In his new book Poorly Made in China: An Insider's Account of the Tactics Behind China's Production Game author Paul Midler gives many first-hand hair-raising examples to justify the in-your-face premise of this book. Paul's understanding of the languages and cultures of China and the USA, coupled with his experience as an agent on behalf of importers, make this a very credible expose. But before we get into detail please view the short video of a method of fishing from China that he used as an analogy in the book for the relationship between the buyer from America and the supplier from China. See if you can figure who is the bird in his analogy....
The cormorant's throat is choked by the fisherman so it can only swallow enough very small fish to live. Everything else is taken from its mouth by the fisherman.
It's a stunning analogy. Most of the book is spent describing how this is played out in China: factory owners consistently and methodically under-deliver on product quality to increase their own margins (quality fade). They gain the upper hand over the buyers by raising prices after committing to low (bait) priced PO's. The greed of the importers led them into the trap. They have nowhere in the world to get the product in time and at a low enough cost and not lose their shirts. So they go along with it. Product quality is whittled away and profits are gained by the supplier where there were none in the initial order price. In the end the buyer gets just enough to get by, like the cormorant. By the time you are finished this book you will have a good understanding of how greed and hubris on the buyers side, and guile, culture, and political differences on the suppliers side have made for practices that are thoroughly unacceptable by western standards. Yet they go on seemingly unabated. You get real perspective on the "talent" of the factory owners when you read how the mob from Jersey is scammed in a recycling deal!
There are many tactics described in the book. Here are a few examples. "Quality fade" is how the suppliers make a profit after taking low cost orders. Cheaper materials are substituted until the buyer complains and then the buyer has no recourse or even any leverage on the supplier to improve. Also Counterfeiting is tolerated by buyers as a cost of doing business there. The lack of product health and safety standards and the impenetrable supply chain and financial workings of the suppliers leave some importers unwilling to even test product quality because they are afraid of what they might find. Knowing they have no recourse importers gamble that customers won't notice. The reader is left with the definite idea that change is not coming anytime soon.
Interestingly the dearth of design talent in China has been ignored by their leaders in favour of copying and counterfeiting. It is original designs that are most coveted by factory owners because they can be copied and sold to the rest of the world at much higher margins than to the first world markets. Europe and North America are in total only about 50% of the market for China's manufactured goods. US and Canadian companies deliver original designs in exchange for a too-good-to-be-true low price. In the end the shoddy goods from China are cheapest in America for this reason.
I think in the end the price paid for "cheap" items of China is too high for the risk we take as a society. Lowering our ethical "bar" to make this trade, and approving of exploitation of the foreign workers in unhealthy conditions (that would be quite illegal here), is selling our competitive advantage far too cheaply. Erosion of product safety standards is very alarming and the theft of intellectual property (our future) is really not worth the price paid. Unfortunately this ship has sailed, politically speaking, and the author makes the point that the US missed its chance to significantly influence China after it was bestowed with Most Favored Nation trading status.
Conscience and Integrity
I found it to be a very engaging read told in an enjoyable personal style that clearly positioned the author at the uncomfortable interface of the two business cultures. Midler shares an understanding that few would have, let alone share with the world. I commend the author for his conscience and integrity when it is apparent that there are many westerners quietly reaping profits from this disturbing status quo. Weighing in at only 240 pages it is quick and informative must-read for anyone in manufacturing, but I think it would interest many people and there is nothing technical about it.
Bust my bubble
A few years ago I viewed China's economic miracle akin to the transformation of post war Japan. I felt that eventually the quality of goods and value added will increase on the imports through good old industrious behaviour. Naively, I foresaw North America getting a run for its money and we'd use our Lean smarts and intellectual property to stay ahead of the developing world. This book busted my bubble. Obvious cultural differences highlighted in the book make it clear that China will be China and not another Japan. China will not overwhelm us with their quality like the Japanese:, and the reasons why are well documented in this book.
What to do?
First thing for me: I am going to weigh purchases carefully with respect to country of origin and err on the side of caution. As a consumer I will reconsider price versus risk knowing what I learned in the book. We all vote with our wallets everyday, and my votes will be changing that is for sure.
It galls me that we are not being "beaten fair and square". Far from it, and that makes me doubly excited to help manufacturers use Lean methods to gain savings here at home without succumbing to the "grass is greener" in China mentality. I fully expect we will continue to lose jobs in uncompetitive markets forever, but we can't allow them to be taken away by unsavoury and unethical "tactics". If there is consistent bad faith by suppliers even product certification marks are not the protection you would like them to be. So what can we do?
Things are not altogether bleak. I understand that in Canada we will have new and improved product safety legislation that will help, but in the end there will not be enough safety testing done on imports and we will still be reactive to lead paint and other purposeful harms done to us to save a few cents in China.
The good news is that delivery time and cost reductions are there for the taking in every North American operation. Those savings (hard won though they may be) along with the Lean advantage of keeping production facilities close to the end user, can definitely counteract "easy" savings hoped for by moving production to China. If you don't think so, tell me how you do sending back that container of substandard goods, or fighting a safety recall... in anycase I recommend you read the book.
Greg's recommended reads
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