Quality Products International

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6th Oct, Premier Wen Jiabao speaking at the Central business summit, asked the European economic ministers not to push for the RMB to appreciate.
Instability in the RMB will cause problems for the Chinese economy which is the primary driver of the world economy at this time. If the Chinese economy falters then it would cause another economic disaster for the world.

Article en Français . Articulo en Español . 文章简体中文 . 文章繁體中文

Quality Products International Ltd has recently been commissioned by a gifts and premium company to make over one million pins for one of their key clients.

Pins, like wrist bands are a popular promotional / awareness campaign device and very useful for charities as fundraising

In this case the pins are both complex and urgent.

Some pins are simple metal pressed items or s piece of cut ribbon, these are complex with various fabric and plastic molded components requiring several stages of production.

They also need to be produced to a tight deadline, and as with most promotional events, timing is critical to the success of the entire campaign.

QPI Ltd has extensive experience in quality control in Asia, with management and inspection personnel here full time. Our team is well placed to manage the production directly with QPI staff on the factory floor supervising IQC and key stages of production, as well as performing final random inspection.

If you or your client have a item that needs special attention, please contact us and find how we can assist you.

What a great headline! All is well in Foxconn and we can all get back to enjoying our little electronic toys and tools without having to worry about poor Chinese workers having to kill themselves in order to make a statement about working conditions.

OK I’ll admit sarcasm is not a good way to make a point but it is funny that this headline popped up a little after I wrote about the factory social audits that need to be done regularly. The problem is that only when you get down to the second half of the article in question is when you see what was done to fix the problem. Foxconn has doubled each workers wage over the past couple of months and at the same time it has reduced the amount of overtime hours from 80 hours per month to 36 hours per month. The funny thing is that previous to this announcement Foxconn professed to treat their workers better than anyone else and they had no cause to complain. Unfortunately 80 hours per month is more than double the international standard and is in fact more than double the amount allowed by Chinese law as well. So it seems that the workers were not being treated as well as they wished us to believe. Considering the problems that the company was having with its workers one might draw the conclusion that overtime was a requirement and not a request as is more common in the west (although one might think that is changing there too). In that case it is no wonder the poor workers were killing themselves. Sure they had all sorts of recreation facilities and activities but, if one is too tired to do anything except show up for work (since you have to work an extra 2 weeks every month just to keep your job), then what use are they?

Considering that the working conditions did not adhere to international standard nor local law, why did everyone say that the factories were fine? Of course there is a certain amount of ass covering in all this but one has to wonder if a proper third party social audit of the company and factories might have uncovered this a bit sooner and maybe headed off the problem to start with. Regular external audits of the factories and conditions should be part of any company’s strategy for doing business in China and the rest of S.E. Asia. QPI Ltd. Is well placed to help with such needs and is in an excellent position to provide independent audits of your manufacturing facilities.

For the full article in the China Daily online click here.

Author: M. Charlin

A recent article on CNN explored the luxury and lucrative industry of premium alcohols in China. One only needs to go into any bar in the main urban areas to see young adults spending large sums of money on brand-name alocohols.

Currently the “flavour of the day” is Brandy, and Whisky is second… These are mostly mixed with red-tea or 7-up. QPI is working with a number of Chinese wine importers/distributors to bring in premium wines and other hard liquor.

Have a read at the well worded article about Tequila in China here…

A recent article from China started me thinking on how the Chinese economy will evolve in the coming years.  The article deals with the wages growth in the Chinese economy.

An income survey report, based on 5,866 enterprises in Beijing, Shanghai and Guangzhou,
released by Zhaopin.com in July, shows that the average wage rise was 10.1 percent so
far this year, 1.9 percentage points higher than 2009.

The statistics from Zhaopin.com show that from 2006 to 2008 wages steadily increased, with
the rate peaking at 13.8 percent in 2008. However, because of the financial crisis in 2009 the
rate dropped 8.2 percent, its lowest rate during the last five years.

“Although they are up again in 2010, and higher than 2007, the rate still hasn’t reached the peak
of 2008,” said Zhao Lipeng, senior payment consultant with Zhaopin.com. “However, in Beijing
the speed of the rises slowed, but wages still increased in 2009,” he added.

Zhao thinks that the 2008 peak is likely to be reached again sometime next year, which means
that many employees will remain disappointed this year.

“Last year, many employees didn’t get a pay rise because of the financial crisis and their
expectation this year is as high as 21.8 percent,” Zhao told METRO.

“I am still waiting for a rise this year and I hope it will be more than 30 percent,” said Eric Hu,
a 25-year-old, who works for a consulting company in Beijing.

The report shows that the top three industries for wage rises in Beijing are finance, IT and
advertising. Labor-intensive industries, such as manufacturing and the service industry, have
the lowest rises.

