Building partnerships with China

Silly-season storm in a teacup or real cause for concern? The summer recalls of toys manufactured in China hit the headlines and caused concern among millions of parents. But did it reflect more on our greed as consumers rather than the quality controls of 1.3 billion people? Andrew Ferrier of Components Bureau has been outsourcing to Asia for decades and considers the real issues that need examining.

Some subscribe to the theory that a long supply chain is simply knitting that’s waiting to be tangled. For fully paid-up members to this club, the summers unravelling of Brand China was the cue for an outbreak of schadenfreude of epidemic proportions.

Components Bureaus commercial manager, Andrew Ferrier, said: Unless you can have your design and manufacture in one place, there will always be an element of control that has to be managed. But before making the decision to place your manufacturing elsewhere the two most important boxes to tick are trust and credibility: geographical distance doesn’t come into it.

Does he expect some purchasing managers will be reviewing their outsourcing decisions and looking to manufacture elsewhere following the bad publicity? A tone of genuine puzzlement is evident within his reply: But that would be false economy! Think of all the time, effort and expense that has been invested during the supplier validation process, before an order is even placed. Why would you go through all that expense and time again? To have approved the source in the first place means there must have been an acceptable quality system and customer audit. The answer isn’t to shift the problem logistically but to investigate where the system broke down and invest in measures to stop it happening again.

Of course, outsourcing managers don’t live in a good news bubble and while he claims not to have experienced any negative effect from the toy recalls, Ferrier sees the whole furore as indicative of our attitudes as consumers.

Andrew explained: Speaking from the perspective of the UK, as consumers, we are perfectly happy to enjoy the benefits of cheap goods from Asia, until something goes wrong and then we squeal loudly. Government economists acknowledge the role that cheap Asian manufacturing is playing in keeping our inflation levels down. I can’t think of many people who would be prepared to give up their plasma TV which they would have to if it cost twice as much. The benefits of Asian expertise in low cost manufacturing should be available for everyone, both producer and consumer, to enjoy, but as with any outsourcing project you have to have strict controls in place.

The open season on Brand China has also brought about a resurgence in apocryphal stories of employee exploitation. Ferrier is sceptical about such stories within the electronics industry, saying: I can only speak of what I have personally experienced. In the Southern provinces skilled employees are highly regarded, factories want to retain their workforce and so will offer bonuses around holiday time to ensure that workers return from their villages. One of the biggest factories we work with has recently installed a state-of-the-art extraction system to protect workers in new processing rooms. I wouldn’t say that employee exploitation doesn’t exist in China, but what you can do is to support those facilities that are looking after their workforce well and refuse to do business with those that don’t. That’s the way to ensure future standards, not by applying some crude broad generalisation.

As regular visitors to Asia, the Components Bureau team has seen the manufacturing capability of its partners evolve in size, capability and expertise.

Andrew said: The growth of investment in China in the automotive industry alone is staggering. This is a massive country with massive potential and it’s maturing all the time as a workforce. It used to be the norm that recent engineering graduates looked to Europe or the US to further their careers, now they are keeping their skills in China and adding to the knowledge pool which manufacturers can draw on. When you are looking at contract manufacturing, the earlier the involvement, the better. A recent case involved a huge cost-saving when we presented a through-hole component placement that had historically been done by hand. By suggesting an increase in hole size it could then be auto-placed, which meant the cost per unit was reduced.

‘There is a real willingness to create partnerships to reach the optimum solution both in terms of price and manufacturing techniques. China wants to be a major player in the global market which is demonstrated by the work ethic and commitment of the partners we are dealing with to satisfy our requirements. At our UK office we are contacted on a daily basis at around four in the afternoon, which is 11 at night in China. It’s the partnership equation that is the key to outsourcing success.

Whether you’re talking about manufacturing in Dongguan or Dolgellau, I would employ the same management approach to both: good communications, regular audits, visits and reviews. Wherever you outsource you have the same processes to go through and thats what it is all about. When you talk about a supply chain, you should be talking about strong links. Of course I appreciate peoples concerns about handing over manufacturing. They are in effect handing over their reputation to us, or whoever, to safeguard but like everything theres a right way and a wrong way to proceed. Whether in China, Vietnam or the UK would you entrust any part of your business to a company you werent 110 per cent happy with? The language might be different, the culture different but delivering to a high standard is a global given, not negotiable at any price.