China Manufacturing Decoded
 

China Manufacturing Decoded

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Join Renaud Anjoran, Founder & CEO of Sofeast, in this podcast aimed at importers who develop their own products as he discusses the hottest topics and shares actionable tips for manufacturing in China & Asia today! WHO IS RENAUD? Renaud is a French ISO 9001 & 14001 certified lead auditor, ASQ certified Quality Engineer and Quality Manager who has been working in the Chinese manufacturing industry since 2005. He is the founder of the Sofeast group that has over 200 staff globally and offers services (QA, product development & engineering, project management, Supply Chain Management, product compliance, reliability testing), contract manufacturing, and 3PL fulfillment for importers and businesses who develop their own products and buyers from China & SE Asia. WHY LISTEN? We‘ll discuss interesting topics for anyone who develops and sources their products from Asian suppliers and will share Renaud‘s decades of manufacturing experience, as well as inviting guests from the industry to get a different viewpoint. Our goal is to help you get better results and end up with suppliers and products that exceed your expectations!

Episodes

Pricing, Negotiation, Contracts | Vetting Chinese Suppliers (Part 10)

Thursday Nov 12, 2020

Thursday Nov 12, 2020

In This Episode...

You've tuned into part 10 of our mini-series guiding you through effective vetting of Chinese suppliers that will help you to find the best possible manufacturer for your products (listen back to the entire mini-series on vetting Chinese suppliers here 👍).

If you've been following this mini-series, you will already have learnt about due diligence, factory audits and visits, exploring testing facilities, and much more when it comes to vetting suppliers. But if you're at the point where you are ready to start asking for quotations, there is still quite a lot to be learnt about the potential suppliers on your shortlist and that's what Adrian and Sofeast's CEO, Renaud, get into in this episode.

Show Notes

00:00 - Introduction and why getting quotations is a helpful part of the vetting process.

02:39 - When is the right time to start discussing pricing with a potential supplier and what can we learn from their prices? There's a difference between off-the-shelf products and more unique products that you're developing new for the market. For the latter, protecting your IP is important so that your product's unique features remain confidential.

05:41 - When to discuss pricing if you have confidential IP to keep secure. The risk of IP leakage (see additional resources below) here is a real threat. A useful strategy is to only release IP to properly vetted suppliers and hold off on speaking about pricing until this has been done (this means going through the whole vetting process outlined in this mini-series before sharing product details and requesting pricing).

You may also choose to omit the unique IP from your designs submitted for a quotation at an early stage in order to get pricing back which will be roughly equivalent to the true cost a supplier can provide when they see your complete product design - this helps you gauge market rate and get an idea of which suppliers are suitable on cost.

10:47 - What you should also discuss with a potential supplier when you're in a position to request pricing. Getting pricing means sharing technical information, but you should also be asking about business terms such as payment terms, incoterm, how shipping is handled, packaging, if the supplier stores your products in the warehouse and then ships them to different countries in batches, etc.

11:32 - How working with the wrong manufacturer on prototyping is a recipe for disaster. Worst case scenario for the maker of a new product is that by working with the wrong Chinese supplier on developing your product and creating its prototypes, you're effectively training them to become your competitor with your own product idea. This shows why vetting suppliers to select the 'right option' is so important.

13:47 - A summary of steps you can take to protect IP. Narrow down the right profile of manufacturer for your needs. Screen out poor candidates. For complex products and large orders, performing advanced due diligence is a must. For simpler products where changing supplier is easier and protecting IP may be less of an issue, some screening is still required. After this, have your one or two shortlisted suppliers sign an NNN agreement and make it very clear what is confidential and understand who works on it and is a party to this IP. Assure they don't share confidential IP with sub-suppliers unless they also sign the NNN agreement. Look out for telltale signs of suppliers who don't take IP security seriously, such as staff members sending important business emails from personal accounts!

18:06 - What can we learn to show us that a supplier is capable? How well does the supplier understand your requirements before quoting? Do they ask questions to get the right information that helps them provide a very accurate quotation and not surprise you with additional extras later on? You also need to make sure you give the supplier the right information to help them, though. So paying attention to what the quotation is based on (such as your quality standard, your intended warranty, etc) is a key indicator of whether the supplier truly 'gets' what you require.

