China’s factory production is prodigious, but the quality of goods made, overall, is like a cheap blouse, unable after several wash cycles to maintain its shape and color.
I can vouch for every problem documented in the popular business book, Poorly Made in China (2009), by Paul Midler. They all boil down to one fundamental fact about the import game in China: product quality fades just when you think you’ve got a good supplier. In other words, Chinese manufacturing has a colorfast problem.
The concept “quality fade” refers to a China import phenomenon that has many causes, but is always connected to the vendor’s efforts to improve his profit margin at his customer’s expense. By saving on material and labor inputs, for example, he puts his interests ahead of the customer’s interests in product quality, timely delivery, and satisfaction. Put another way, and owing to the 12-hour time difference, while you are asleep in the United States, your Chinese vendor is awake trying to screw you.
American businessmen go to China expecting big savings. The expectations are justified. I know how the plot goes, because I’ve seen this movie dozens of times:
Customer goes to China at the invitation of the factory boss, is picked up at the airport, bunked in a nice hotel, then wined and dined at one of those noisy, four-story seafood restaurants that you could mistake for an aquarium.
At the conclusion of dinner customer is informed to meet for a dim sum breakfast meeting while throwing back his 15th shot of baijiu at the same time being introduced to a beautiful young masseuse who will tuck him in for the night.
Next day the customer, nursing a hangover, tours the factory with an entourage worthy of a state visit, is impressed by how hard Chinese workers work compared to American workers back home, but forgets to ask why there is so little production the day he visits.
That evening, the customer finalizes details on pricing, quality, technical requirements, and delivery, shakes hands, and places his first trial container order.
Then it’s gan bei all around, first at dinner, then at the KTV bar, with everybody having become the customer’s asshole buddy, from the lowly production line foreman to the company accountant. ”When are you coming back to China?”
What happens in the ensuing months is the substance of Midler’s book–how the first few cans, promptly delivered and flawless in quality, are followed, slowly but surely, by the drip-drip-drip of product defects, initially minor in scope, then large, and finally intolerable.
I have been down this hard road with a few customers and there is no avoiding the risk unless you are lucky and stumble into an honest boss, or, you put your American boots on the ground in China. But, even then, it is possible to get screwed. The Chinese will find myriad ways to scrimp on raw materials, beginning with the grade of wood in the case of hardwood flooring, all the way to substandard packaging that breaks apart in your warehouse.
The motivation has never been clear to me, because it always seemed obvious that you would make more money working toward the long term than the short term. But the time horizon of the Chinese factory boss is the next container order. They are totally production-oriented, caring little for the customer’s ultimate marketing needs. There is no connecting the dots from factory floor to living room floor. Should a defect be discovered, the boss seems to think, then just order another container!
My theory for this phenomenon is not necessarily that Chinese businessmen are inherently evil, but that they are acting rationally in an economy of inefficient production. There are simply too many producers, particularly in commodities. To get the business, they promise the American distributor an impossibly low price to grab the order, then, once they have you committed to a buying program, they start squeezing you on price, while at the same time low balling their suppliers which means inferior quality material inputs to your product.
My experience has taught me that it is too alarmist to worry that China will take over the world economy. There are simply too many bad factories, too many shoddy products, too much tainted food, and far too much environmental degradation. I have tried over the years to implement the most basic of quality inspection regimes in my factories, only to have them abandoned. There is no buy-in at the top and that half-ass attitude cascades all the way down to the shop floor.
Then there is the piecework problem, an archaic compensation scheme from the first industrial revolution, in which workers are incentivized to make repeated mistakes on the production line. If you are a poor urban migrant from rural China desperate for cash and told that the more units you make, the more money you make, no matter how many defects you make, what would you do?
In spite of all, there is still a lot of money to be made in China. I haven’t made it, but my customers have. There is always room to get up on the learning curve, and some of the smarter Chinese bosses who are willing to fight their worst impulses are doing it.