Quality Assurance in China - Developing a quality management system for a California company

[johnnym1]

Hello,

I am new to the forum so if this is already discussed somewhere else please point me in the right direction.

My situation is that I was recently hired (I'm 2 months in) to develop a quality management system for a California based hand tool company. The vast majority of the products are manufactured in China. We currently employ 2 people who work in China (full time) to visit each vendor regularly to perform product acceptance inspections. Having the 2 people in China has gone a long way to improve the product quality or so I've been told. They currently spend a lot of time traveling to and from each vendor with calibrated measurement equipment and aren't able to perform a very thorough inspection on every product prior to kitting the final product. The inspection plans and subsequent quality related processes are still being developed but will require more in depth product inspection than what is currently being performed. Currently only about 50-75% of the items are being inspected and most of those items are only being visually inspected.

My question is how do companies typically handle quality inspections in a foreign country?

My initial thought was to setup an inspection/warehouse office in China that they can work from instead of traveling to and from each vendor for inspections. This seems like the most logical step to me but I am not familiar with what it would take to setup an office in China so I was hoping to hear what other companies do in similar situations.
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[Sidney Vianna]

Welcome to The Cove.

My question is how do companies typically handle quality inspections in a foreign country?

It depends a lot on who the customer and the suppliers are. It depends on the type of product and the volume, as well. The ideal scenario would be one where your organization did a good due diligence of selecting reliable suppliers, and the owners/bosses did not let low pricing be the only factor in the supplier selection process. There are a number of cases where faulty consumer goods were imported from shady suppliers, leading to injuries and fatalities, what, in places like the USA, translate into multi-million dollar lawsuits. In other words, being cheap ends up being very costly.

From what I gathered, over the years, the supply chain in China can be problematic. Numerous stories of bait and switch situations, inconsistent quality, unresponsive suppliers, etc... So, assuming you are "married" (i.e., a divorce is costly) to the current suppliers, one thing you can and should do is to document any quality issues that are critical in nature and/or repetitive and, demand robust corrective actions so such problems are "resolved".

Your strategy of performing source inspection at the suppliers is advisable, but, at the same time, make sure the supplier(s) understand that your inspections are NOT SUPPOSED to replace their QA/QC checks. In the developing world, there is a lot of misunderstandings about source inspections and I have found out that some companies stop doing all inspections because they think they no longer have to check the hardware, since the customers are performing inspections. And I have even heard some horror stories that the source inspectors being bribed to report huge lots of products as being good, when the suppliers know they were defective.

Finally, if the suppliers have ISO 9001 certificates and fail to adequately respond to your corrective action requests, you should engage with their certification bodies, as they have some leverage over the supplier that you don't.

Good luck.

 

[Golfman25]

How would you do it if your vendor was in New York?

 

[Sidney Vianna]

How would you do it if your vendor was in New York?

Very differently, since in New York, he would not have to deal with the language, cultural, and geo-political barriers he has to deal with doing business with suppliers in China. Chances are, he would not have to have source inspectors going around their suppliers. On the other hand, he would probably be paying 3-4 times the prices he pays from China.

 

[Ronen E]

This thread is a little outside my comfort zone (medical devices), but still, some general comments -

It sounds as if the OP is operating in the low-cost/commodity zone (hand tool kits). This is commercially a very competitive zone - I always marvel at the amazingly low prices of such products (typically made in China) in mainstream Australian outlets - how can they turn a profit at all?... So I assume that the quality/efficiency room to manoeuvre is extremely limited from the get go. Difficult situation.

The second thing I noticed is that the OP (and some of the discussion that followed) focused on QC. QC is not QA, or in other words, QC is not the only way to achieve improved Quality. In the bigger picture, it's arguably not even the most efficient way. Normally I would zoom-out and ask myself how can Quality be guaranteed/improved in that situation WITHOUT so much QC (=inspections). But given the nature of that industry, compounded by language and cultural barriers, I'm not sure that this would be a good move. Definitely if the supplier was NY-based I would have advised considering the larger toolbox of QA rather than just trying to streamline QC.

Without top management buy-in and active support it's going to be difficult to achieve much either way. I think it's quite inevitable to see some initial decline in profitability if Quality is to be improved, and processes streamlined and made more efficient, in the longer run. It will take a bit more foresight on top management's part than the next quarterly report to get there.

 

[johnnym1]

Since shipping times are not nearly as long, we probably would just have parts shipped to our facility for inspection and wouldn't have 2 employees doing it there. Potentially cutting up to 100 days out of the corrective loop is driving the desire to catch defects in China vs the USA.

Just to reiterate, my question is regarding how to manage inspections in China due to the long travel times between vendors with calibrated equipment, the Chinese governments regulations, and the reasons that Sidney Vianna and Ronen E. mentioned. The two employee's that we have in China are instrumental in working directly with the vendors to overcoming those barriers as we develop the QA program and I don't want to get rid of them just on a whim.

Starting with the QC inspections is allowing me to see where the holes like data capturing, design standards, vendor qualification, risk analysis, vendor contracts, etc. are in the rest of the processes. As the QA program is developed I plan to expand the standard processes such that we transition from reactionary quality control practices to preventative quality assurance practices. I doubt we will ever get to the point where we do APQP but we have to start somewhere and build our way up through continuous improvement.

A vendor that has been used for a couple years now that I just met a week ago said that their sewing process is manual so they can't improve the quality and defects will happen. Other vendors made similar statements expressing a "good enough" mentality. Like many small growing businesses nobody had time to address this with the vendors so they have been getting away with it a lot. This obviously is not acceptable (which I expressed to the vendor already) but I don't have the luxury of starting completely over with the supply chain to find quality suppliers.

