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Interview with an expert: Challenges and Chinese factories

by John Niggl

Steve MogentaleEver wondered where your shoes are being made? How about if the factory that produces them pays its workers a fair wage? Ever wondered how much of the price might end up in someone’s pocket as a bribe? I wanted to talk to an industry expert about these issues, and others, which few people who have never stepped foot inside a factory could understand but those which affect manufacturers, purchasers and even end-consumers across the globe. More specifically, I had questions about factories in China.

I sat down with quality assurance expert Steve Mogentale of InTouch Manufacturing Services to see if I could pinpoint some of the challenges faced by inspectors and their future implications for manufacturing in China.

John – How long have you been performing inspections in Chinese factories?

Steve – Over three years.

John – Where are the factories located?

Steve – All over China, but mostly on the East coast, primarily Zhejiang and Guangdong. I’ve been to over one hundred factories in probably ten provinces now for inspections.

John – What are some common issues that you’ve encountered during a supplier review?

Steve – The most obvious thing is the lack of procedures being used by factory staff. So this can mean that when you start going through the production processes it’s very obvious when they’ve got random bags of components in places that are never going to be using those parts or they have good products and bad products all mixed in together and nothing is clearly defined or separated. It’s not clear how raw materials start from point A, move to point B, go to point C and then end up as a packaged product. It’s disorganized.

Product in an organized factoryJohn – Disorganized and difficult to track.

Steve – Right, which often leads to a lot of quality problems. A disorganized factory will not have lines indicating where certain things should be located in a factory. In a very clean and well-organized and well-managed factory you’re going to see a lot of lines painted on the floor, usually in red or yellow or white, and each box or each machine or each area is all very clearly separated from the other parts of the factory.

John – What are some common issues that you’ve encountered during a social compliance audit?

 An inspector sorts through factory records and dataSteve – The biggest deficiency is poor record keeping. Maybe things are written in by hand. Maybe things are not written in at all. Maybe you have one set of documents saying that Employee A worked on this day for this long, and then you have a separate set of production records that indicate that the factory was actually working on this holiday when all of the payroll records said that nobody was working.

John – Inconsistencies.

Steve – Inconsistencies, right. So when that situation arises it’s impossible for the auditor to say whether or not the factory is following local law. We don’t know which set of records is real. It’s a very common problem.

John – In what ways do factories attempt to cut corners during production?

Steve – Substitution of materials.

 – Inferior materials?

Steve and a fellow inspector assess product qualitySteve – Right. So if a client thinks that they’re getting silver jewelry it shouldn’t oxidize a few days after it’s been made. And it’s very common for the samples to be made to a high level of quality. Then the order gets approved by the client, the PO is placed, production starts, and then that’s when things change– after they have your deposit.

John – Can you tell me about the general attitude of most factory managers? Are they welcoming towards auditors that come in to look at their factory?

Steve – The initial greeting is usually pretty positive and they’re very accommodating, but once you start finding problems that’s when the inspection really tests the mindset of the factory. An honest factory that takes pride in making a quality product is going to recognize that when you find hair in the packaging or a scratched item or something missing from the product that’s a problem. But a factory that doesn’t care about that is much more likely to fight that. They’ll try to influence the auditor not to count that as a defect, or they will say, “the client’s not paying enough for this… this is not reasonable”, rather than just letting the inspector go there, look at the products, record the results of what he found and then report that to the client and have a discussion after the fact.

Auditors communicating with factory staff during an inspectionJohn – What are some challenges faced in dealing with factory staff?

Steve – Managing space is a significant concern because most factories are not set up with a very sophisticated inspection environment. So maybe they don’t have a table with a smooth surface. They don’t have adequate lighting overhead. If you’re using products that generate heat maybe they don’t have a fan or air conditioner nearby… If you’re inspecting a digital camera it’s a relatively small item. But if you’re inspecting a ten-piece cookware set now, all of a sudden, one set’s going to take up half of a decent-sized table. So, depending on the item, space management becomes very challenging.

 Inspectors pulling a random sample of productJohn – If you’re doing a product inspection do you have problems making sure that you get a random sample and that you know where it’s coming from?

Steve – It can be, and it definitely depends on the size of the order and how well the factory is organized. So if the factory has everything stacked on pallets, everything is clearly-marked, they don’t have different items on the same pallet… those guys are going to have a much harder time justifying why we can’t pull a random sample. We’re going to want to pull samples from the front, middle, back, top, bottom, evenly. We don’t want to pull samples just from the front or the top because that’s too easy. A sneaky factory can stack the deck if we pull a sample that way.

 Bribes may come in the form of gifted Chinese red envelopes, or hong baoJohn – Does corruption ever play a role in dealings with factories? Are factory auditors ever offered incentives for favorable inspection results?

Steve – Factories do, from time-to-time, offer bribes to inspectors, yes. It can be as simple as coffee, snacks, maybe go out for a nicer dinner, maybe go out for KTV, or just a red envelope full of money.

John – Do you think the situation is improving for inspectors working with factories or is it getting worse?

Steve – I think it’s getting better. The reason for that is China’s becoming a much more Western society. They’ve interacted with many more people from many different countries. They know that, in terms of quality, a lot of their markets are serious about that, and they’re going to want a product inspection before it ships… Overall the factories are becoming more and more on-board with the social compliance standards, what they mean, and how they comply with them. The low-end factories are, I think, getting weeded out slowly or being consolidated with larger factories because they can’t compete.

Sunrise over ShanghaiThere you have it. If there is one central problem that leads to challenges when working with Chinese factories it would seem to be disorganization. Well-organized factories have fewer compliance issues, more cooperative factory staff and managers, higher overall product quality and are subject to relatively smooth and painless inspections and audits. According to Steve Mogentale, dawn is breaking as factories in China adapt to global standards and accountability, while those that can’t keep up or refuse to change are being “weeded out”.

John Niggl is a Client Manager at InTouch Manufacturing Services, a QC firm that performs product inspections and factory audits in China for US and EU clients. John also writes for the QC-related blog, Quality Wars.

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