Lessons from China: tighter supply chain control in order

From toys to toothpaste, reports of China-made products getting pulled off the shelves have left procurement officers and supply chain professionals saying the same thing: more stringent supplier qualifications and tighter supply chain control is in order.

One company forced to recall its China-manufactured products is Mattel, which in August recalled nearly 18 million toys worldwide reported to have unacceptable levels of lead paint in them. China hit back, with local media reports citing Chinese officials as saying the recalls were due to design flaws and new industry standards.

While the US and China go back and forth pointing fingers, procurement and supply chain professionals have taken away one lesson from this - that quality control cannot be overlooked, whether the product is procured in China or other bases.

"The product recalls have brought companies' attention to the need to ensure supply chain integrity," said Dr Lye Wei Moon, vice president of operations at YCH DistriPark. "This comprises two key aspects: quality and security."

According to Dr Lye, who oversees YCH's procurement needs, companies will need to enforce more stringent supplier evaluation, stricter product quality evaluation and more rigorous product testing and inspection.

Assessing factories should also be done in person, and Dr Lye suggested "speaking to suppliers' other customers and verifying that subcontractors are legitimate".

Further, companies will be well-advised to enhance visibility through every link of their supply chain to prevent tempering, shoddy handling or the infiltration of counterfeits. One of the ways to achieve this is to employ the use of RFID, which while is a hefty investment will go far in ensuring products are not compromised.

Despite measures to control quality, doing business with China may still change, said Robert Santoli, president and founder of US-based Procurement Analytics. "China has always asked for large sums of money upfront, and because of the very low labour rates, US companies complied," Santoli said. "I think moving forward if companies keep their production in China they will not so easily ‘lay that money out'."

Santoli, who has had over 20 years of spend management experience, believes the onus is on China to take a more proactive role and place more emphasis on quality control in its manufacturing plants. "I think it is incumbent on China to come up with some new ways of doing business without increasing the costs for security," Santoli said. "The US is paying for this service in the first place. If they have to pay more, then that is when you will really see a potential shift to other countries."

For the moment, China remains one of the most lucrative sourcing bases. "In light of the recent ‘Made-in-China' product recalls, there may be an immediate ‘avoid China-made products" syndrome as companies would prefer not to be associated with the bad press happening around China manufacturers" said Dr Lye. In spite of this, Dr Lye said companies are not likely shift bases for the moment, as quality control will continue to be a problem whether sourcing in China, India or any other low cost countries.

"Additionally, China will continue to offer a compelling proposition with its low cost base and government incentive schemes," he said. "Besides, there is already a sufficiently huge domestic market within China itself, so China will always be a leading manufacturing base."