25:03 - Mistakes buyers make when requesting quotations from Chinese suppliers. Negotiating a low price at an early stage before the supplier has all of the information they need may seem like you're locking a good deal, but if the supplier hasn't sourced components and don't know how long production will take, for example, price rises later are almost inevitable and will cause you a lot of trouble.

26:26 - Why doing product design and prototyping outside of China/Vietnam etc is a good way to protect IP and streamline the vetting process. Instead of vetting a supplier, then going through the product development and pre-production stages with them, you can do that abroad while you vet them and go to them with very specific designs and prototypes to get accurate quotations and start work quickly. This also means that the Chinese supplier wasn't involved with the design and there's less chance of IP leakage. This would typically be the model when using a contract manufacturer and such preparation helps show you as a serious and credible customer.

30:35 - Are the extra costs for developing products and prototyping abroad worth it? This depends on the expected volume and how much capital can be spent at this early stage. If you don't do this, working with a Chinese OEM could work, but assuring you own the IP is going to be a key concern before doing so, otherwise, you can go into partnership with them if sharing ownership of IP is acceptable and you're unsure if you can get investment elsewhere.

33:42 - How buyers need to be very clear when communicating requirements in order to help suppliers give them a solid quotation. Chinese suppliers may not be very organized, so you need to be sure to help them to help you by being very organized yourself - not sending them full information, or sending it piecemeal will definitely slow things down and cause misunderstandings.

34:50 - Closing tips for buyers who are new to manufacturing in China in order to have more success when negotiating price with suppliers, etc. Don't be tempted to try to drive down the price to the extreme, even if it makes you feel like you're a top negotiator (this will no doubt increase later or result in very poor quality).

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Exploring Good Manufacturing Practices (GMP)

Wednesday Nov 04, 2020

Wednesday Nov 04, 2020

In This Episode...

We're discussing GMPs (Good Manufacturing Practices). What are they? How are they useful for importers with suppliers abroad in countries like China? What is their relation to controlling your suppliers in comparison to activities like quality audits, social compliance audits, and process audits?

After listening to this episode, you'll have a grounding in what GMPs are and how to implement them yourself if you feel that they'll help you improve results from your suppliers.

Show Notes

00:00 - What are GMPs? A brief explanation behind the concept. What are the basic things that must be done well and carefully when it comes to manufacturing? This is the basic idea of GMPs. They can vary based on industry and are often grounded in quality and safety.

03:18 - What industries (aside from food, medical, and pharmaceutical) are particularly benefited by using GMPs? More relevant for any product type which has high safety and/or quality requirements. 

04:57 - Some similarities between GMPs and ISO 9001. GMPs may be insisted on when it comes to practical actions suppliers should focus on that an auditor will check on-site. This applies to the physical, whereas the opposite would be social compliance audits which focus very much on what people say, not necessarily what they physically do.

07:28 - Why focusing Asian suppliers on physical improvements is a good way to spur improvement. It's harder to fake - they either 'do something' better, or not. Costco is an example of a retailer who has a fairly simple GMP checklist that they ask their suppliers to follow for products which are not medical, etc.

09:14 - Are GMPs a part of the manufacturing agreement with a supplier? They may be, but can also be used during initial qualification of a potential supplier, too. Their improvement based on GMPs can be assessed over time and rewarded with more orders (or fewer).

10:24 - What list of principles might typically be included in GMPs? It will vary per industry, but for general consumer goods, it may include: How materials are stored. Segregation of conforming vs non-conforming material. Production equipment maintenance. Staff training and experience. During or after production checking schedule and method (includes sampling and testing equipment). Planning to avoid excess inventory. 
Some buyers may have specific requirements based on their industry, too, in a subset of the GMP checklist. For example, checking the material purity and the molds would be key for producers of die-cast products.

Any more specific and you go into the territory of process audits, but GMP checklists usually don't go that far.

16:15 - How GMPs are more superficial than process audits. GMPs are more generic, but they have a value in terms of making sure the basics are followed properly.

17:35 - Do suppliers keep records about following GMPs. Suppliers rarely admit to following GMPs, but it may happen in specific cases where GMPs are critical (such as from a safety perspective).

18:04 - What are the kinds of elements that make up the USFDA GMPs for medical devices? This gives an idea of the demands placed on suppliers of medical devices where safety is critical. Focus on documenting good manufacturing practices and quality system. This will include QC records, traceability information, preventive maintenance, images of the machinery and facility, how defective pieces are dealt with, BOM, pre-production verification records, and more. All of this goes into a technical file which is retained until required and can be updated when needed, also. For SMEs, following these GMPs would put you well above the average.

