If you import from China, you are probably frustrated by the lack of updates about production advancement. Not only that, but you must have been shocked by the lack of reliability of any update or forecast that your suppliers give you.

Simple reporting from the supplier

For those of you who purchase from a trading company, or who have a very good relationship with a factory, you should request at least a weekly update about each of your running orders.

It can take the shape of the below table, for example. The most important is to keep this reporting really, really simple.

With a bit of color coding, you will be able to see immediately most upcoming delays. In the above example, all seems to be running all right (green color).

Let’s say the factory notices some quality issues and needs to rework some of the goods. The “all sewing is over” milestone might be delayed, and the table might look like this:

Then, naturally, you should audit this update process by checking the status of production. Either you or an inspector can do it easily, and check product quality at the same time.

A few words of caution about the request for updates (from a comment written on a past article):

The attitude (on both sides) and the way we check and request updates is really important. I have seen many requests for update sent to suppliers by email that are just a one liner and lead to either a one liner ping pong game or a flaming chain of email. Not the way to project manage a p.o.

More in-depth planning

For those of you who ABSOLUTELY MUST FOLLOW VERY VERY CLOSELY a particularly sensitive order, there are basically 2 solutions:

• Come in China for several weeks.
• Pay a third-party quality assurance firm for stationing an inspector in the factory every day.

Either way, you should work more professionally. You should take a project management approach. The “Gantt chart” is a useful tool, if you have the resources to work out the planning and keep it updated. Read this article to understand how to use it.

The main problem is that it is very time-consuming to prepare. More than 99% of factories will be unwilling or unable to keep such a document updated by themselves. It is only viable when it makes sense economically to station someone in the factory over several weeks.

Has anybody got other suggestions?

Many people in Europe and in the US think of factories are large organizations where everyone follows a standard procedure. Quality and lead times are consistent because of detailed planning, and because it doesn’t matter if a few cogs don’t come to work in that gigantic gear system one morning.

Well, this is representative of less than 1% of Chinese factories. Over 90% of them should be compared to a small restaurant instead. And I am thinking of your neighborhood restaurant, not a McDonald’s or a Subway place.

The JLMade blog just published an article (A Lot Like Dining Out) that develops this same analogy. Here are two examples from that post:

Consistency: We just went to this place two weeks ago. We go back this weekend, order the same dishes and there are noticeable differences. The ingredients, the consistency, the taste…all different.

In manufacturing, the same will happen with your order. Regardless if it is the 3rd or 4th time you’ve ordered the same product, without the proper control there will be glaring differences. The differences could be results of multiple factors: changed material vendors, different guy mixing the paint, the old production line boss moved to a different facility, etc… Regardless of the reason something is going to be different.

Reaction: And your production facility will be no different than the waitress once you inform them of a problem. They will at first giggle nervously, and say sorry and their main goal is not quickly making it right, but they are deep down hoping you’ll shut-up about the issue, take it as it is and go away. Remember, when dealing with China, nothing, never, no way is EVER anybody’s fault.

Informing your factory about issues that have already been done is futile and you’ll be wasting your breath. Instead control up front, make things as clear as possible from the beginning and monitor processes along the way.

Actually, I already read a comparison between Chinese factories and Chinese restaurants, in One Small China Restaurant Writ Large. Really Large. (published on the China Law Blog).

Here is the typical cycle that many local restaurants go through:

1. Restaurant opens with nice space, really good chef, plenty of staff, and no skimping on ingredients.

2. Restaurant gets really popular and then chef asks for more money and when that is refused, he or she leaves. New, cheaper chef comes in and food quality starts to decline.

3. Decline in quality from #2 above leads to a small decline in customers.

4. Seeking to make up for the decline in customers, the restaurant owner starts skimping on the ingredients. Maybe they go from top quality fresh spices to cheaper dried spices.

5. Decline in the quality of ingredients leads to a decline in the number of customers.

6. Seeking to make up for the decline in customers, the restaurant owner lays off some staff and starts skimping on overall upkeep of the restaurant.

