Can you simply approve a sample, pay a Chinese factory to produce it, and then import the goods into your country? Do you know about the safety requirements for YOUR production?

Even China has quality standards for what it imports… Most Western countries have a long (and rapidly growing) list of requirements.

You should research these standards before placing orders. You might bring unsafe production in your country and endanger peoples’ lives without being aware of it…

There are basically three ways of knowing safety requirements:

• Work hand in hand with a quality control firm. They have all the information you need, or they will find it. Then they will help you check if all requirements are met.
• If you work with a large manufacturer, they probably know much more than you about it (their other customers from your country keep reminding them). Hopefully they will tell you everything you need to know.
• Contact your freight forwarder and/or the customs department in your country. This way you can get first-hand information.

Let’s say, for example, that you are buying garments for kids, and you resell them on the Spanish market. Textile products are not particularly dangerous, so first-time importers often forget about safety standards.

However, it turns that the European Union has LOTS of requirements applicable to this particular case. It is intended to be used by children, so buyers should respect directive EN-71. Here is a partial list of safety requirements:

• Polybag thickness & marking
• Marking on the product itself (“Keep away from fire”)
• Resistance to tension of all small parts that can be ingested by a kid
• Seam strength, wherever there is stuffing underneath the fabric
• Length of strings that could cause strangulation

If you take most toys, the list is 3 or 4 times longer–not to mention other directives that apply as well.

Has anybody found another source for this information?

I just found an article on supplychain.com entitled Buyers find pitfalls of China sourcing (h/t to @MaxHenry). It is based on a survey of importers by a consultancy (Gartner). I listed below the main frustrations that were mentioned:

Vendors using fake certificates

Sometimes Chinese suppliers bought fake certificates attesting to ISO quality standards, Six Sigma and social compliance, which prove hard to detect.

This is a classic. Don’t trust any paper here–everything can be faked. Buyers who need to know have to pay for it (e.g. paying for third-party lab testing, or conducting a factory audit).

Price increases

Some manufacturers accept orders, receive deposits, and then ask for a price increase. Sometimes they simply want to make more margin. Sometimes they notice the products are more complex to make that they thought. And sometimes they are very busy and they don’t want the order.

How to react in this situation, if you really need the factory to produce that order for you? See the last post on the SRI blog to see how some real professionals do.

Reducing production quality over time

Many Chinese suppliers reduce product quality over time in order to increase their margins and profits. Typically this happens after the first few orders, whereby a product’s ingredients or subcomponents are altered without changing the outward appearance, making it difficult to detect.

That’s exactly what Paul Midler calls quality fade. Sometimes it is deliberate, other times it is a natural degradation in the quality standard.

In any case, experienced purchasers keep inspecting and testing their products over time, not only for the first order.

Ignoring delivery times and patents

Gartner also found little or no respect for sticking to delivery times and the violation of patents which can result in lawsuits for infringements.

These are two separate issues, calling for different solutions. Penalties for late shipment can help reduce delays. And a good “NNN” contract can reduce intellectual property violation risks.

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I would add one more frustration that I hear all the time: the unwillingness of Chinese suppliers to be responsible for quality issues in their past shipments.

Any other problem that keeps bothering you?

I got an interesting comment on a previous article (4 proven ways to enforce your quality standard in China):

If I am hiring a third party to do the quality control should I get a “perfect sample” from the factory, then send it to the third party quality control company? Or is it possible for the factory to send the perfect sample straight to the quality control company?

I responded that there is no universal solution, but I suggested a few ways to do this.

The most reliable way is this:

1. The factory sends you several samples,
2. You approve them (hopefully),
3. You send a few samples back to the inspection company.

This way, the factory has no way of substituting or degrading the sample used to evaluate their production. It can be a real temptation, because it can easily make the difference between a passed report and a refusal.

If you can’t afford to do this way (either because of the cost or the timing), you can find another solution to put a sample at your inspector’s disposal in the factory:

• For example you can sign on a sample when you check the launch of production yourself (make sure you send a photo of the sample with the signature to the quality control firm).
• You can also send the samples to the factory and tell them to keep it in a sealed package, “to be opened only by the inspector himself”.
• Take some products from your own stock and send them to the inspection company. This is only possible if the products are identical to what you want the manufacturer to produce for you, of course.
• If the products are expensive to send (example: furniture, car seats…), you can cut small pieces out of the sample you have in your office. It should be enough for the inspector to compare the materials and their look & feel.

