China QC Inspections are so Worth It

I have always thought it a mistake for a company not to have a quality control inspection done of its China products before shipping.

The Quality Inspection Blog has a post, How much does an inspection in China cost? that puts the need for a QC inspection into proper focus. The post starts out talking about the two kinds of reactions the author usually gets when he quotes his company’s USD $295 daily fee for China product quality inspections:

Some purchasers get to talk about their project for some time, see where we would help them, and finally (nearly as an afterthought) ask for the price. I tell them 295 USD per day of work, and I can nearly hear them thinking “wow these guys are cheap”.

They compare this fee to the costs of professional services in their country, or maybe to the total amount of the order, or to the cost of their best alternative (taking a flight to China). So it sounds really low.

With other buyers, it’s the exact opposite. To them, even our basic “no frills, internet booking” service, at 170 USD per product type, seems like a rip off.

They compare it to the salary of most English-speaking staff in China (5,000 rmb), they divide it by 30 days, and they think we make an insane margin. Forget about the main costs of a company that has set up a network in the main regions (training/supervisory/internal control overhead, travel expenses, client communication, taxes in China, etc.).

The post goes on to discuss the second type and their unwillingness to pay the minimal fee for protection:

I learned that the second category of buyers, unless they absolutely have to, will never accept to pay the market price for quality control inspections. They prefer to pay a cheap “agent” who will not do a professional job (if he does any QC job at all), or to simply roll the dice and let the factory ship out. It is not rational because in the end they are probably worse off — it is psychological.

Because my law firm charges thousands of dollars to draft China manufacturing agreements (in Chinese and in English) the companies for whom we draft these agreements typically think nothing of paying a bit more to ensure their China-manufactured products meet their quality standards. This combination of a China-specific OEM manufacturing contract and good quality control monitoring means our regular clients virtually never call us for legal assistance relating to quality problems. The same companies that pay for a good manufacturing contract and good quality control monitoring tend to be the same companies that conduct due diligence on their potential Chinese suppliers before they enter into any agreement with them, and it is these three things together that truly reduce the likelihood of China product quality problems. See The Five Keys for Reducing Your China Manufacturing Risks.

The phone calls our international manufacturing lawyers get regarding Chinese product problems almost always come from potential clients, not existing ones. Most of the time, the amount at stake for these companies is so little we advise they simply be more careful the next time.

Every few months though we get a call from someone out $500,000 or more and we are usually unremitting in our questions to them.
The following is a typical exchange:

Manufacturing Lawyer:  Do you have a contract with this Chinese factory that you can send me.

Them:  No, because I have a purchase order.

Manufacturing Lawyer: Does the purchase order set forth the quality standards required?

Them: No.  I didn’t think that was necessary.  Everyone knows what is required to have a good quality _________.

Manufacturing Lawyer:  Without a written document setting forth the specifics on quality, your case will be much tougher. Did you have someone inspect the goods before they were shipped?

Them:  No.

Manufacturing Lawyer:  Why not?

Them:  Because the whole point in going to China is to save money and if I pay for QC inspections I won’t be saving as much. (Long Pause) Guess I would have saved more by having paid for the inspection though.

I do not know what percent of product comes back bad for those companies that do not use QC inspections nor do I know what percent of product comes back bad for those that do. But I have seen enough to become absolutely convinced (as is pretty much everybody I know who works in or around international manufacturing) that QC inspections are pretty much always worth the money.

What do you think? To QC inspect or not to QC inspect?