Chinasavvy HK Ltd

1. Chinasavvy HK Ltd

2. Avoiding Product Recalls Ensuring quality of Chinese made products in today’s hostile environment

3. The Made-in-China label Under attack from consumers Strengthened regulations from destination countries Reputation damaged Increased recalls

4. What is a recall? Retail recallProduct has reached the end customer and has to be recalled Importer recall Product has reached the importer and has to be recalled Regulatory recallProduct stopped at customs

5. Made-in-China Recalls (just a few!) • Heaters (35,000) • Fans (300,000) • Toys (18,000,000 +) • Candles (106,000) • Bracelets (4,000,000) • Jewelry (too many…) • Tires (450,000) • Glassware (200,000) • Remote Controls (10,000) • Pet food (millions) • Toothpaste (millions) • Batteries (240,000) • MP3 Players (13,000) • Recliners (‘000s) • Jackets (‘000s)

6. Infamous recalls • Mattell Toys

7. Infamous recalls 2 • Toothpaste

8. Infamous recalls 3 • Pet Food

9. Recalls • Recalls don’t have to be that dramatic to hurt your business • Recalls can be as simple as rejection by the customer of the cosmetic appearance of the product on arrival • The cost of even a simple recall can have a catastrophic effect on your bottom line • The real cost is more than replacement

10. The real cost of recalls • Lost product and shipping costs • Cost of retrieving distributed goods • Replacement by airfreight • Legal costs – consumer • Legal costs – government agencies • Loss of market share and goodwill • Time and cost of executives/staff time

11. The question: WHY does it happen so often?

12. The answer: • 3 main reasons: • Lack of pre-emptive Quality Control • Lack of any Quality Control • Supplier actions

13. The answer: • 3 main reasons (in reverse order): • Supplier actions • Negligence • Lack of knowledge • Deception • Lack of any Quality Control • Lack of pre-emptive Quality Control

14. Deception • 7 Tricks used by suppliers • The Xiamen Double Trick • The Baiyun Post Check Switch Trick • The Shenzhen Certificate Writer Trick • The Foshan Substitute Packaging Trick • The Dongguan 50:50 Trick • The Guangzhou Pocket Liner Trick • The Xianju Surface Trick

15. The Xiamen Double Trick • The Trick The supplier provides a sample for approval and then switches to a cheaper material for production – unnoticeable because both look alike but have different performances • The Antidote Advise the supplier from the outset that you will be testing production materials Test the materials for performance with an independent testing company

16. The Xiamen Double Trick

17. The Baiyun Post Check Switch Trick • The Trick Customer product was rejected and then re-made. At 2nd QC inspection supplier said that 70% only was available for inspection. After QC supplier added back rejected stock • The Antidote Make sure all items are available for inspection. If not wait for full quantity. Seal cartons after inspection with security anti-pilfer labels.

18. The Shenzhen Certificate Writer Trick • The Trick Supplier is advised of material (steel) specification. Supplier provides a certificate from his supplier – later found to be false. • The Antidote Advise supplier you will be testing material. Get material tested from a reliable test company.

19. The Shenzhen Certificate Writer Trick

20. The Foshan Substitute Packaging Trick • The Trick At QC inspection supplier advises that packaging cannot be delivered so requests substitute. Substitute is cheaper and weaker and products arrive damaged. • The Antidote Unless you see and test the substitute insist on your specified packaging.

21. The Foshan Substitute Packaging Trick

22. The Dongguan 50:50 Trick • The Trick Supplier offers to pay for all the tooling. You later find the supplier is producing your product and his own using your IP. 50% for you and 50% for him. • The Antidote Pay for your own tooling. Sign an agreement with the supplier at outset covering ownership of IP rights

23. The Dongguan 50:50 Trick

24. The Guangzhou Pocket Liner Trick • The Trick Your QC inspector carries out the normal inspection. You receive a call from your customer saying the quality is bad. You find the supplier has bribed your QC inspector. • The Antidote Make sure you have managers to check the inspector’s work on a regular or random basis. Rotate your QC inspectors.

25. The Xianju Surface Trick • The Trick You place an order for painted wooden products. You QC the product prior to shipment. It arrives split and covered with mould. • The Antidote For these types of products do several different QC inspections at different stages of production. Test the product prior to shipment.

