by European and American multinationals (MNCs). Entire China, in the process, got trained in quality engineering work using modern processes.

The smart Chinese personnel soon started leaving MNCs to start something of their own or become vendors of MNCs. Modern China learnt quality from export production, which became its quality culture. When work was outsourced to SMEs by these foreign firms, they taught their vendors the right processes, demanding quality.

Then, in late-1990s, these SMEs started exporting to other countries. That is when quality took its toll. The world rushed to buy from China and these trader importers taught Chinese to reduce the quality for a cheaper price. China today has a large number of SMEs that produce products with high quality, but it also has many others mushrooming to offer low-priced products demanded by trader importers.

Delivering quality essentially demands good designs that meet assured or claimed performance, expertise in technologies involved, knowledge of choosing the right materials, control over processes and skills to implement these with diligence and sincerity. The core of this is pride of the team involved in design and workmanship. It demands creating and motivating mutually-supportive teams to produce and deliver a product that gives an organisation a sense of pride.

Before meeting customer needs, the organisation, however, needs to set even higher standards for the team than what the customers demand. The challenge is even more in doing so within target costs and prices. I often used to say to my team that we have to deliver champaign at the price of beer.

All the quality processes mentioned above essentially show proven ways to achieve that goal. Most of these, however, are regimental. One must inculcate quality as a culture and a way of life, not limited to just the production work in the confines of a factory.

I have found that SMEs everywhere in Asia, including India, have several definitions for their quality goals, depending on how high up in the sky they choose to be. At the very least, it is about meeting customers’ specifications. The better objective is to give customers a product that meets their need and continued efforts to improve processes. Some SME manufacturers feel that quality needs to be good enough to ensure that customers come back and products do not.

Unfortunately, most SMEs in India, China and other low-cost Asian countries, are still at the base level. For them, producing a quality product means complying with rules imposed by a customer. With that mindset, higher quality means extra inspectors for quality policing. They complain that it costs more money. One Chinese SME said, “If customers use statistical quality-control standards based on acceptable quality level (AQL) limits, or if buyers set a tolerance tighter than what is usually considered normal for general consumer goods, they will raise the price”.

This mindset is reactive and not proactive. The manufacturer here does not wish to take any initiative to improve the design and production process but simply tighten the in-company inspection of quality.

I have observed that Chinese SMEs, like in India, consider quality and price to be tightly-linked. One conscious of quality must refuse to produce low-quality products, as happens in Germany or Japan. I find that trader importers too focus on low cost. They too get lured by nice samples that they see or receive from China and by their low price, not realising that sample quality is not indicative of mass production quality, and many, eventually, regret receiving products in bulk that are not up to the standard of the sample.

During my SME study in China, I found that Chinese do not like Indian trader importers. There is a cultural disconnect. Chinese wonder how anyone can demand high quality and also pay a low price. If the price is low, quality should be expected to be low, they say.

The problem is, Chinese SME suppliers, in a vast majority, are incapable of illustrating what quality standard they follow. Any reputed company that cares for its quality reputation will refuse business than dilute its benchmark quality. But, most Chinese suppliers are willing to accommodate such customers, who are willing to accept cheap goods. It is common in China for manufacturers to explain the difference for several pricing levels.

Let me, for a moment, move away from SMEs and talk about the concept of quality in the new business paradigm. A lot of us are not aware that iPhone 4 had several problems and Apple was aware of those. Yet, they released that version to avoid delaying the launch. They knew that they might have to replace some iPhones for free. It was considered the least-costly solution to their company. For them, the problem was known but they were sure that only a minority will detect it. In fact, free replacement for a few even raised the value of the company in the eyes of the customers. They knew that problems were minor and acceptable to risk the release.

The same thing is largely true of many software products, classically, Microsoft’s Window versions. This probably happens in other markets too because manufacturing is now controlled by businessmen with MBAs, rather than technologists like in Germany or Japan. Money has become a centre-piece, not quality. Companies have now become commodities for corporate growth.

Getting quality goods from China
One of the biggest barriers in China is language. Chinese SME suppliers do not speak or understand English and their business perceptions too are different. I, certainly, therefore believe that pre-shipment inspections are important to secure quality from China. That is why, in 2003, I set up a company in China to help ourselves and other friends’ world over to find the right sources and get assurance that we could get quality goods.

In order to secure on-time delivery of quality goods from Chinese suppliers, you will need to consider three areas.

1. Your supplier needs to be a genuine manufacturer. Many Chinese manufacturers found on the Internet are just catalogue/website companies. You can never get quality from a Chinese supplier who is not properly equipped to manufacture products; such as, the right test and production equipment, necessary skills and experience. He also should be willing to cooperate with you on regular improvements.

2. You need a local arm to work upstream to further reduce the risk of getting below-standard goods, instead of just filtering these at the end of the process. Local check is necessary even though quality remains the responsibility of the supplier. One must go deeper and dig in the details of what actions the supplier has implemented to fulfil the desired quality. Even after you have identified a good supplier, you will want to review the quality-control plan to make sure that all aspects are covered. One needs to be explicit in highlighting quality requirements and expectations. Many misunderstandings will be avoided during this step.

3. Pre-shipment inspection is always good insurance. There is no point in carrying out the inspection and stopping poor products just before shipment. What good it is for your business if you do not get the desired product at the right time? Discussing the inspection plan with the supplier is the best way to avoid this.

In my experience, there is no shortcut to the above-mentioned steps. Even if you are lucky enough to find a good supplier, you must follow these steps so that the process is faster and more straightforward.

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