In This Episode...

We're going through the NPI new product introduction process. Renaud will explain what this process is, why it can help to reduce your risks and provide other benefits throughout a new product manufacturing project from design to mass production, and the phases included in the NPI process which you can follow for your production.

Planning ahead before rushing into production is so important, and in this episode, you're going to learn exactly why reducing risks before you go into production by following a sound NPI process is worthwhile.

Show Notes

Start to 05:19 - Introduction to the NPI process. The dangers of trying to manufacture new products without a process to guide you.

05:19 to 08:55 - The single greatest mistake that companies make when they're developing a new product. Going from prototype to mass-production misses out some crucial actions. Why Chinese suppliers might rush into mass production, even though it's a mistake.

08:55 to 23:30 - What is the makeup of our suggested NPI process? - looking at the different phases of the process in detail that would typically be useful for electrical and mechanical products:

  • 09:18 - Phase 1: Document specifications & requirements in a clear and measurable manner. 
  • 11:03 - Phase 2: Feasibility study / Proof of Concept - especially useful for more complex and technical products.
  • 13:22 - Phase 3: Prototyping - source components suppliers who can do the best job and test the prototype/s to be sure that the product reaches expectations.
  • 16:07 - Phase 4: Tooling - when to order new tooling and testing it to make sure it's perfect and creating the final prototype or golden sample (relevant blog post on QualityInspection.org: The Conundrum of Investing in Tooling Before a Final Prototype).
  • 18:40 - Phase 5: Pilot run & pre-production prep - risk analysis, process FMEA, process control plan, small production batch, pre-production review of processes and materials.
  • 22:30 - Phase 6: Production - ordering materials, applying the plans made and improving and solving issues over time.

23:30 to 30:16 - Is such a detailed NPI process necessary for every product type? - dependant on expected volumes to be ordered, product complexity, and money at stake, as reducing risks for large amounts is more crucial. Some of the negatives you can expect if taking too many risks! Balance the risks and plan ahead.

30:16 to 33:44 - How Chinese suppliers can rush into production which contradicts prior-planning and following an NPI process - many Chinese suppliers want to ship the goods ASAP in order to get paid, therefore they often dislike time-consuming pre-production steps.

33:44 to 38:20 - Adding your expectations to a manufacturing agreement - large manufacturers may take a hands-on approach to assure that the supplier follows the NPI process in the factory.

38:20 to END - What can a buyer expect from implementing an NPI process and its impact on quality? - a clear standard, a less risky product design that leads to fewer quality issues, the manufacturing process that causes less quality issues as it has been honed over time, more consistent production that is closer to the golden sample.

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In This Episode...

Join us as we continue our deep dive into the vetting process used when sourcing new Chinese suppliers.

We've already discussed quality audits and social compliance audits, and this time we're going to cover factory process & system audits. While this type of audit may not differ too much in terms of structure (an auditor still goes into the factory observes, questions staff, and takes notes), this time we're checking the maturity of the factory's systems and process controls with the objective of assessing how reliable they are, if they've put thought into how they manufacture, if they follow best practices, and, therefore, if they're going to be capable of fulfilling your expectations in the longer term.

As a part of the supplier vetting process, process audits give great insight into whether you're selecting a supplier who can fulfill their promises to you.

Show Notes

Start to 9:35 - What are factory process audits? A general explanation of what auditors do when they go into a factory. How many audits don't focus on production processes and the new product development side of things (which can reduce risks at an early stage). The auditor checks processes (for example, the cutting of materials) in detail and assesses them while considering if all possible issues are avoided. 

9:35 to 12:05 - Why it helps process auditors to have real-world knowledge about the production processes and products being manufactured, but that they also require an open-mind and the willingness to ask a lot of questions.

12:05 to 14:56 - What kinds of businesses will benefit from performing process audits? Order size and the nature of the products will impact if they're useful. Importers with a lot of money at stake or producing technical or high-risk products will find them useful for providing an in-depth analysis of the risks involved with dealing with that supplier.

14:56 to 15:36 - A quick definition of 'high-risk products.'

15:36 to 32:58 - What is usually checked in a process audit? A list and explanation of each point are given:

  • Management systems (16:30)
  • New product introduction (16:54)
  • Specific process controls that are relevant to your needs and product (using plastic injection molding as an example) (18:00)
  • Training & staff evaluation when hiring (21:12)
  • Equipment - funny anecdote about a factory doing CNC machining in a shocking way (21:50)
  • Predictive/preventive maintenance (24:22)
  • Mistake proofing for operators (26:13)
  • Statistical analysis of processes (27:13)
  • Measurement devices (27:42)
  • Environment - good anecdote about a kids' toy factory (29:41)
  • Office activities (32:15)
  • The shop floor - warehouse and suppliers to check components (32:28)

32:58 to 34:32 - GMP checklists - if the supplier is following this, it reduces the need for the auditor to be extremely familiar with the manufacturing processes in use.

34:32 to 39:05 - Can process auditors give advice to spur positive improvements? This is dependent on context - a 3rd party auditor is unlikely to do this, however, internal or 2nd party auditors may well do this.

