Imagine you’re manufacturing portable DVD players at a factory in Shenzhen, China. Like most importers, you decide to inspect the order before shipping to check for any quality issues. QC inspection reveals some problems that are easy to address, such as errors in the printed user manual for your product.
But you also find more serious issues that will be more difficult to remedy. Many of the DVD players are malfunctioning because the factory used substandard components. Your supplier tells you the components you want will increase your costs. And shipping is now delayed indefinitely, as the factory will need weeks to replace the parts and repackage the order.
Wouldn’t it be great if you could’ve prevented these quality defects from occurring in the first place?
Your best defense against quality defects is prevention (related: How Experienced Importers Limit Product Defects in 3 Stages [eBook]). And the most crucial time to prevent product defects is when beginning your sourcing journey, as you sift through potential suppliers. Let’s look at the various steps you can take at the start of your relationship with a new supplier to limit your chances of finding unacceptable quality defects later.
How to prevent product defects when negotiating with suppliers
Nearly every importer has had to deal with product defects in their shipments at one time or another (related: 3 Ways to Handle Defective Products). Defects are an inescapable reality of manufacturing—no factory is perfect 100 percent of the time. But that doesn’t mean you should resign yourself to poor quality products from your suppliers. Preventing a quality defect when first beginning the supplier relationship is almost always far easier and cheaper than trying to correct it after it appears.
When it comes to factories’ production capabilities in Asia, not all factories are created equal. Some factories are high-tech powerhouses on par with innovative manufacturers in Germany or the United States. Others are small and simple operations that may rely on sub-suppliers to manufacture most parts of your product. Every importer’s manufacturing needs are different. But regardless of your own quality standards, it’s essential to begin the conversation about your expectations before choosing to work with any particular supplier.
Be upfront about order volume
Importers sometimes promise large and frequent orders when searching for prospective suppliers, even when they have no intention of following through on that promise. They often think this overpromising will convince suppliers to work with them, offer more competitive pricing or pay more attention to their product quality over that of other buyers.
But in truth, this kind of misleading doesn’t set a good foundation for a strong relationship between the factory and buyer. Suppliers hear overpromising all the time. Most receive countless requests from importers who paint an optimistic picture of a steady flow of business for them. And for that supplier that believes you, your early dishonesty will likely hurt your supplier relationship. That supplier is more likely to deceive you about their own deliverables and their willingness and ability to meet your quality requirements.
Rather than just telling the factory what you suspect they want to hear, suppliers usually appreciate it if you’re upfront about your order volume from the beginning (related: 5 Tips for Negotiating with Chinese Factories). Honesty tends to be reciprocated in supplier relationships, and this honesty typically extends to the quality of your product.
Don’t haggle too hard on price with suppliers
One of the main deciding factors for most importers’ in choosing a supplier to manufacture their product abroad is cost. They want lower production costs offering higher profit margins. And importers have come to expect lower costs, especially lower wages, in many Asian countries. But if you expect higher quality products, you have to be willing to pay for them.
When haggling on pricing with your supplier, tunnel vision can be your worst enemy. Focusing on getting the lowest price possible can have severe implications for your order’s overall quality. Suppliers need to make money too. And your supplier needs a decent profit margin to continue operating. If you push for a low price, they’ll need to make cuts somewhere to ensure those margins are healthy enough.
Ultimately, you get what you pay for. With a super low price that seems too good to be true, any number of scenarios is possible. The factory might:
- Use cheaper materials than specified (e.g. lower quality timber than required in an item of furniture)
- Substitute lower-cost alternatives for product components (e.g. cheap antenna in a mobile phone)
- Rush production to process your order faster, which often leads to defects caused by worker carelessness
- Prioritize other orders ahead of yours, typically leading to production and shipping delays
Any or all of these outcomes are likely when you put excessive pressure on your supplier for price. You can usually prevent these problems by striking the right balance between price and quality.
