New Rules for China Sourcing

A couple of weeks ago, I was talking to a friend about China.  Discussing the recent toy recalls, lead paint, and other quality issues, he asked how my job had changed.  What new rules are companies following?  How can you buy from China now?

I’m sorry to tell you that while consumer awareness is now heightened, there are no new rules.  Nothing has changed.

When did companies stop managing suppliers?  Did managers really think that sourcing from China was easy?  That enjoying cost reductions came without risk?  For more information, visit Quality Sourcing Solutions, and review some articles and guidelines for China sourcing.

I’ll summarize some steps here.  This is the process that I’ve used successfully time and time again:

1. Know what you want.  Develop a good specification before you start.
2. Qualify your supplier with a thorough audit.
3. Develop a qualification plan.  How will you know your getting what you want?
4. Manage your supplier with inspections and periodic audits.

Engineering Input and Output

We’ve followed the specification process from the marketing spec to the engineering spec.  What is the output of the engineering department?  The engineering department produces a product data package that is sent to manufacturing (remember, manufacturing could be down the hall, or on the other side of the planet).  The product data package includes (and there may be many more things depending on the industry):

1. Assembly drawings of completed product and subassemblies.
2. Detail drawings of components used in item 1.
3. Purchase specifications for purchased parts used in item 1.
4. Complete engineering bill of material (BOM).
5. Approved manufacturer’s list, if any parts are manufacturer specific.
6. Packaging details (specifications and maybe drawings).
7. Required agency approvals.
8. Test output specifications (used to generate manufacturing tests).
9. Completed design verification and useage validation test results (to prove compliance with engineering/marketing specification and actual usage requirements).
10. Possibly operating and service manuals (may be done in another department).

The engineering data package then goes to manufacturing (or concurrently in many organizations) and a manufacturing data package is produced.  For our purposes, we’ll stop there.  The manufacturers in China are likely to use different methods, and will develop their own manufacturing data based on your engineering product data package.

Next time, we’ll develop the list of information you’ll want to gather before you start your China-sourcing project.  This is the information that the engineers at QSS will ask you for when you call to initiate the process.

American Society for Quality Audit Conference

I’m heading to Atlanta this evening for the ASQ Audit Division Conference.  Send me a note if you’ll be in town!

QSS performs audits for customers.  As usual, I’m wondering how provide more value.  I want to make our audits more complete, more relevant, and more consistent.  I hope to learn some new things and meet new people as well.  Hope to see you there!

Meet the Team!

My bio and resume are on the QSS site, but it occurs to me that you don’t know the rest of the team.  I’ll start with Violet, and over time, will introduce the rest.

Violet is the glue that keeps it all together.  She’s my Office Manager, and is responsible for keeping track of all samples, reports, expenses, and schedule.  She’s also a talented computer expert, and sets up all of our data bases and tracking systems.  As with many small companies, we all wear many hats.  Violet also works on sourcing projects, and can even be found performing measurements when we need her.

I’m very proud of my team.  We’ve accomplished so much together.  I’m convinced they’re the best technical team in China!

Engineering Specification

Let’s get back to our discussion of specifications.  The last specification post was about the marketing specification for a plasma cutter.  Let’s now take a look at how the engineering department looked at that spec.  This obviously isn’t a full spec, but is meant to give you the flavor.  Again, why do you care?  The more work you do upfront to understand your requirements, the better you can explain them to your vendor.  What we want to get to is — what is the minimum amount of information you need to gather before starting your China-sourcing project?  We’re taking the scenic route so you can understand the connection between all of the documents, and understand why a quick review of the product data package can be helpful.

Engineering Interpretation for Light-Duty Portable Plasma Cutting Power Supply 

Proposed Product Name:  Plasma Chopper 1000

General Description: 

Weight:  Max 15lbs.

Form Factor: Square box approx 12 inches on a side.

Light duty: less than 40% duty cycle at ambient temperature.

Integrated torch.

Must meet IEC specifications and any applicable UL requirements.

CSA required, possibly on separate model.

UPS packing test required.

Input voltages:  230/460 3 phase.

230 single phase.

Cost target: $500 without torch, but including all packaging, manuals etc.  Cost is based on anticipated 40A cutting current.

Cutting Performance:

Run full performance testing on the Plasma Whacker 100 and Sparker 80

Attribute	Plasma Whacker 100	Sparker 80	Plasma Chopper 1000 anticipated
Max cut	1/2”	½”	½”
Max speed (on 3/8” ms)	8 inches / minute	6 inches/minute	10 inches/minute
Max pierce	½”	½”	½”
Tip life (# of cuts on 3/8”)	450	388	500

Useful Life:  

Anticipated life 3 yrs.

Perform HALT testing as part of DVT.