39:05 to END - Outlining roughly what is in a process audit checklist - capacity / incoming material check / setup of processes / process controls / checking finished products / HR / Equipment (read this blog post for more details about audit structure).

 

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In This Episode...

We're discussing manufacturing contracts. These are an essential piece of the puzzle for buyers with suppliers in China or elsewhere in Asia as they provide you with a way to clarify your requirements with your supplier, outline your expectations and the penalties for if they aren't met, protect your IP from being used or distributed incorrectly, and provide a legal framework to take action if things go wrong.

Hopefully, if you have an enforceable contract you will never need to resort to litigation, but we do touch on this, too.

Show Notes

Start to 02:47 - Introduction & do buyers work with suppliers without a manufacturing contract? - this is fairly common, but the idea that contracts are not enforceable in China (which is fairly prevalent) just isn't the case.

02:47 to 05:30 - What makes buyers feel secure enough not to use a contract when dealing with Asian suppliers? - this could be down to a lack of awareness about the need for a specialized manufacturing contract that is enforceable in, say, China, because they're used to not requiring a new contract per project in their countries. They may not know about the risk-reducing benefits of a valid contract, especially where larger orders are concerned.

05:30 to 07:53 - Payment terms which can help mitigate your risks - exploring preferential payment terms which may be acceptable to suppliers if large orders are placed, such as paying by letter of credit or paying a 20% downpayment and the balance after delivery.

07:53 to 12:22 - What are the benefits of having a valid and enforceable manufacturing contract? - outlining key benefits. The number one is the ability to outline and clarify your expectations to the supplier and have them commit to it in writing. Using a clear quality standard as an attachment is also important here.
The second key benefit is the extra leverage that the contract provides to buyers in the event that something goes wrong.

12:22 to 25:45 - What is included in a manufacturing contract - there are roughly 3 elements to consider (although this will depend on your needs and the type of supplier you deal with) and we'll go through them one by one:

  • Confidentiality agreement - China NDA or more comprehensive China NNN agreement - this will prevent the supplier from sharing your IP, using it to compete against you, or reaching out to your customers behind your back. Note - keeping penalties sensible is important.
  • Product Development Agreement (PDA) – (if developing product/s with your supplier) - this controls who will own the IP and outlines who financed what, etc. This will help you to move to new suppliers and take tooling and designs with you if needed.
  • Manufacturing Agreement (MA) - this outlines what you want the supplier to commit to. Product, spec, quality standard, price, shipment date, etc. It takes away any ambiguity and makes your requirements 100% clear.

25:45 to 27:05 - Further discussion about when these 3 elements may or may not be appropriate - for instance, if a Chinese supplier has rightfully developed the product that you are, say, white-labeling, then it is not appropriate to insist on a clause of exclusivity for the design.

27:05 to 31:53 - What else should go into the manufacturing agreement? - you may include payment terms, a clause about access to their factory for audits and checking, that no sub-contracting is allowed, the inspection process, and when products will be allowed to ship (contingent on passing inspection), what happens if products are received, but many quality issues are found - Why many lawyers struggle to distinguish between manufacturing and design defects which can lead to conflict between supplier and customer if the wording of the contract is not clear on this point and defects occur after some time that the products have been in the field (which would usually indicate a design defect, not a manufacturing defect that the supplier would be responsible for unless they developed the product, too) - also clauses on when a supplier may be sued or termination of the contract can be actioned.

31:53 to 34:36 - Manufacturing contract templates and contract depth - the length and depth of your contract is influenced by the size and type of supplier you work with and your order size and complexity. A small supplier may not have the bandwidth to deal with a very long and detailed contract.

34:36 to 36:40 - The strength of the manufacturing agreement to remove ambiguity - how the contract keeps everything in black and white and prevents managing a project via skype, wechat, email, etc. This could cause problems if trying to find fault for issues, in comparison to a contract where everything is clear and simple.

36:40 to END - How realistic litigation is if there are problems - this will depend on the contract. If it's not enforceable in your supplier's country litigation will be harder, but holding the supplier accountable in general will be affected. The dangers of being 'too trusting' and not planning ahead for the worst-case scenario.

*Please note, we are NOT lawyers. Any information provided in this episode is of an casually informative nature, but we recommend contacting a lawyer who is familiar with China/Asian law to help you produce your manufacturing contract.

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This podcast uncovers everything importers are likely to need to know about management system standards. We'll discuss key standards, their benefits (for both manufacturers and buyers), good and bad ways to implement them, auditing them, and more.

What are management system standards?

Certifications of these standards are achieved by organizations to demonstrate that they're able to perform the tasks required to achieve their objectives or those of their clients and/or drive improvements in a certain area. An example would be the ISO 14000 family which relates to environmental management being adopted by a manufacturer whose factory must limit pollution and other negative environmental impacts in order to be able to work for an environmentally-conscious client. 

When a supplier is certified for a standard this will allow a buyer to feel confident in working with them if this standard is important to their business, therefore it's one factor to consider as part of the vetting process.

Show Notes

Start to 4:04 - Introduction - explaining why management system standards are important to pay attention to, especially when vetting new suppliers or auditing your own operations (as they can form the basis of an improvement checklist).