By Wang Chen: Wages Rise but don’t meet expectations, China.org,
http://www.china.org.cn/business/2010-07/28/content_20588480.htm

So what does this have to do with your manufacturing in China?  Well you can see that costs are going up. Labour is probably the biggest cost savings in moving manufacturing to China in the first place. Now you are seeing an average increase of just under 10% in the cost base.  Admittedly this is substantially less in the manufacturing industry but the cost is still increasing.  What does bear watching is that the export industry is not growing at the same rate.  The economies of the United States and Europe do not show the growth necessary to fuel this increase from China.

What can fuel income growth? Two main  thrusts, growth in markets increasing scarcity and thus profit, or increasing productivity which reduces costs and increases profits.  Considering the technology already available for manufacturing in Asia the idea of increased productivity being able to absorb this cost increase by itself is not sustainable in my opinion.  At some point Chinese manufacturers will have to look at other markets/products  or fail.  Either that or suddenly costs to manufacture in China will start to increase to keep pace with increased labour costs.  It happened in Japan and Taiwan and it will happen here.

Some manufacturers will stoop to cutting corners, not just on materials but also in labour areas.  This is an area that is rarely checked once the initial audit or survey is performed.  This lack has caused problems in the past.  A large sportswear manufacturer in the U.S. attracted much bad publicity due to the conditions in the factories where the products were produced.  Initial investigations by the company found things above board but, as cost pressures increased, unsavory practices crept in until someone found out. This cost the company a great deal of lost goodwill and money in cleaning up the problem.

Since labour is such a large component of costs of production in most cases it is seen as an area where there is scope for savings.  A more modern example is the issues currently facing Foxconn in China.  It is not enough to pay your workers well but to also treat them well.  Treating your labour force as just parts in a machine will eventually cause them to crack.  In earlier times this may have been the cost of doing business not only in China but in the West as well.  Just think back to the early days of the industrial revolution and the factories using women and young children.  However in the modern age these practices even if practiced elsewhere on the planet will reflect badly and publicly on the companies involved.

A yearly audit or survey should be part of a company’s standard operating procedure to combat such cost cutting and also to keep abreast of changes.  QPI Ltd. Offers a number of cost effective Audit services to keep your company informed of your partners in Asia both at the factory floor and their current solvency.

Author:   M. Charlin

Below is an article and video showing actual events at Foxconn. This is all the more disturbing in the light of some of the reports of early deaths not being consistent with suicides. Family members and other witnesses said that injuries on the body were not consistent with a simple suicide. IE> there were too many injuries in different locations on the body.

Quoted from SHANGHAIIST.COM:

“Just when we thought we wouldn’t be hearing anymore of that hellhole-of-a-workplace otherwise known as Foxconn, yet another scandal has erupted. This time, several security guards at Foxconn’s Beijing plant have been filmed getting physical with factory workers. In a clip that has been circulating around on Chinese interwebs, two guards are first seen pulling a Foxconn employee by his shirt and shoving him around. Meanwhile, three other guards outside have pinned another employee to the ground, and they are joined by another ten or so guards who then jointly beat the living daylights out of that guy.”

Read the full article and see the video here…

Further to our recent article “OEM production in China” about the need for clear specification, we came across a similar story from the furniture trade.

The look on his face tells me he’s not happy and by now starting to feel a little like he’s being ripped off.  He paid a deposit, gave instructions and now the supplier is not delivering. “Whats wrong with these people?!?! He is having trouble comprehending why they won’t just “do a good job.” Now I have been in this situation myself many times before. The look on the vendors face tells me a similar story. “We gave an excellent price, we held the product for him (even though we could easily sell it to another buyer) and we did our best to make the changes he requested.

Its almost always a same/similar situation:

Buyer:

Vendor

Trying to achieve a certain standard in the product (preferably even a better standard) andwithin their budget which they believe they have communicated clearly to the supplier (and at the same time, assuming that the supplier of course understands what they are talking about). Travels to China a few times a year for buying trips. Believes they are “proficient” and experience China buyers. Worries about “over paying.”

Trying to sell a certain type of product, so that it can be paid for and shipped as quickly as possible (and assumes the buyer understands what standard they can produce at). Has never left China and in fact rarely ventures beyond their shop and factory. Has sold to foreigners before with mixed results. Worries about actually getting paid.

At first glance, the issue lies in that there is probably a huge gap in the buyers standard of quality and expectations verses what standard the supplier is actually delivering. You want white – they want black – and with a lot of pulling and tugging hopefully you’ll get gray. But is it really that simple? Does it really all boil down to just communication issues?

Full Article: ACF China

Quality Products International Limited (QPI Ltd – QPI) is very familiar with this situation and can assist buyers in navigating the waters in China.

QPI can assist with any stage of the supply process. Many buyers simply engage QC companies for PSI / FRI (Pre Shipment Inspection / Final Random Inspection) which is a sensible ”insurance policy”.

QPI can also assist in factory selection, factory audits (capacity, capability and ethical auditing), as well as the product development / specification phase.