Abusive handling test required in addition to standard UPS shipping tests – device must fail in a safe mode.  After abusive handling, user must not be exposed to energized surface.  Must still comply with standard finger access test.

Maintenance:  No component-level repair will be possible.  Major components such as circuit boards should be replaceable at a service center.

 Trade Dress/Color:

Black background pantone color:

Pink spot pantone color:

Gloss finish paint.

Growth through China Sourcing?

Like most people, I often find myself explaining what I do for a living.  I’m excited about QSS and the value that we provide to our clients.  I’m proud of my team and the amazing things we can accomplish.  Sometimes, however, I don’t get a chance to explain all of the good things.  Mention China in upstate New York and then brace yourself for the inevitable response complete with tales of closed factories, lost jobs, and the ruined economy.  It’s very true that this region has seen its share of hard times.  Kodak alone layed off more workers in Rochester than most companies will ever employ.  I blame myopic management long before I blame the Chinese for that particular failing.  I don’t want to wander too far into the world of politics and global economics.  I simply want to point out the primary reasons why companies seek Asian sourcing.

1.  Cost reduction.  Of course, companies seek to reduce cost.  In today’s world, its critical and unavoidable.  Asian sourcing can be an important part of a companies cost-reduction strategy.  For me, I’m happy to help, but this isn’t the most exciting work.  Too often agressive cost reduction is a race to the bottom.  There will always be someone willing to work for less than me.  In this scenario, my value addition is short-lived.
2. Capability/Capacity enhancement.  This is the most exciting type of work for me.  In short, a company is doing very well, and needs to either add additional capabilities, needs to increase manufacturing capacity, or needs to outsource some components to allow growth in other areas.  This is where QSS can add the most value.  My team of engineers and QC experts can provide the right quality, the right cost, and our project management experience allows us to do it in a controlled fashion that minimizes risk.  Growth through Asian sourcing?  Of course!

Shanghai Expat Show!

Our friends at Ningbo Guide have a booth at the upcoming Shanghai expat show, Sept. 21-23.  QSS won’t be there in person, but we’ll have brochures available at the NB Guide booth.  Stop by and say hi to our friends, and pick up a brochure!  Enjoy the show!

Marketing Specification — Where sourcing starts.

What information do you need before you start your China sourcing project?  That’s where this series on specifications is heading.  In previous posts, I discussed general specifications.  In this post, I’m going to start out with the marketing specification.  These specs aren’t meant to be complete or accurate, they’re just meant to provide some basic flavor so we can talk about China sourcing material.

Let’s set the scene.  You’re a purchasing manager who has been tasked with outsourcing some product.  Your business has been booming, and you need to handle the increased volume demand.  You need more room to assemble and service product, and the management team has decided to outsource some components, freeing up factory floor and workers for an expanded assembly line.

You’ve partnered with QSS to help (good choice!).  A team is established, and we begin to review product for opportunities.  You’ve pulled together marketing and engineering specs, including BOMs, so we can get a feel for requirements.  The first product we look at is the Plasma Chopper 1000, and we start with the marketing specification:

Marketing Specification for Light-Duty Portable Plasma Cutting Power Supply 

Proposed Product Name:  Plasma Chopper 1000

General Description:  An easily portable, light-duty, inverter-based, plasma-cutting power supply.  This power supply will be integrated with a non-removable plasma cutting torch and will be sold as a system. 

This product will be targeted for the North American market, including Canada.  A separate model may be necessary for Canada, and that is acceptable.

The target market is the tradesman who requires plasma cutting, but for whom cutting and welding is not their primary job.  For instance, HVAC installers often use plasma cutters to prepare ducting.  It is anticipated that such a system will also enjoy a portion of the home garage fabricator and artisan markets.

Cost target: $500 without torch, but including all packaging, manuals etc.  Cost is based on anticipated 40A cutting current.

Sales Volume: Anticipated 500 units in the first month of sales.  Thereafter, 600 units per month.  Detailed sales projections to follow.

Sales Channel:  Catalog (Grainger, others), retail industrial supply outlets, retail home improvement centers (Lowes).

Cutting Performance: Performance must be better than the two best selling competitors, the Plasma Whacker 100 and the Sparker 80.

Useful Life:  Field life of this product should be approximately 3 years.   Unit should operate after drops from a table top or during transport.  Extreme abuse (drop out of moving truck or from top of building) should cause a safe failure.  That is, it is ok for the power supply not to survive, but an operator who attempts to use the product after such abuse must not be injured.

Maintenance:  No component-level repair will be possible.  Major components such as circuit boards should be replaceable at a service center.

Trade Dress/Color: This will be an extension of the larger Plasma Chopper Line, and should therefore have the distinctive pink spots on black background color scheme.  Form factor should remain essentially the same boring square box, but smaller than the larger products in this range.