 

[greenlantern]

Since shipping times are not nearly as long, we probably would just have parts shipped to our facility for inspection and wouldn't have 2 employees doing it there. Potentially cutting up to 100 days out of the corrective loop is driving the desire to catch defects in China vs the USA.

Just to reiterate, my question is regarding how to manage inspections in China due to the long travel times between vendors with calibrated equipment, the Chinese governments regulations, and the reasons that Sidney Vianna and Ronen E. mentioned. The two employee's that we have in China are instrumental in working directly with the vendors to overcoming those barriers as we develop the QA program and I don't want to get rid of them just on a whim.

Starting with the QC inspections is allowing me to see where the holes like data capturing, design standards, vendor qualification, risk analysis, vendor contracts, etc. are in the rest of the processes. As the QA program is developed I plan to expand the standard processes such that we transition from reactionary quality control practices to preventative quality assurance practices. I doubt we will ever get to the point where we do APQP but we have to start somewhere and build our way up through continuous improvement.

A vendor that has been used for a couple years now that I just met a week ago said that their sewing process is manual so they can't improve the quality and defects will happen. Other vendors made similar statements expressing a "good enough" mentality. Like many small growing businesses nobody had time to address this with the vendors so they have been getting away with it a lot. This obviously is not acceptable (which I expressed to the vendor already) but I don't have the luxury of starting completely over with the supply chain to find quality suppliers.

Very late response, but I'm in a similar situation, california based company with fully outsourced manufacturing in China. One thing that has been useful in my situation is developing an audit program where QA goes to suppliers and sub-suppliers annually and audits their entire QMS. Since you've been getting glimpses of their gaps, it sounds like you would know where to start during an audit.

I think this accomplishes two things. One, you gain a better understanding of the gaps and can work with the supplier to improve it. Like other's have mentioned, using the third party that accredited their certs as leverage is good and backing it up with specific clauses they're not compliant with in a formal audit report is even better.

Second, the supplier realizes that they will be under routine scrutiny for their entire operation, not just a batch or two. Hopefully this will motivate them to step up their game. The program could even be used to benchmark your current supplier against other potential suppliers in the future.

 

[Ronen E]

Very late response, but I'm in a similar situation, california based company with fully outsourced manufacturing in China. One thing that has been useful in my situation is developing an audit program where QA goes to suppliers and sub-suppliers annually and audits their entire QMS. Since you've been getting glimpses of their gaps, it sounds like you would know where to start during an audit.

I think this accomplishes two things. One, you gain a better understanding of the gaps and can work with the supplier to improve it. Like other's have mentioned, using the third party that accredited their certs as leverage is good and backing it up with specific clauses they're not compliant with in a formal audit report is even better.

Second, the supplier realizes that they will be under routine scrutiny for their entire operation, not just a batch or two. Hopefully this will motivate them to step up their game. The program could even be used to benchmark your current supplier against other potential suppliers in the future.

This is a good example of "the deeper QA toolbox" I mentioned earlier, but again - it doesn't come without a cost, and the return is not guaranteed upfront and is sure not immediate.

 

[johnnym1]

Thank you for the replies. It has been a while since I've reviewed this post but I have a couple follow up questions I'm hoping to get some insight on.
First a quick update on what I've been working towards. I've been focusing my efforts mostly on developing and automating the basic quality related documentation and reporting processes (i.e. inspection reports, NCR, SCAR, etc.) using Fusion lifecycle. These are still a work in progress as I'm mostly doing this on my own. Other efforts have been focused on implementing more quality related activities throughout the product/supplier development process such as requiring PPAP submission for product approval, Supplier quality agreement, and initial supplier evaluation and audit process. This is all very much still in the infancy phase of development and will be improved upon for several years to come I'm sure. I've also implemented lesson learned meeting throughout supplier development projects so we can identify continuous improvement activities that will result in quick wins. As I'm implementing these activities I'm trying to manage my expectations within reason to only require critical process related documentation submission. There are still several items still on the list of things that need to be done though. So far developing these tools seemed like the best use of my time.

Now that you're all caught up I'm running into a problem especially with our mutual acquaintance Covid. We have started to diversify the supply chain into Taiwan and Vietnam. We still only have the 2 employees located in China but they are currently split between China and Taiwan. Due to quarantine requirements it is not efficient to move them back and forth as needed for source inspections. Before we bring on several more people to help with source inspections in 3 different countries I'm wondering how other companies have managed the source inspection function with oversea suppliers. Like others have stated this is a commodity market where price is a driving factor. Perhaps I'm naïve however I feel like audits, scorecards, and PPAP documentation is only a portion of the solution that must still be accompanied by source inspections to keep suppliers honest.

Potential options I've considered are:

1. Hire more quality technicians in each country to perform source inspections for each production lot.
2. Use a 3rd party inspection agency to perform/supplement source inspections for each production lot in all three countries.
3. Use historical data to prioritize which assemblies require regular/increased source inspections
4. Setup a warehouse/inspection facility within a Free Trade Zone so all products can be shipped to the same location for receiving inspections, kitting, and inventory management. I'm not sure what it would actually take to setup a FTZ company or if it's even a viable solution.
5. Develop a robust supplier development and management (APQP/PPAP, contracts, etc.) process, eliminate regular source inspections for each production lot, and rely on 3rd party inspection agencies for source inspections as needed based on customer complaints or randomized inspections in the USA or EU. This option is more of a long term solution and will require significantly more development to be setup than I actually mentioned.

Thoughts???