24:40 - Flexibility of GMPs for medical devices. The USFDA GMPs are purposefully flexible, as there will be a big difference in safety requirements and preventive thinking, for instance, between the production of a pacemaker and a head covering for hospital staff.

26:25 - Are such GMPs covered in ISO 13485 for medical devices? No, but a good auditor will consider them during the audit and ask questions about them. Also discussing how issues are minimized and tested for even after the product is on the market by reliability and quality engineers.

30:07 - What are food GMPs? No one standard, but a focus on hygiene is common. ISO 22001 food safety management system defines GMPs as 'prerequisites' as they are the basics that should be in place before foodstuffs are produced. They would include points like pest control, staff hygiene and controls on smoking, rubbish and waste disposal, correct water supply, and more which are specific to food production. Food GMPs often differ from one country to the next.

33:27 - GMPs' basis in common-sense. They are the basic things that no one can dispute need to happen.

34:15 - Wrapping up: How should buyers who want to implement GMPs get started? Think about your product categories. The approach will be different for general consumer goods in comparison to those that require advanced safety like food or pharmaceutical goods, for example. 
List the basics that you need your manufacturers to do to a good standard. Will they be used in your ongoing re-auditing program for suppliers or with a management system audit? Consider your objectives and scope. If you're concerned mainly about how materials are handled and manufacturing is done, then implementing GMPs is appropriate, but if you need to go deeper into a supplier's capability then a quality system and/or social compliance audit may be relevant.
Brainstorm and develop a checklist, organizing it by category. Audit based on the checklist and hone it over time. If you work over different product categories, the GMP checklist may need product-specific subsets added to it, too.

Extra GMP information you may find helpful

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How To Perform In-Depth Due Diligence On Your Supplier | Vetting Chinese Suppliers (Part 9)

Wednesday Oct 28, 2020

Wednesday Oct 28, 2020

In This Episode...

You're listening to part 9 of our mini-series guiding you through effective vetting of Chinese suppliers that will help you to find the best possible manufacturer for your products (you can catch up on the entire mini-series on vetting Chinese suppliers here 😉)

This episode (recorded in late October 2020) is particularly timely as many importers aren't able to travel to China to check on their new or current suppliers' progress, so getting an understanding of how their business is doing and if they're engaging in any practices which could cause risks for your supply chain (such as if they were to be shut down by the government for flouting certain regulations). Therefore, understanding how and why to perform in-depth due diligence is an important step to assuring supply chain stability and quality for those of us in who can't visit China yet and as a standard part of your vetting process to stamp out risks.

Show Notes

00:00 - Why is performing due diligence on suppliers in China so important at the moment? China hasn't been unaffected by the pandemic. Can you be sure that your supplier is going to stay in business, for example? This would be a big issue if a key supplier were to suddenly close down. Also, explaining why some manufacturers won't disclose if they are having some difficulty.

06:00 - Why the lack of travel to China causes trouble for buyers who lack visibility into their supply chains. Being unable to visit suppliers' factories blocks many buyers from making their own subjective evaluations based on what they see (👂 listen to this episode about On-site, Subjective Factory Evaluations), so a lot of buyers have no idea if their suppliers are in good shape or not and feel worried that they could be at risk.

07:54 - How even local buying offices with foreign staff in China may have limited visibility into the suppliers due to local COVID restrictions. 

10:03 - When performing due diligence, what are the points to focus on (modelled on what we do for clients here at Sofeast)? 

  • Checking on how are the real company owners
  • Looking into the financials of the company
  • Assessing levels of debts and who creditors are
  • Ownership changes
  • Has capital been transferred for new companies
  • Checking that in-house processes adhere to specific regulations

All of the above are best accompanied by an on-site visit where the operations are examined in detail in order to find out about company health. An example is given where the inspector sees that the company is now leasing out a part of their facility to a different organization where they used to occupy all of it. Is this a cause for concern that the company isn't doing so well?

15:38 - Checking that in-house processes don't fall foul of local regulations. How this can cause a factory to be very quickly shut down in China for this, losing you a supplier overnight! Checking relevant licenses for polluting processes etc is necessary.