7. Decline in customers accelerates and restaurant eventually shuts down.

8. Owner blames new restaurant down the street for the problems.

The point is, it also happens a lot with local manufacturers. The owner might spend a lot of time entertaining customers (and getting entertained by suppliers), while the show is run by a production manager. That’s the key person, like the chef. If he leaves, the factory’s reliability might suddenly go down.

How to make sure you work with a well-organized manufacturer, rather than an informal operation run by one key manager? Perform an ISO 9000 audit on them.

What do you think?

I have been contacted several times by trading companies or importers to “prepare the field” for a social audit. Generally, one of their potential customers conducts a social compliance audit to qualify factories, before issuing any order.

In this case, what to do?

There are basically two ways of proceeding:

1. Some consultants (often former auditors from big-name auditing firms) can train the factory to get a better score. It often involves preparing fake documents, and training the staff to answer questions in a certain way. This is actually quite common in China.
2. Another method is to start by doing a real audit, and then working transparently with the factory to address the problems noted in the report.

Needless to say, my favorite is the second option. Last week, a client was asking us for consulting services and I responded this way:

Here is our suggestion:

-1- The first step is to do an audit anyway, to see how many issues stand on the road to a satisfactory audit report. Without this first step, we are all in the dark regarding the actions to take.

-2- If the audit shows many issues, I suggest that you discuss with the factory whether they think they can improve on those issues (which will be clearly listed in the audit report). If the factory refuses to reduce the number of working hours or to buy protective equipment for the workers, for example, there is no need to send a consultant to help them.

-3- We do a follow-up audit after the factory has implemented corrective actions. Once again, most corrective actions are pretty obvious if the factory reads the first audit report.

Anybody has different experiences?

Chinese factories tend to focus on “making production”, rather than working on improving their processes. In their vast majority, they try hard to get new customers and grow their business, even when a few improvements in their processes would decrease their overall costs by 10% or 20% (and potentially multiply their profit by 5 or by 10).

The problem is, a process is either improving of degrading. If no one is working on its stability and its efficiency, it is sliding back.

What I reproduced below is an extract from Toyota Kata (an excellent book by Mike Rother that is causing me to re-think everything I have read about lean manufacturing:

It is generally not possible simply to maintain a level of process performance. A process will tend to erode no matter what, even if a standard is defined, explained to everyone, and posted. This is not because of poor discipline by workers (as many of us may believe), but due to interaction effects and entropy, which says that any organized process naturally tends to decline to a chaotic state if we leave it alone [...].

Here is what happens.

In every factory, small problems naturally occur every day in each production process– the test machine requires a retest, there is some machine downtime. bad parts, a sticky fixture, and so on–and the operators must find ways to deal with these problems and still make the required production quantity. The operators only have time to quickly fix or work around the problems, not dig into, understand, and eliminate causes. Soon extra inventory buffers, work-arounds, and even extra people naturally creep into the process, which, although introduced with good intention, generates even more variables, fluctuation, and problems.

This is something 99% of Chinese factories are not aware of. Yet it takes place in their workshops, just like in American of European ones.

If you visit one of your suppliers’ factory and you ask “what have you done over the last 3 months to improve this process?”, you will know immediately if their organization is focused on improvements or simply on pushing orders out of the door.

Two days ago, I was in a factory in Shenzhen. I had just selected the cartons to check, and I was going to the inspection room. It was around 10am. Then the music started, and everybody got up to exercise.

It was so funny, I shot this video:

This type of exercise, at a certain time for everybody (both in workshops and in offices), is not very common in factories.

It is mandatory in schools, early in the morning, though. Many adults seem to miss it. Some of them got fat and told me they wish they had to run around for 15min every day…

So I like this idea, but the downside is that it interrupts the workers. It might be fine for piece workers, but what about office managers trying to concentrate on complex tasks?

Many Chinese factories have no dedicated area for third-party QC inspections. We often sit down in the packing department (because that’s where the cartons generally are), or in a meeting room (because that’s where we can get a large table without disrupting production).