It can be a headache for the first orders, but it is usually easier for repeat orders. Don’t be discouraged, putting an approved sample in the inspector’s hands is necessary if you want to realize the full potential of quality control.

Should importers simply contact a quality control firm, explain their situation, and follow the advice they receive?

I don’t believe so. It might actually not be the best use of their money, if they want better results out of their procurements in China.

There are basically three best-selling quality control solutions that make up the bulk of QC firms’ profits:

• Product inspections (around $300)
• Factory audits (around $600)
• Laboratory tests to certify regulatory compliance

The industry has no interest in offering a “no frills” service… even though it is in the interest of most buyers.

Let’s see how it plays out for each of these three solutions.

1. Control of product quality:

I distinguished 3 levels of quality inspection.

Bare minimum (very low cost, except for heavy products):

Ask your supplier to send you photos and production samples.

Better (a little time + 150-200 USD):

Have an inspector go to the factory, draw some random samples, count the defects, and take photos of the products and their packaging.

Even better, make sure the factory has a “perfect sample” for reference, and ask the inspector to send a random sample to your office.

Best (some preparation time + 300 USD per man-day):

(1) Define the inspection checklist before production and get your supplier’s agreement.

(2) Make sure a “perfect sample” is in the factory or is sent to the inspector.

(3) Have an inspector go to the factory, draw some random samples and look for defects, verify if each checkpoint is respected (with supporting photos), and run appropriate tests on a few samples.

My advice:

If you can afford to get the “best” solution during production and before shipment, by all means do it! But you should go for the “better” solution if that’s the most you can pay for.

If you start making trade-off and avoiding inspections during production, you are not really reducing risks. What if you only do a final inspection, and you find that most products are unsellable? It’s too late!

Even a quick-and-dirty review of the first finished products can save you several weeks and many thousands of dollars. If issues are found at that point, you have time to plan ahead and to ask the supplier to address the problem.

2. Selection of a supplier:

Bare minimum (some time + very low cost):

Get several contacts on trade shows or online directories; request samples and quotes; ask for other customer references and call them; ask for info about the factory (address, number of workers, photos of the building).

Better (a little time + 200 to 600 USD):

Have someone (you or an agent) go in the factory to check capacity and general organization; ask your supplier to certify that production will take place there; run a background check on the supplier.

Best (a little time + 600 USD):

Send an auditor to check the factory quality system in depth, and if necessary the working conditions.

My advice:

The logic is that same as in part 1. If you can follow the “best” solution to approve a primary manufacturer and a back-up supplier (in case you have to abandon your “partner” at one point during the project), do it.

If not, trade down to the “better” solution but, if your order cannot be canceled, get back-up factories lined up. Except maybe if you have a very stable supplier and he keeps producing the same goods.

3. Certification of product safety:

Bare minimum (free):

Before issuing orders, ask the supplier for a past certification of the same product reference, or at least of the materials to be used in production. It gives no guarantee but it is better than nothing.

Better (can be quite expensive, depending on the product):

(1) Send an inspector to pick some samples at random in the factory and to send them to a third-party lab of your choice.

(2) Ask the lab for the standard list of tests to run on this product for its destination market. Perform all the compulsory tests. Get the results yourself and pay for them yourself.

Best (at least as costly as “better”):

Do the “better solution” on the main materials, before they are used in bulk production.

My advice:

Depending on your product line and your country, lab tests can be prohibitively expensive (that’s what I call the importer’s dilemma). Sometimes it is really necessary to avoid obvious risks (say, for children jewelry that might contain lead). In other cases it is out of question (say, for bed sheets exported to Africa).

If you do need lab tests, go for “better” and if possible for “best”, which might not be more expensive.

Sometimes a client does everything he can to ensure that inspections will take place in good conditions. They send me clear specifications about the product, they pass the right message to the supplier, and they keep a couple of days between the inspection and the ex-factory date.

And yet… All sorts of unpredictable things happen. Delays from the factory side, of course. Or changes in shipment plans due to urgencies on the customer’s side. Or power cuts that last for 5 days. Or a cancellation of order. The list can go on and on.

In some cases it means we have to spend more time, or allocate more inspectors than we originally planned when the quotation was prepared. For example, if an order is cut in two partial shipments, it takes more man-days to get the two batches of goods inspected.

There are basically two ways to deal with this.

First, the quality control firm can re-issue a quotation based on the new information. That’s what the “majors” of the industry do: “please send us a new booking form and we’ll issue a new quote”. Sometimes it is the right thing to do: if the supplier is causing some troubles, let him pay for all the extra charges he incurs.