We provide production management services with direct local factory liaison, inward QC, and compliance testing.

While all that can sound expensive, it helps ensure that items are produced on time, within budget and specification.

QPI offers “cut down” services where the buyer simply wants something more than FRI for a lower value order.

Recently there have been a few articles concerning the plight of workers in China.  The most widely known case is, of course, the deaths and suicides on the Foxconn campus.  What is increasingly becoming clear is that China is going through some of the upheavals in labour relations that the West went through during parts of the Industrial Revolution.

The average Chinese worker has now grown up with a better lifestyle and more freedoms than his or her parents had, and the person’s attitude toward work is displayed in that new outlook.  No longer is a worker prepared to work at a backbreaking pace just to have a roof over his or her head and a better life for his or her offspring.  These people want to enjoy some of fruits of their labour.  Evidence of this desire can be seen in the large number of strikes and protests that are being allowed by the ruling Communist party.  The party  recognizes the changing face of the population and is allowing workers greater freedoms to express their discontent within certain limits.

A strike at Honda Motor Co. and the official response to a spate of suicides at Foxconn Technology, a maker of electronics for industry giants such as Apple, Dell and Hewlett-Packard, suggests China’s leaders are at least tacitly allowing workers to talk back.

Over the weekend, the top Communist Party leader in Guangdong province visited Foxconn’s sprawling factory — where 10 workers have committed suicide — and urged the company to adopt a “better, more humane working environment” for its mostly young workers, state media reported.

“The ’80s- and ’90s-generation workers need more care and respect and need to be motivated to work with enthusiasm,” said Guangdong party chief Wang Yang, who has backed efforts to shift Guangdong up the industrial ladder, away from reliance on exports of cheap, low-tech products.

From: Delaware Online

What does that mean for companies doing business in China?  Well, as conditions improve, so do costs.  If costs go up, then manufacturers will either increase prices or look to other areas to cut costs.  With the current global economic environment, and competition growing in lower cost centers such as Vietnam, Laos, and Cambodia, Chinese manufacturers will be under pressure to keep costs low.

Manufacturers will find it increasingly difficult to keep prices and profits at the same level they have been.  One area where costs have been cut traditionally is in the raw materials used.  Substitutions or the adulteration of supplies with cheaper alternatives has always been an option.  Problems arise when this is done without prior consultation or approval of the customer.  With labour costs increasing and most other inputs relatively static, the focus on cutting raw material costs will increase.  It behooves all companies that manufacture in China not only to have stringent quality standards in place, but to also have a mechanism for verifying those standards preferably before product reaches its final destination.

Quality Products International Limited (QPI Ltd – QPI) is well placed to help you insure your standards are being met not only with physical inspections of product but also audits of the conditions inside factories and the supplies used.

Inward Quality Control (IQC), and formal testing of either raw materials or finished goods becomes more important.

QPI has western owned and managed partner labs conveniently located in China to provide prompt cost effective testing such as REACH, RoHS, WEEE, AZO, EN71, Phthalate, DMFu, CPSIA and many others.

The CPSIA is a federal law applied to all States in the US, and is intended to make toys and other common consumer products safer. In addition, it makes product recalls more effective and gives more authority to federal and state enforcement agencies.

The CPSIA:

• restricts the use of lead and phthalates in children’s products
• implements the mandatory ASTM F693 toy standards
• specifies certain products to be tested by third-party laboratories
• is applied to any product subject to any consumer product safety rule under the act, or any similar rule, ban, standard or regulation, under any act enforced by the CPSC Consumer Product Safety Commission.

Quality Products International has teamed up with leading laboratories in Hong Kong and mainland China to provide advise, assistance and to facilitate product CPSIA compliance testing. Part of the service offering from QPI is that of sample picking during production. This means that true “un-doctored” samples will be tested, minimizing your liability and risk.

Quality Product International has spoken first hand to some phone suppliers currently holding stock of phones that were destined for India, but now have an uncertain future.

The industry typically relies on high volume and fast turn-around. Many factories only hold a few days stock of components, normally shipping partial orders a few times per week.

The stranded stock ties up working capital and storage space.

On the other hand, many Indian customers would have paid deposits, which they have now forfeited as they are not taking delivery of the stock.

While the QPI team has been involved in supplying the Indian market with Telco products in the past, we have been fortunate not to get caught in this as most of our current business has been in Africa.

None the less, it will be interesting to see who is impacted most heavily by the Indian ban!

India’s Department of Telecommunications has issued a blanket ban on imports of telecoms equipment from China, in a move that will hurt Huawei and ZTE, along with the rest of the Chinese telecoms industry.

Interestingly, the reason for the ban isn’t competition issues, or nationalism, but national security – India is concerned that telecoms equipment from China could contain spyware and malware that’d allow Chinese spies access to Indian telecoms networks. The two countries have a strained relationship following many clashes over the past century, most notably in 1962 when the Sino-Indian war broke out.

Read more here