Next time, we’ll move into the engineering spec and the BOM.  Why start here?  It’s so important to have a solid understanding of your requirements before you approach a vendor.  Doing careful work up front will help you manage your sourcing risk!

Toy Recalls and Inspection Failures

My friends at chinalawblog recently discussed an article from Caijing Magazine titled “Death of a toy-maker.”  I was compelled by this tragic and revealing article to delay our discussion of specifications for a day or two.

This article points out a series of inspection failures.  There are examples including falsified test reports by a paint supplier, failure to perform independent testing, and a generally lax attitude on the part of inspectors.  Every company that exports from China should mitigate their sourcing risk through the use of third-party inspection agencies such as Quality Sourcing Solutions.  Of course, as we all know, you can’t inspect in quality.  Quality is the result of focused effort on the part of management and the workforce.  The lesson with respect to inspections is clear.

There is another issue that is mentioned, and it’s an issue that I’ve seen all to many times — the use of a non-approved supplier.  All large companies will maintain what is commonly called an AVL or AML – Approved Vendor List, or Approved Manufacturer list.  Internal purchasing agents are required to purchase from this list.  Often, specifications will require outside vendors to purchase components from designated suppliers.  All too often, especially in China, these requirements are relaxed to permit local sourcing.  This may be appropriate, depending on the product.

On many occasions, I have noticed a change in a product, only to be told that a new supplier was used.  I always make note of this and notify my customer.  Was he aware of this change?  Was it authorized?

In addition to the inspection points made earlier, there are a couple good takeaways here:

1. Consider your specifications carefully.  Do they list designated products or suppliers?  Should they?  What are the quality/safety/liability implications if the designated supplier isn’t used?
2. Do your audits include review of purchasing processes?  Incoming material inspection and material control? (Do you audit your vendors?) 
3. Do you have a clear understanding with your vendors that you must be notified of any changes, including changes in supplier?
4. Does your vendor have a supplier management system?  Do they rate and audit their suppliers?

Please take a moment to read this article and reflect on how your business could be effected.  We’ll return to our specification discussion in a day or so. 

Specifications! Who cares?

In a recent article, I raised two points about specifications 1) Make sure your specification is clear to you, and 2) Make sure your specification is clear to your manufacturing partner.  You have to know what you want, and convey that clearly to your supplier.  But what is a good specification, and who writes them?

In future posts, we’ll delve deeper into what makes a good specification.  We’ll explore inputs and outputs and features of good specs.  For now, I’d like to discuss the various types of specs and who is involved with developing them.  I had a boss in a previous job who was a real purist with respect to separation of marketing, design, and manufacturing information.  While it was sometimes frustrating to argue what belonged where, the exercises really got to the bottom of who needs to know what to get their job done.  (Thanks, Fred!)

Whether your organization breaks specifications into marketing, engineering, manufacturing, and test specs, or lumps them all together into a general product specification, they will all contain the same major elements, which will likely be authored by the same group of people.  Let’s explore those major elements:

1) Marketing.  Product managers, marketers, and salespeople work together to produce the marketing specification.  This spec distills customer expectations into list of requirements.  It will include the following: performance requirements; cost targets; geographic regions into which the product will be sold; trade dress such as color, shape, weight and packaging appearance; estimated sales volumes; life expectations; usage expectations (toughness, durability); maintanance expections; and competing products.

2)  Engineering.  Starting with the marketing information, engineers will intrepret each of the requirements into a technical specification.  For example, if the product will be sold in Arizona, this will give the design engineers information needed to specify operating temperatures (it must operate when it’s really hot!), shipping requirements (must survive a truck journey from point of manufacture to end user), regulatory requirements (what does the US government and the Arizona government require for this product), and input power requirements.  The engineers will interpret customer requirements such as “must remove all air from the bag within two minutes” into technical requirements such as “must reduce pressure inside the bag to less than 1 psia within two minutes, requiring a flow rate of 45 scfm.”  Likely benchmarking tests will be required to determine these specs.  Sometimes combined with the engineering specification is the test specification — not manufacturing tests, but the tests necessary to determine if the design meets the requirements outlined in the specification.  The engineering specification will also include a bill of materials.  The output of the engineering effort, is the engineering data package (design details).

3. Manufacturing. Manufacturing engineers, assisted by quality control, logistics, and engineering, convert the engineering data package into a manufacturing data package, or manufacturing specification.  This describes how each part on the bill of material will be made, and to what tolerance, to insure that the finished product meets the engineering specification, and hence the marketing specification.  This specification will include material and time usage, machines that will be used in the manufacture, any special tooling that is required, and what tests will be performed to insure compliance.

Stay tuned for future posts, where we’ll discuss more about specifications, and what information is critical for you to know before you begin your China sourcing project.