China Law Blog

The relatively new Quality Wars blog is looking like it will be a good source of information on quality control (QC) in China. The blog's subtitle is "The fight for quality export product in China." I especially liked two of its posts.

The first, entitled, "QC…In-house vs. Outsource," deals with whether foreign companies manufacturing in China are better off doing their own QC with an employee in China or hiring an outside QC company. The post very nicely sets out the following pros and cons of each:

Outsource QC to a 3rd Party QC Company

Positives

1. Opportunity to work with management and trained staff who specialize in checking product, factories and production in Asia

2. Can capitalize on the acquired knowledge of a QC company who has checked various different products and understands how factories in Asia attempt to “short-cut” and cheapen products for which a standard has already been established

3. Ease and economic value of having staff contracted on a “per-use” basis, with short notice

Negatives

1. On a “per-use” basis you may find that the cost of using a 3rd party QC company is higher than hiring one of your own local staff

2. May be difficult to get a 3rd party QC company (not all, but some) to get highly specialized and focused on your product line the way an internal staff could be

Hiring Your Own Local Staff

Positives

1. Generally will provide you a lower cost option on a per-inspection basis than working with a 3rd party QC company (especially if you were to be doing 20+ inspections in Asia per month)

2. This person may be trained to handle functions outside of QC, such as price negotiation and other sourcing functions, which a 3rd party QC company will not get involved in

3. Opportunity to develop long-term relationship with a single individual which could be a strategic to your long term sourcing solution

Negatives

1. Generally difficult to find and train a single individual in the quality control function, who has not worked in a structured QC company previously – even more difficult from a remote location

2. Higher likelihood that such an individual will be bribed by a factory to pass unacceptable goods (a major issue in the QC industry) –no company structure to provide a moral framework and no cooperate measures in place to prevent unethical behavior

3. Difficult to keep a low-cost employee employed remotely and on a “per-use” basis, which is often how QC is needed by your company

I am going to go out on a limb here and say that most of the time, if you are not a big company, it makes sense to hire an outside company to handle your China QC. I say this because I have heard and seen far too many instances where the inside employee was on the take. What do you think?

Quality Wars also has an excellent post, entitled, "Keeping Clean....," in which it discusses why your QC company should not be the same company as your sourcing company:

You can not be living and working in China, and not be approached at least once a month with requests to “find me this” or “find me that”. Working in the QC realm, with all the contact we have with factories, trading companies, agents, and US buyers, my company is constantly being bombarded with sourcing opportunities. I find myself saying out loud now more than ever “we don’t do that because we are strictly a 3rd party QC company”. My point: be wary of any QC company who at any time tells you they are also involved in sourcing. On the same hand, be suspicious of any trading company’s own in-house QC. Trading and QC are inherently conflicts of interest when it comes down to making tough decisions about shipping product, and they are always best handled by separate companies. A good 3rd party QC company does not participate in sourcing in any fashion if they are looking for long term success.

I do not know the QC business well enough to affirm or deny whether engaging in QC and sourcing is a conflict, but it certainly seems to make sense to me.

Let's be careful out there.