17:38 - The differences between 'Old China' and 'New China' in terms of suppliers. With 'Old China' thinking factory owners are more likely to skirt certain rules and play fast and loose with the law (examples provided), and 'New China' where owners behave in a more sustainable way and follow the rules. The latter are far more risky suppliers to work with these days as government scrutiny and enforcement increases.

21:10 - Common strategies of 'Old China' manufacturers to be aware of. Is an owner sinking all of their money into real estate, or perhaps has moved their operations out of a major city into a more undeveloped area or province in order to reduce scrutiny? Buyers need to be aware of tricks like this which are possible red flags.

25:21 - How the culture is changing, leading to less risk for buyers. 

27:37 - Is there more transparent business information out there for buyers who are examining suppliers? The forthcoming corporate social credit system could be a game-changer here as it will show importers very transparent information about companies' health and affairs.

29:44 - Why financial information, such as accounts, don't give a picture of the present time + recap of the 'Big 2' due diligence points: Financials and respect for regulations. How all of this is industry and product-specific, so checking certifications and test reports is also needed.

32:15 - The serious risks you need to investigate when examining a potential supplier. Don't trust anything without confirming it. Focus on the key points of importance, such as:

  • Their long-term stability
  • Relatively healthy financials
  • Ownership and management
  • Stability of their suppliers (your sub-suppliers)
  • Processes and efficiency for cost-control
  • Experience in your product niche
  • Familiarity with standards for your country/market

36:25 - Should a backup supplier be planned for in order to switch if there are issues with current suppliers? Explaining how to organize this in order to guard against the discontinuity of supply.

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The Basics of Quality Management for Buyers

Wednesday Oct 21, 2020

Wednesday Oct 21, 2020

In This Episode...

Our CEO Renaud Anjoran (whose background is as a Certified ISO 9001 & 14001 lead auditor, ASQ certified Quality Engineer, and Quality Manager) discusses the Quality Management Process, including its 3 main sections: Planning, QC, and Improvement. This process allows buyers to plan ahead to assure good quality from the start of the project, use real data to pinpoint and eliminate quality issues they're getting from a supplier, and to stop issues from recurring in future by putting in place processes and systems that prevent the issues from reoccurring in future.

The takeaway from this episode is a proven QM process which you can use to improve your own quality, and it's based on this graphic which is referred to throughout:

quality management process

Show Notes

00:00 - Summarising the quality management process and its basis in the Juran trilogy, namely the planning, control, and improvement phases.

06:34 - What benefits do implementing such a quality management plan provide to buyers over those that don't pay as much attention to quality management activities? Instead of flying blind, the QM process allows improvement to processes which would otherwise keep throwing up quality issues. Measuring data also allows better control over component suppliers. Overall, poor performance across the supply chain has a negative effect on your business, not necessarily theirs.

11:04 - Best practices for getting started with quality management if you're starting from scratch. As a minimum, document your requirements (what you and your customers will or will not accept) as this allows you to point out if a supplier has done something wrong that deviates from them! Without this, you can see how improving quality may be an issue if a supplier disagrees with your assessment. 
Based on the requirements, the second key best practice would be to do some QC inspections (including product reliability & compliance) - fundamentally, do the products reach your expectations?

17:56 - Can 'small buyers' affect change? If you're a very small buyer, let's say 0.1% of a factory's output, for example, driving change in your suppliers may not be possible as they will not listen to you. However, if you account for 10, 20, or 30%, for instance, then it's a different story.

18:43 - Do quality recurring quality issues leave small buyers like some FBA sellers in a difficult position? What can you do to protect your business and improve quality? Would it be as drastic as needing to switch to a new, better supplier? Assuming the factory is capable, it may be a design, material, or component issue, so this is worth looking into when you have some quality and defect information.

***

Going through each step of the quality management one by one to illustrate the process that buyers can follow in detail.

21:59 - Quality planning

  1. Know your customer expectations (a good specification sheet and drawings will be helpful)
  2. Set objectives (approving samples is an important step here and boundary samples may be effective if you have a little tolerance between two points)
  3. Qualify supplier & sub-suppliers (we refer to this episode on different supplier types)
  4. Audit systems and processes, find risks (FMEA), plan accordingly

28:51 - Quality control

  1. Product/material inspections (product inspections can be before during and after production, although DUPRO is favorable as there is then time to make changes before all products are finished)
  2. Laboratory testing (some samples are sent to labs for reliability/compliance/safety testing, especially if they cannot be done on-site at the manufacturer's facility)

31:00 - Quality improvement

  1. Use problems found during auditing or QC to drive improvements
  2. Set controls on identified risks (this could be a preventive maintenance plan, for example)
  3. Keep updating the quality standard as and when new issues occur, also the risk analysis for when new risks are found, and feed back to the supplier if there are issues with materials or components coming from a certain sub-supplier

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Factory Testing Facilities | Vetting Chinese Suppliers (Part 8)

Wednesday Oct 14, 2020

Wednesday Oct 14, 2020

In This Episode...

