As the advantage of outsourcing work to China moves beyond cost toward the ability to capitalize on the growing Chinese consumer market, manufacturers have an immense opportunity address the recent public debate surrounding recalls and substandard products coming from China by upping the ante on accountability and oversight.
Developing and managing a successful business operation while leveraging the manufacturing capabilities in China is a complex endeavor. A lot has been written recently on how to successfully manufacture in China. What has been missing from the conversation has been the concept of holding outsourcing partners to the same level of scrutiny and expectations for integrity. Like many best practices, there are general rules and guidelines which -- when followed in very basic sense -- can go a long way to moving the needle on quality manufacturing in China.
The Long and Winding Road to Quality Production on a Global Scale
Changing the rules of engagement with outsourcing partners requires that manufacturers focus on the fundamentals: people and technology. Through each of these elements, manufacturers can engage, educate and evolve production models in China to achieve higher levels of quality.
People are possibly the most critical key to success. China is still undergoing radical change as it moves from a Communist society to a capitalist model -- and manufacturers have the opportunity to shape the outcome of that transition. Until now, China has been seen by many as a source of low-cost labor and excess capacity when it's needed. But it is undergoing double-digit growth of its economy and maintains a continued ranking as one of the fastest growing manufacturing and electronics assembly markets. By framing your China strategy as a roadmap to keep you on track through the inevitable difficulties, you send a powerful message to your Asian counterparts around the value of maintaining a long-term partnership.
Strategies and tactics include:
- Hire Chinese nationals, train them at your corporate headquarters with your management team
- Provide local employees with incentives to develop your business in China
- Pay your Chinese employees sufficiently well to warrant their honesty, require that they sign a code of conduct and ensure that violations have meaningful consequences
- Choose capable and strong-minded mentors, not dictators or risk-averse bureaucrats to run your China business. Chinese employees are looking for leaders.
- Establish from the outset that your operations -- wherever located -- adhere to the standards and codes of your own culture and government.
Basic Business Process Tools for Control
Integrating technology and processes to provide the oversight needed to ensure that cultural norms are being adopted is the next step. Think of it in the old post-Cold War adage -- trust but verify. The ability to collaborate and share data across global locations creates clear business benefits. Phones and faxes have been supplemented by Internet technology to accelerate data sharing and provide visibility into multiple remote locations. The utilization of collaborative business process tools -- ERP, CRM, business process software, etc. to establish data control and transparency -- removes power from individuals and develops the ability to optimize multiple locations using best practices. Global visibility additionally enables rapid adoption to changes and emergencies.
Test at Every Level
Manufacturers need to develop tools and processes to manage product quality and provide test at every level. With the threat of contaminated food, electronics product recalls and lead-bearing toys affecting consumer confidence and spending, a focus on quality is more vital than ever to brand reputation and ultimately the bottom line. Tools focused on enabling manufactures to expand their footprint in low-cost countries while maintaining acceptable product quality levels are essential.
The ability to remotely provide data collection and analysis over the end-to-end production process -- component quality, test and process results and repair data -- is a valuable tool. If used properly, the analyzed data can ensure:
- Quality improvements to drive reduced returns
- Yield improvements which provide reduced costs
- Early correction of component and design problems reducing the cost of quality
- Faster time to volume production increases revenue
- Test time optimization increasing yields and lowering costs
Keep Your Intellectual Property Assets Close to Home
Finally, although you have all of your strategies and safeguards in place, you still need to protect your intellectual property (IP) by embedding your most valued IP assets in components built domestically. If your strategy is to develop a market leading edge technology, you should carefully guard the "corporate jewels" and keep your most sensitive technologies safely at home. If you are forced to build your technology in China, isolate various technologies from each other so your partner does not have the whole picture. Any company doing business in China should assume that its designs and products are being copied. Legal protection of intellectual property in China is improving, but it is currently unreliable and biased.
Even as this is being written, the rules of engagement in China are evolving. Ultimately, the companies that will be successful are those that remain alert and diligent about ensuring quality at the standards set by their own brand. Capitalizing on the staggering growth opportunity presented in China requires investment, resources and continuous process improvement. The good news is that as China takes it place on the world economic stage, companies that have established themselves and overcome the obstacles, will find the rewards even sweeter.
Chris Rehl is director of marketing for CIMTEK which helps manufacturers bringing products to market quickly and cost-effectively, without sacrificing quality. Its solution turns manufacturing test data into actionable insight for making better decisions, throughout the product lifecycle, from product design and sourcing to production and warranty support. Reh may be contacted at (781) 726-6227; or by e-mail at [email protected].