The second way is to think “we are here to help the client, and it’s not his fault if plans change”. I often do it with my good clients, and I am certainly not the only one. I might lose a bit of revenue in the short run, but the client remembers it and appreciate the ease of dealing with QC issues.

It is a little dangerous, though. Suppliers can easily abuse the system–I always say it is “exceptional”. Chinese suppliers are quick to see a favor as a given…

Let’s take an example. Last season we maintained a quotation unchanged even though the shipment was split (a bit before Chinese New Year, and the rest after). This season, the same supplier fails to present 1 reference to us because production was late.

Their reaction? They told us “but last time you accepted to come twice”. What I reminded them is that, if they confirm a certain quantity for a certain day and they don’t keep their promise, we don’t come back for free to inspect a second time. Not for free, anyway. And usually at their charge!

The usual process for third-party inspections of production is this:

• The buyer appoints an inspection firm and communicates the product specs;
• An inspector is sent to the factory with a sampling plan and a checklist;
• The buyer uses the inspection report to estimate whether the production can be sold on his market.

In this context, I can understand why most manufacturers do not like the idea of QC inspections (even though it is often in their long-term interest). When quality issues are noticed and then communicated to their customer, they have the same feeling as a driver who is arrested for speeding.

But, as long as the inspector is professional and reports the situation clearly, there is no reason to complain…

Except when the buyer refuses the goods, asks for corrective actions, and send an inspector again for re-inspection. Of course, this second inspection is at the supplier’s charge. Generally, they have to pay for all the consequences of their mistakes, including penalties for late shipment and/or for air freight.

The amount to pay for re-inspections

If there is only 1 day of work, and if the reason for rejection was very clear and legitimate, the factory can only complain that “it is expensive”. They compare the inspection cost to the salary of their in-house controllers, so even $100 would be expensive in their mind. no need to discuss.

If there are several days of work for the re-inspection, the supplier usually says that they will only pay for 1 man-day because “it can be done in 1 day”. It is really hard to explain why an inspector can only do so much in a day if we want his findings to be clear and reliable.

Another source of misunderstandings is the aborted inspection. Let’s say we send 1 inspectors to check 2 references, and only 1 of these references is presented. A few days later, we have to come back to check the other reference, but we could have checked it if the original planning had been respected. Many Chinese suppliers have a hard time admitting that it should be at their charge.

So all I can do is give a price, respond politely to the supplier, and make it clear that it is a quotation and NOT a negotiation.

How re-inspection fees are settled

The simplest way to settle re-inspection fees is this: the buyer pays for it, and then issues a debit note to his supplier. This way, it is deducted from payment.

Some of my clients prefer to force the supplier to pay my company directly. In that case, I usually ask for payment in advance (except maybe if the supplier seems reliable and is based in Hong Kong).

Chinese suppliers have all kinds of ways to signal their unwillingness to pay. For example they might say “we need your original invoice with your chop”, or “we can only pay in RMB, not in USD”, or “our manager is out of town, so we can only settle it next week”.

Fortunately, importers understand why I require payment in advance.

I am really glad I don’t sell to Chinese companies. Giving credit to customers is pretty common here, and you never know when you will get paid…

In the industry, we estimate that 80% of importers don’t do control the quality of what they buy (i.e. either by one of their employees, or an external inspector). Even when the goods are headed to demanding markets like Europe or the US.

Is it an economic problem? Sometimes. It seems weird to spend $300 to verify the quality of a $1000 shipment, especially with a regular supplier.

Is it a timing problem? Sometimes. The buyer is in a rush and pushes the supplier to ship “ASAP”. Anything that might delay the operations, even by one hour, is dismissed.

However, I think most importers who don’t do quality control do not do it because of a lack of education about the way their products can be checked in the producing country.

I thought about it when reading this section, in Designing the obvious:

[A fast food chain's marketers] asked a bunch of people if they would find appealing the idea of ordering a low-carb version of their hottest-selling cheeseburger. Resoundingly, people said they would… The marketers knew they were onto something. So they whipped up a plan, sent the recipe-makers into action, and released the sandwich… The sandwich failed miserably.

The sandwich failed to live up to its promise because the promise was based on meaningless conversations with people who thought they would do the smart, responsible thing and make the healthy choice.

It rings so true to me… In met with hundreds of buyers, on trade shows, who said “Very good, we’ll call you next time we have a shipment” enthusiastically. And they never even responded to my email, 6 months after.