You're listening to part 8 of our guide to the effective vetting of Chinese suppliers that will help you to find the best possible manufacturer for your products.

In this episode, we're discussing factory testing facilities and how they can help you to assess how capable a supplier is. Ask the question: "How can this supplier know that their product is good if they're unable to test that products reach my specifications, quality, and safety requirements?"

So, when vetting a supplier, paying attention to their testing facilities is a worthwhile step either for yourself (if you're visiting a factory in person) or for your auditors who assess the supplier on behalf, as their professionalism in testing speaks for their overall ability and quality-consciousness.

Show Notes

00:00 - Intro and catch up about the state of things in Hong Kong and China re: manufacturing and restrictions to visiting these days (late 2020).

03:33 - What testing gets done in a factory (or not) and why is this important to pay attention to? Some Chinese suppliers won't do much more than a visual check on products before shipping. Therefore this possible lack of testing can cause problems for the buyer if a supplier doesn't check components, materials, or finished products. Therefore auditors will be interested in in-house testing equipment and its processes and condition.

08:00 - Why checking the factory's testing equipment is the easiest way to flag a manufacturer that doesn't care about quality (if it's unused or in poor condition this should tell you what you need to know).

09:11 - If your supplier conducts its own testing and provides you with a test report or self-declaration certificate of some kind, what are you looking for here? Firstly, this is a good sign that they take quality and compliance seriously. Secondly, if you were, say, sued and in court, after a product caused an injury, what you as the 'supplier' did to ensure consumer safety would be investigated and product testing reports from your supplier would be of benefit to you to dispel accusations of negligence. Thirdly, ideally, you will also conduct your own lab tests on some random samples picked from the batches in addition to your supplier's in-house testing, as this provides you with solid evidence of product quality, safety, and compliance that cannot be 'tampered with.' 

13:03 - Some examples of testing for different types of products and some key observations about what suppliers may or may not do in these cases:

  • Garment factory - they often don't record test results after doing them.
  • Consumer electronics (music amp) - buyers usually perform their own tests in order to keep electronics suppliers accountable and drives improvement.
  • Batteries -  suppliers will be doing tests on 100% of the batteries. It's important to get data about batteries that haven't passed in order to make sure that the tests aren't just for show.
  • LED suppliers - it's fairly standard for them to have quite expensive in-house testing equipment and this will be expected by customers.
  • CMM machines - these are expensive devices to precisely check the dimensions of mechanical parts. Even though the cost is high some factories even have one of these machines simply as it's expected, but don't use it!

Key point: If a supplier shows you some fancy testing equipment, make sure that they can back up its use by showing you accurate results.

20:50 - Do even very simple products call for a supplier to require in-house testing facilities? Some tests, such as chemical tests will need to be in a lab so this kind of equipment likely will not be in-house. A better way to look at this is how often you're likely to need to do the tests - on simpler products it would perhaps be less so. Therefore, conducting occasional tests in a 3rd party lab would be fine as the expense of purchasing in-house testing equipment may be prohibitive for a supplier in this case.

23:07 - Is it helpful to have a supplier's test reports in hand when you go to a laboratory to conduct your own tests on the product samples? While having a test report from a client is useful as we discussed earlier, you should not need it to know which tests to perform. In order to buy from China safely, you need to be fully aware of the kinds of tests your product is required to undergo in order to be compliant and safe (so you're not taking a supplier or lab's word for it alone).

24:49 - The risks of 'buying cheap stuff from China' without understanding your liabilities as an importer and what kind of testing is required. An example: The very unbalanced PPE industry has now got a lack of trust on both sides, which has been increased by people rushing into buying without performing the necessary checks.

27:22 - Why the testing of high-risk products is all the more important based on the experiences in the PPE market in 2020. 

28:12 - Some examples of the testing equipment you'll typically find in factories which produce products with common processes, such as electronic assembly, injection molding, etc. Smaller factories often won't be proficient in testing at all, but larger factories often have sophisticated and expensive testing equipment in the factory. 