In some cases, the factory is so small, we have to work on the desks on their office merchandizers. The worst case is to do the job on top of folded cartons…

My first choice–provided the inspection samples can easily be carried around–is the dedicated inspection room. The meeting room, if we are the only ones using it, is also quite good (and it always has air conditioning).

Why? For our own comfort and privacy? Not at all.

The reason is that we are not interrupted.

I got upset several times with guys walking around the packing department, spotting a foreigner (myself), getting closer and starting asking stupid questions. Whether they were curious or trying to have some fun is irrelevant. They just wasted my time.

Some inspection companies have a dress policy (either a vest of a certain color, or a “QC” sign around one arm). I dislike it because it draws the attention to the inspector and invites questions. But a QC inspector needs calm to keep his concentration and follow his procedure rigorously.

If you can’t close a door, put your Ipod’s earbuds on. You’ll do your job 25% faster. Seriously.

I like this quote from Jason Fried:

Would you expect someone to get a good night’s sleep if they were interrupted all night? Then how can you expect someone to get a good day’s work if they are interrupted all day?

I also like the concept of the “sterile cockpit”: during takeoff and landing, nobody is allowed to talk about something unrelated to the conduct of the plane. Excellent idea…

A reader who is going to follow production issues in China for a US company sent me a message. He asks what it takes to do that kind of job properly.  Here are a few elements of response:

First, it helps to be an engineer or a designer, but it is probably not necessary to follow production. The most important is to get clear specifications from your company’s technicians, and I encourage you to spend a lot of time in the workshops.

Second, make sure you set a clear (and non-negotiable) quality standard, and always keep it separate from pricing/timing negotiations. You will see, this is easier said than done. Chinese suppliers tend to mix everything up. It is your job to frame the discussions.

Third, and most important… Relating with Chinese people in a way that does not upset them is VERY important. Many foreigners don’t even notice when they piss a factory manager off, but it has heavy consequences. If you have never lived in China, get advice regularly from a local about “what is really going on”.

At the same time, it is crucial to retain their respect and to set some boundaries. Don’t be their friend, don’t accept generous dinners or karaoke nights, but be fair and objective at all time. They will push and push and push to get that gift in your hands, but they will respect you if you don’t take it. You don’t have to behave like them, as long as you are clean, fair, and predictable.

Extra points if you show them that you care about their side of the deal and you try to help them out from time to time. It comes down to being fair.

Any other tips?

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Related reading:

How to behave in a Chinese factory

Managing Chinese suppliers: how to maintain your authority

Every time I read an article about rising Chinese labor costs, it seems there are only two solutions: moving to inland provinces or automating production. I do not really buy into these proposals, and I want to focus on the myth of automation.

Automating a process allows a reduction of headcount (lots of operators are replaced by a few technicians who set up the machines) and an acceleration of cycles. But there several drawbacks.

First, it is a large upfront investment. Does it make sense to make 200,000RMB molds rather than 20,000 RMB ones, when every customer insists on making his own designs and on renewing them every year? No, except for very large and predictable volumes.

Second, automating a poor production system does not make it better. It improves some efficiency measures (e.g. direct labor cost), but it does not address the most important opportunity for savings–the optimization of the whole system.

This second argument is backed up in a VERY interesting article on Evolving excellence that describes the most profitable Toyota factory:

There was not a computer visible on the floor. Anywhere. A large electronic sign that showed the status of each line, but everything else was manual. Individual parts bins were manual kanbans (but with bar codes so the paper cards themselves didn’t transfer). When empty they were replenished by guys driving trains of carts up and down the aisles between the lines. As a bin of parts was emptied, another was put in its place. For thousands of bins, parts ranging in size from washers all the way up to engines and doors, across acres of factory floor.

Toyota automates only what is dangerous (welding) or too heavy for humans. Everything else is done by humans… because humans can create ideas for improvement. And that ongoing improvement is one of the truly impressive aspects of this operation.

From my observations, 99%+ of Chinese factories can easily shave 10% of their costs, simply by applying some good manufacturing common sense / best practices. No need to invest millions in new toys.

What do you think?