There's a lesson to be learned in the recent news stories about recalls of products made in China because of safety issues, and China bashing isn't the answer. While China is taking steps to improve the safety and quality of the products it exports, the onus doesn't lie solely with China or any other country to which manufacturers outsource products.
China remains an important part of what I call a "Global Triad Strategy," so eliminating production there to avoid such problems may be throwing the baby out with the bathwater. A Global Triad Strategy enables 21st century companies to manufacture products where it makes the most sense to do so.
Here's how a global triad strategy works:
- In countries such as China and India where labor and other costs are low, you can make products and components with stable designs in large quantities; these products and components generally serve the lower "value" price point.
- In countries such as Mexico and in Eastern Europe, where labor and other costs are not as low but which are closer to the mega consuming markets, you can make things with less stable designs that generally serve the middle price point.
- In countries such as the U.S. and in Western Europe where costs are high and customers are nearby and quite demanding, you can manufacture highly customized products with designs and features that are constantly changing and with price points and margins that are generally higher.
So how does a company embrace a Global Triad Strategy and avoid the quality issues that led to the unsafe toys that were recently exported to the American market? It's tempting to try to lay the blame squarely at China's feet, but the companies that have outsourced work to China and other countries in the value chain must also accept some culpability. Outsourcing work doesn't mean a company gets to abrogate its responsibility to its customers, and that responsibility includes making sure that the products it sells are safe and work as intended.
What went wrong? I suspect that once the manufacturing agreements were in place, the parent company failed to provide oversight -- an urgent requirement in a global strategy. Providing oversight means that the company doing the outsourcing looks for issues and problems in the factory and follows up on them as it would do if the factory floor were in their home plant. Either the operational management has to be willing and able to travel to the satellite sites to make sure that operations are running as expected or local managers must be hired, trained, and trusted to maintain local operations to the parent company's standards.
In either case, someone has to take responsibility to ensure that brand standards are being met. A logical first step would be to spell out explicitly what is acceptable in the manufacture of the product. One key element of a lean value chain includes creating specific metrics for safety, quality, cost and delivery -- all managed through strategic supplier contracts that you establish for non-commodity suppliers. For example, it would be easy enough to include in a contract wording that lead-based paint may not be used in products intended for children. This will require thinking ahead of time about all the possible problems that could arise and then following up to avoid a product and public relations nightmare later. But just putting it in writing isn't enough. Someone must still follow up to make sure that the written terms are being followed in practice.
If you want to reap the advantages and avoid the pitfalls of global supply chain partners, you must continuously manage holistically. Collaboration can mitigate crisis on a playing field that is increasingly connected. Like a tripod, if one leg is shaky, the whole structure might fall.
Anand Sharma is president and CEO of TBM Consulting Group. TBM is the global business improvement leader, helping companies on five continents use LeanSigma methodologies to achieve dramatic levels of efficiency and productivity, new competitive advantages -- and sustained profit and revenue growth. For more information visit www.tbmcg.com