33:51 - Conclusion: Factory testing facilities and in-house tests are useful in a vetting sense as they help you to assess supplier proficiency and red flag those that aren't quality-conscious.

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What Is Compliance Testing And When Is It Appropriate?

Wednesday Oct 07, 2020

Wednesday Oct 07, 2020

In This Episode...

Today we're discussing compliance testing.

Compliance testing is not only a crucial tool for reducing product risks and assuring their safety, but it also enhances consumer trust and confidence in your brand which is ever more valuable in today's world.

You'll carry out tests on your products to assure that they're safe, don't include restricted materials, and are saleable in your markets. Tests may also include your packaging, too. Jump into the episode to start to explore just why this testing is an important step that YOU need to be in control of.

Show Notes

0:00 - Podcast & topic intro + introduction product tests. Defining what product tests are into roughly 2 large families of tests, reliability tests and compliance tests. Includes some examples, such as drop tests. Why many compliance tests are dictated by consumer safety regulations which can be rather country and product-specific.

07:00 - Why not all compliance testing leads to certifications and examining what a test report is. The big difference between a test report and a full certification. Why test reports may not be trustworthy...what to be cautious of, such as NOT getting a test report from a supplier (the level of trust you have with a supplier is connected to the manufacturing contract you have with them).

14:19 - Exploring what 'certification' means. This is more serious than a 'test report.' They tend to be product-specific and are done towards the end of the development stage of a new product. A lab will test the products AND provide certification to a certain standard which is more complex and with increased oversight.
They often look at manufacturing processes and systems and so are more difficult to obtain. 

15:48 - The benefits of regularly testing to a certification's standard. This isn't the same as becoming certified, but it will provide oversight on production runs to assure that they remain compliant and safe. A random testing regime is better if testing 100% of batches aren't possible. Not testing and/or letting your supplier know when products are or are not being tested opens you up to abuse.

17:53 - Is it 'safe' to use Chinese testing labs? Many larger companies prefer testing in Hong Kong as they have trust issues with mainland labs in general. Chinese labs' internal control may not be as high as foreign names, but they're likely to be cheaper. Checking that the lab is certified to ISO 17025 and checking that their nominated scope applies to your product type is a 'must do.' Where to find lists of accredited labs. A few horror stories about a lack of integrity in labs.

24:36 - Vetting the right lab. Discussing best practices for when trying to find the right lab for your compliance testing.

26:09 - How do buyers know what kind of testing and certifications they require? Many resources exist online in paid and free formats for buyers to research the right standards that apply to their products. You can speak with people who have been there and done it before. There's also the option of working with companies like Sofeast or Compliancegate on your project to assure the correct testing and procedures are followed for your compliance. A good tip is to request quotations from testing labs - this will provide you with the tests they believe you require to be compliant (this may vary from lab to lab).
The dangers of doing 'too many tests' as this can get quite expensive and they may not all be strictly necessary.

31:28 - Would you instruct factory auditors to focus on the key tests and standards products must undergo and comply with? Yes, auditors can bear these in mind during the initial vetting process, or ongoing factory audits on a factory who has been producing for you over time. Checking if the factory is doing the testing that they have, say, committed to do is just another process to check during process audits, for example.

34:24 - What information should you provide to testing labs when requesting a quotation? Giving you a helpful list of the product-specific information points to prepare, such as region for sale, materials, image, instructions, etc.

35:47 - Wrapping up - knowing your risks and why compliance testing protects you. A serious compliance issue can be enough to kill a company and the supplier usually doesn't share responsibility. Reiterating that for safety's sake YOU need to control the compliance testing process, not leave it to your supplier. Also, your own certification (with your name on it, not your supplier's) can also be used to market your product.

 

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Analysing the (NPI) New Product Introduction Process & its Benefits

Wednesday Sep 30, 2020

Wednesday Sep 30, 2020

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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Exploring Process Audits | Vetting Chinese Suppliers (Part 7)

Wednesday Sep 23, 2020

Wednesday Sep 23, 2020

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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How & why to create a valid China manufacturing contract

Tuesday Sep 15, 2020

Tuesday Sep 15, 2020

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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All You Should Know About Management System Standards & Auditing Them

Wednesday Sep 09, 2020

Wednesday Sep 09, 2020

In This Episode...

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 9001 - the 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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