4:04 to 09:50 - Tying in management system standards to working with Chinese suppliers specifically - the difference between adhering to a standard and being officially certified. Where to check certifications if they're claimed. The role of standards in building client confidence. Warning about fake certificates and those provided by companies who are less credible.

09:50 to 14:07 - Key management system standards - all of these are sets of requirements with different purposes:

  • ISO 9001the basis for many standards due to its framework. Quality management system standard for an organization to adopt when focusing on its customer's needs and improving.
  • Other QMS standards specific to certain industries, like ISO 13485 for medical devices, IATF 6949 for the auto industry's components, and others such as for aerospace.
  • ISO 140001 - environmental management / friendliness
  • ISO 45001 - occupational health & safety
  • ISO 27001 - information security

In Chinese factories, ISO 9001 & 14001 are usually the most commonly adopted certifications as foreign clients often demand these before for working with them and so they are more appealing if they hold these certifications.

14:07 to 18:40 - Does the Chinese government's focus on the environment provide an impetus for manufacturers there to gain environmental management certifications? - discussing the government's environmental regulations and enforcement in recent years and how effective this has been. Why ISO 14001 certification would make sense for companies who are close to the limits of environmental regulations in China. Positive global recognization of greener companies, like Patagonia.

18:40 to 30:40 - Certifying to multiple standards - if a company wishes to certify to more than one standard it is possible to do this without an enormous amount of work as many standards are quite similar in many ways. Also, discussing the differences between good and bad implementations - explaining how you can save time and money in a 'good implementation.'

25:05 to 29:03 - Why and how certifying bodies and auditors often push in the wrong direction - how they can sometimes drive clients to do everything from scratch unnecessarily costing them extra money! What a good certifying process looks like. Being wary of being in a position where you're overpaying certifying bodies.

29:03 to 30:00 - Does the certification process vary a lot per certifying body? - why their similarities prevent this from being particularly problematic.

30:00 to 35:25 - The logical path for learning more about standards - the same bodies do the training and the certifications and often push companies to purchase a standard to learn from, then implementation training, and then learn how to do the auditing by doing internal and then lead auditor training. How all of these activities don't necessarily make sense and can be very expensive, especially if you have some understanding or past experience in implementing standards. It's also possible to find a lot of the information you need for free online in order to start the learning process.

35:25 to 46:21 - Why and how are audits of the management systems carried out? - explaining the difference between 1st (internal audit by supplier's own staff), 2nd (customer sends an employee or uses an external agency like Sofeast to go an audit the supplier), and 3rd party audits (auditor from a certifying body goes in to perform the audit sticking strictly to the standard's clauses), and their benefits and drawbacks.
Auditing will help buyers to vet new suppliers (a higher score than other options being favorable) or can help keep the pressure on current suppliers to assure that they maintain the standards you require.

46:21 to END - How auditors can help to suggest improvements for the future - this is especially the case when working with 2nd party auditors and using the audits as a part of an improvement program.

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In This Episode...

Recently Renaud wrote a blog post on the 'China Law Blog' titled: Verifying and Monitoring Your Chinese Suppliers. In it, he discussed 7 challenges facing buyers with Chinese suppliers which stem from a lack of transparency. We'll discuss these challenges in today's episode.

When we speak of risks and challenges these days many buyers are thinking of the effect of the US/China trade war, the situation in Hong Kong, and other political issues on their business, but the risks covered here are related to the daily struggle that buyers have just to receive their products at the quality they expect and some of the steps you need to take to mitigate them.

Show Notes

Start to 4:35 - Introduction + what are the 'risks' and challenges facing buyers today that are NOT box-office news topics like US/China trade war, Hong Kong, Xinjiang, etc? The 7 situations where challenges occur due to a lack of transparency and how these are very damaging. Podcast episode on social compliance audits (referred to around 2:25)

4:35 to 12:17 - 1. Supplier screening & qualification - taking control of your supply chain and not letting the supplier keep sub-supplier information, etc, from you. 

12:17 to 18:33 - 2. New product development (manufacturing side) - includes how prices can be increased without warning and suppliers can skip pre-production steps like a pilot run.

18:33 to 25:54 - 3. New product development (design side) - including why you should expect to be given up-to-date designs for your product and not being sucked into losing the rights to your IP to OEMs who want to lock you in by holding your designs. Podcast episode on choosing the correct supplier (relevant to this section).

25:54 to 30:40 - 4. Confidentiality of information - how Chinese suppliers can play 'fast and loose' with information and IP that should remain confidential and how to safeguard against this.

30:40 to 37:29 - 5. Purchasing materials & components - being wary of counterfeit components and how to keep tabs on suppliers who may switch out components to improve their profits.

37:29 to 40:02 - 6. Manufacturing (Sub-contracting) - can you be sure that the production is truly carried out at your supplier's factory as agreed, or is it being subcontracted to a sub-supplier that you don't know about due to being too busy? Solutions to this issue.

40:02 to END - 7. Your supplier selling your products without permission - are you open to abuse by the supplier because they have your tooling and can use it to produce your products and sell to other clients or in your market against you? What to do to avoid this.

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