Offer suppliers a target price to set your standards early
One way you can avoid the challenges posed by trying to balance quality and price is by offering suppliers a target price directly. Some importers think this will hinder their opportunities to reach a lower price. But a target price actually helps you to set expectations from the very beginning regarding product quality and requirements. The price you mention should reflect the quality of input materials and components you want and will helps prevent suppliers from cutting corners with product quality.
If you’re unsure of the appropriate price for your order, you can use several methods to get an idea as to what is acceptable to pay (related: 3 Tips for Getting the Best Price from Suppliers). Some approaches to consider include:
- Gathering price quotes from multiple suppliers producing similar products
- Asking for documentation from prospective suppliers like a bill of materials (BoM) and itemized pricing—these will often help you understand the cost of various parts and materials in a product
- Requesting a product sample to get a sense of product quality and determine how much it’s worth paying for
By gathering a price quote and breakdown of pricing from several prospective suppliers, you can more easily filter the “good” suppliers from the rest. After gathering this information, you’re better equipped to set a reasonable price for your order given the competition in that area, while maintaining quality standards.
When you’re honest about your order volume and desired price, you might actually find a supplier that refuses your business. This might seem like a huge step back in your sourcing process, but it could actually be a sign of an honest supplier that knows they probably can’t meet your standards. And that allows you to find another supplier that can actually provide what you want at your desired price and quality level.
Auditing a prospective supplier’s factory to avoid quality problems
Auditing a prospective supplier’s factory is often the final step in deciding on a sourcing partner. There are many types of audits that provide the importer with a variety of insights into a factory’s operations. For example, good manufacturing practices (GMP) audits ensure regulatory guidelines are met for the production of food, cosmetic, pharmaceuticals and medical products. And social compliance audits help you confirm whether a factory complies with local labor laws or particular brand or retailer standards.
But the most common audit importers perform at potential suppliers’ facilities is a quality management systems (QMS) audit. QMS audits are especially relevant in helping you avoid working with a supplier with glaring quality problems in their factory.
How a QMS audit helps predict quality issues before mass production
Sometimes also called a supplier review, the QMS audit focuses on assessing a factory’s ability to manufacture products while maintaining a certain level of consistent quality. The audit is usually based on the ISO9001 standard, which is founded on a set of seven internationally-recognized principles to guide an organization’s process improvement.
Just like some importers who overpromise on their intended order volumes, some dishonest factories are prone to overpromise on their production capabilities. A QMS audit provides you with information to deduce whether a supplier’s factory can deliver the product quality you require before mass production begins. A QMS audit reports on a number of areas in a factory related to product quality, including:
- Machine and equipment maintenance and calibration
- Internal QC procedures and related personnel for material, during-production and finished goods control
- Any internal lab testing and dedicated lab technicians
- Engineering and design capabilities, including typical lead time for preparing tooling for a new product
Learning of any problems found in a particular area can signal “red flags”, helping you to avoid working with a supplier that can’t meet your quality standards. For example, an audit might find that factory workers don’t properly maintain and calibrate machines and production equipment. This is an indication that product quality may not be consistent and shows that a higher defect rate is likely at that factory.
The information provided in a QMS audit report can also be helpful throughout your manufacturing process, not just in choosing a supplier. For instance, you might avoid relying on a factory’s internal QC staff for inspection if an audit reveals they’re inadequately trained to inspect your product. With this information available, you’ve got a better idea of which product inspection method is best for you in identifying quality defects (related: How Quality Control Inspection Helps Importers Detect Product Defects).
Preventing product defects through negotiating with suppliers saves importers a tremendous amount of time and money in trying to fix these issues after production. But preventing defects shouldn’t be a one-time process you only consider when first choosing a supplier.
In following these steps during the sourcing process, you can also avoid mistakes that are damaging to your relationship with your supplier. You can continuously build on a strong supplier relationship to set high quality standards for your product and minimize quality defects over time. And with higher product quality, you can boost your reputation with your customers and set your business apart from manufacturers who fail to comprehensively monitor product quality.
What steps have you taken when negotiating with suppliers to prevent quality issues? Let us know in the comments below!