26. The Xianju Surface Trick

27. The answer: • 3 main reasons (in reverse order): • Supplier actions • Lack of any Quality Control • Lack of pre-emptive Quality Control

28. Lack of any Quality Control • In this category: • No quality control at all. • Assuming that the product shipped will be just as the sample sent prior to order. • Assuming that the product shipped will be just as the sample sent “from the production run”. • The supplier “will do his own QC” Quite simply, if you rely on any of these you must expect to have quality problems

29. The answer: • 3 main reasons (in reverse order): • Supplier actions • Lack of any Quality Control • Lack of pre-emptive Quality Control

30. Lack of Pre-Emptive Quality Control • In this category: • You carry out quality control just prior to shipment. • You do not consult with your customer about his quality expectations. • You give the supplier no prior warning or knowledge of what you expect the quality to be. You may be lucky but the chances are that you will still have quality problems

31. The real solution Pre-emptive Quality Control (PEQC)

32. What is PEQC? • PEQC is: • Establishing the customer’s requirements and quality expectations • Defining the required performance of the product • Advising the supplier what quality is expected in advance • Allowing for everyone’s actions and possible failings

33. PEQC: The customer • Involve the customer • Get the product specs in detail from the customer. • Ask the customer what his quality expectations are in detail. • Add your own product spec observations and send to customer. • Send your customer the same quality specifications and processes that you send to supplier.

34. PEQC: The Product (1) • Understand the Product: • Know how the product works and what is required of its performance. • If you don’t understand fully how the product works and its environment you will never be able to specify the quality requirements.

35. PEQC: The Product (2) • Consider all aspects of the product and its requirements: • Regulatory • Durability • Safety • Functionality • Cosmetics

36. PEQC: The Supplier/Manufacturer • Involve the supplier/manufacturer: • Make sure the supplier knows what quality is expected of him at the earliest stage. • Discuss any quality issues/problems before production starts. • Make sure he knows that products / materials / components will be tested where necessary. • Provide bi-lingual documents so there is no chance he does not understand anything.

37. PEQC: Internal staff • Ensuring your own staff understand the product: • Essential that all staff involved with the product/project understand the product specs and quality requirements. • This is not possible if the staff do not understand the functionality of the product. • Product education is essential.

38. Implementation: Product Specs • The Product Specs: • Technical products: • Typically Drawings; Dimensions; Processes; Materials; Finishes; Packaging; Performance; Regulations affecting it; etc. • Non-technical/Consumer products: • Typically Photos or drawings; Dimensions; Processes; Materials; Finishes; Packaging; Safety; Regulations; etc.

39. Implementation: The QC Specs • The QC Specs • EVERY last detail must be included in your QC specs. • Sit down with your internal staff and cover every aspect of the product to be manufactured or sourced. • Regardless of how basic, write a QC spec of each component or process, from raw material down to the final shipping marks.

40. Implementation: The QC Specs • The QC Specs Work on the assumption: If it can go wrong, it will go wrong.

41. Implementation: The QC Specs • Establish quality standards • For each item on your QC specs establish error levels into Critical, Major and Minor • Establish, against a defined sample size, how many Major and Minor faults you will accept in an inspection. • Establish that ANY Critical faults will mean the whole batch will be rejected.

42. Implementation: The QC Specs • The important procedures: • Now send the specs to your customer for comments. He/she may have additions or corrections to make. • Once you have your detailed specs do NOT file it away until you do your QC inspections. • Send it with your purchase order to your supplier. Not later. He must have this before he starts manufacturing the product.

43. Implementation: The QC Specs • The pre-emptive message to the supplier: • These detailed QC specs are what we will be checking for in our inspections. • Every item will be checked on a total or sample basis • Materials may be checked with independent labs such as Intertek or SGS • You have been warned!

44. QC Inspections • Preparing for the inspections • List every item on your QC specifications • Establish the sample size. Calculate the acceptable fault levels. • Running the inspections • Make sure the inspectors cover every item on the checks list for every item inspected. • Do not allow your inspectors to make their own judgements but encourage comments.

45. QC Inspections • After the supplier inspection • If not already done and if necessary send materials/parts for independent inspection. • Create a written report (bilingual) for distribution to both customer and supplier. • Discuss with supplier so he understands why product has been rejected (future education)

46. The bottom line • Pre-emptive Quality Control • Eliminates or reduces quality problems • Substantially reduces costs by informing all parties (customer, supplier) of what quality is needed and defines quality levels. • Establishes better relations with both the customer and the supplier. • Eliminates or reduces the possibilities of RECALLS

47. Thank youChinasavvy HK Ltd