Some of them contact me a while later and say “you were right and I should have followed your advice. I got a really bad experience, I lost a lot of money and also the trust of a customer”. Then they are willing to make the effort to make quality control part of their working method.

The point is that people make the choices they know how to make.

Taking the initiative to do quality control is something many buyers don’t know how to do. The first time they are not comfortable about it. They don’t know how to tell their established suppliers. They don’t know how much money and time it is really going to cost them. They don’t know who can help them.

If you are in this situation, feel free to read these articles:

4 steps to start doing quality control

4 proven ways to enforce your quality standard

David Dayton’s latest article illustrates the bad practices of the largest testing laboratories in China. It really shows that something is “broken” in the sourcing process.

The dynamics of the consumer products testing industry is driven by a few large actors (the regulators of importing countries, the mega-retailers in rich countries, and the 3 or 4 biggest certification companies). As often in China, it results in a system that is consistently gamed by the most savvy players, at the expense of all the small importers.

I listed some dark practices adopted by most of the large testing laboratories, and their perverse effects on the safety of Made-in-China goods.

High prices, to be borne by small & medium buyers only

At SGS, BV, and ITS (the three largest certification & inspection firms), the “consumer products” division is usually the most profitable… Thanks to laboratory tests. Margins are insane, simply because there is no real competition and no risk.

There are hundreds of labs, but only a handful of them have an international network and are “authorized” by large retailers or governments. In Dayton’s experience:

You can only use a testing company from a US govt approved list—and of course, those on the list charge more for their certification than companies who are not on the list. In addition to that, some large box stores also “strongly suggest” that if you want to place product in their stores you have to use a specific testing company.

Why do mega-retailers play this game? Because they benefit from it. Their suppliers are obliged to pay for testing in a specified lab… At very high prices (example: 60 USD for a simple drop test in their facilities). And in compensation, product inspections, which have to be paid by the importer, are artificially cheap (sometimes 50 USD).

No transparency of methods used

Most buyers do not realize that even the largest testing houses regularly subcontract certain jobs. A laboratory cannot do all tests on all products!

Add to this the poverty (or lack?) of internal control in these huge structures, and you get to inconsistent results:

When testing, the responsibility is on whomever requested the tests to make sure that everything is done correctly—and really, how in the world can you know if it was done correctly or not?! Unfortunately, the reality is that if there are problems in the methodology, you’ll never be told about it.

Can you imagine requesting to be present when your samples are being tested? I doubt it would be accepted, especially when tests are subcontracted.

Profit motives get in the way of proper conduct

Testing laboratories are for-profit companies. And some of them are more “flexible” than others when it helps in getting more orders.

Let’s say you work in a Chinese factory. You have been exporting the same type of products to the US and Europe. You have noticed that different testing laboratories (required by different customers) give you different test results for the exact same products. When given the choice, will you go for the toughest one? Of course not!

Dayton gives a first-hand account of this phenomenon:

We pulled and sent all the SAME samples for ALL three clients and mailed them ourselves to the two different testing companies so I can personally testify that NOTHING changed in the samples between tests. But the results were different—radically different.

If tests were really performed in controlled environments, under the relevant standards and with the right tools, this type of surprises should not be that frequent. I heard similar stories from other sources. There is something wrong, for sure.

I remember Paul Midler also denounces the ease of “circumventing third-party testing” in Poorly Made in China, a great read if you want to see how experienced factories can cheat naive importers.

No advice to small & medium clients

Some of my clients have no idea what tests they should perform on some products they buy from China. So I contacted several testing labs (who gave me different answers, of course). They gave me lists of supposedly compulsory tests. Sometimes it reached 2,000 USD in testing fees, when the whole order was only 10,000 USD…

In this case, any importer prefers to close his eyes and ask for a certification from his supplier (even though everybody knows it’s only a piece of paper with no value in 90% of cases). It is just not manageable for small orders.

So I asked for a distinction between “the tests that most often fail for this type of product” and “other tests that usually pass”. No way. QC firms run a huge liability if they advise what tests should be done, they forget one, and if it causes some safety issues after delivery. So they have an double incentive to stuff the list up.

Don’t ask a barber if you need a haircut, right? But if you want to source quality products that represent no danger, who should you turn to, if not to testing labs??

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A past article about the same type of issue: Social compliance audits in factories: perverse effects.

How can importers establish a quality standard, and then enforce it? Here are 4 proven ways to handle your suppliers in China and other Asian countries.

1. Insist on getting a “perfect” sample

Whenever possible, you should have a perfect sample (i.e. a prototype that is conform in all points to what you want to receive) in your hands before production is launched. The best practice is to get at least two samples, and send one back to the factory with your signature/stamp on it.

This is the most basic way to establish your quality standard. The difficulty will be in the enforcement.

In China, and in South-East Asia in General, factories know that sending very nice samples is what helps them get orders. These perfect samples (prepared by experimented technicians who take their time) are usually better that what can be made in mass production.

Suppliers simply assume that the buyers know it. And in any case, a buyer who has wired a 30% deposit and is in a hurry to ship usually accepts this situation. Many factories count on it.

How not to fall in that trap?

1. You should avoid at all cost to settle the payment before the quality of bulk production is approved (either by yourself of by an inspection company).

2. You should write a note about what has to be EXACTLY similar to the perfect sample (e.g. the overall outlook, the color, the function, etc.) and get your supplier to sign it.

3. You should make a list of the differences that you can live with (see next part).

4. Check early in the production cycle. If you can afford it, send either one of your technicians or a third-party inspector in the factory. When? During production, as soon as finished products get off the lines.

This way, you will notice if the factory is not respecting your quality standard. And you will have time to negotiate a solution with your supplier.

If possible, the factory can avoid the same problems on the products that are not in the process yet. And they can rework (or reproduce) the output that you have rejected.

2. Define tolerances wherever applicable

Sometimes it is not realistic to expect a very precise result. For example, garments are generally made by hand, so there has to be a tolerance for measurements (example: 15cm in S size, +/-1cm). In this case, the objective is the comfort of the garment.

Another example: for juvenile products (toys, children clothes…), it should be impossible to pull small accessories off with a force of 90 Newton of less. If you have no idea about the safety issues surrounding your products, you can get in touch with a quality control firm.

Once you have approved some tolerances, put all your specifications on paper and get your supplier’s signature on them. You have already done half the work to establish and enforce a relevant quality standard.

These specifications will naturally become the inspection checklist when time comes to verify quality.

Sometimes it makes no sense to give a tolerance, of course. Here are two examples: “hard disk drive should be 120 gigabits in capacity”; “red color is Pantone TPX-1664″. In these cases, your specification is clear and precise, and the supplier should follow it.

3. Set a limit on the proportion of defects

A defect is an issue that you cannot accept on all products.

In the aeronautics industry, manufacturers have to guarantee near-defect-free products. But for consumer goods such as toys or apparel, such a high quality standard is neither realistic not necessary.

The different types of defects

Some defects are worse than others:

• Critical defects might hurt the user (e.g. poor construction that induces an electrical shock);
• Major defects are not acceptable by most buyers in stores (e.g. large stains) or might cause problems in the supply chain (e.g. unreadable carton barcodes);
• Minor defects can be tolerated by most buyers, but only in small quantity.

How to set a limit on the proportion of defects?

The quality control industry uses the same statistics (derived from a US army standard), when it comes to checking consumer goods.

All inspectors, and virtually all factories and traders, are familiar with the contact of AQL (Acceptance Quality Limits). In clear, the AQL is the highest proportion of defects that you can accept.

For most product categories, the AQL limits are usually the following:

• 0% for critical defects
• 2.5% for major defects (or 1.5% for relatively valuable goods)
• 4.0% for minor defects (or 2.5% for relatively valuable goods)

As a buyer, you have total freedom in setting these limits. But you are advised to discuss this from the beginning with your supplier, and to get their written agreement.

4. A quality standard suffers no exception

Let’s say a supplier is late, you negotiate a delay with your customers, and before shipment you notice that quality is less than desirable. You still prefer delivering the products, rather than cancelling the order. So you tell your supplier that he can ship out and that next time should be better.

The problem is, the “exceptional tolerance” will become the de facto standard for the factory. Count on them to remember that you can accept less-than-perfect products.

Chinese manufacturers tend to have a “can’t do” attitude after an order production has started. Two of their favorite expressions are “cha bu duo” (it’s off, but not by much, so you should accept it as is) and “mei ban fa” (there is nothing we can do about it now, no need to keep pressing this issue).

You should fight their natural inclination. Ask for re-work and re-inspections, even if it costs you 10 days. This type of efforts pay off handsomely in the long term, as long as the factory can reasonable achieve your quality standard (you will have clarified this if you follow the steps I listed above).

This should be a general rule, except when you are about to stop giving business to a supplier.

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Further reading: Four simple steps for starting to do quality control