General objectives of a factory visit
No factory visit is complete without a walk through the factory. Do take the time to inspect the floor. After you receive the permission from your Chinese partner, take photos of anything you find interesting. Picking up and poking stuff is normally allowed, and if you see something fishy, do not hesitate to ask.
Remember that it takes time to collect information well, so do take another spin around the factory floor if necessary. Hang in the factory until you have all the information you need. Finally, talk to the production manager about general issues like wrong moulds, unclean products, ripped packaging, late delivery, etc. If you are willing to take the time to discover the real issues, you will save time (and energy) in the long run.
Another objective of a factory visit is providing reasons to lower the price. Reasons can be vague, and your role is to generate them, since to make the Chinese back off their quoted price, good reasons are needed. Absurd reasons work just as well as real ones. For example, you can tell them that another hypothetical supplier offered you a 20% discount.
Have an idea about the production, such as the cost, time, delivery, staff, defect, back-up plan, etc. A thorough knowledge of your business partner is vital: the better you know your partner habits/strategies/attitudes, the better you will manage eventual conflicts or conduct positive negotiations.
Discover the Chinese suppliers' physical reality
There are limits for Chinese suppliers about what can be done financially, emotionally and physically. There is a limited number of workers, places, money and time. No matter how much you will both profit from your future contract, bear in mind that the reality of physically executing the contract is often less optimistic. At the end of the visit, you may be frustrated that your supplier is just not cutting the costs for you. However, maybe they honestly cannot meet the standards you have set. If you are willing to accept their reality, you will be able to refocus you frustration or negotiations in order to meet the physical and/or financial capacities of the supplier. The best solution is not just take your suppliers’ word for it, but get your own first-hand information when visiting the production floor (time and check the production your own to finally really understand the production line).
During a site visit you can easily see if the quality and packaging department does 100% quality check on all the products (a final Quality Control on 100% of the production). You should however also check whether or not they are effective in sorting out the bad pieces. There are reasons why the factory final Quality Control is often not effective.
One of the reasons is that a factory inspector usually performs only a visual check, and even this on samples and not the whole batch. Due to this way of performing the quality control, many issues go unnoticed.
Factory inspectors are not trained properly for their job, and they often do not have any knowledge of the product either. Moreover, they generally check products before packaging, while a high number of defects originate actually from poor packaging. Factory inspectors have the same schedule as others in the factory: at least 6 days a week and around 10 hours a day. Worse comes to worst when there is an urgency, they have to work “until the whole job is done” (such working conditions are really not helping quality control at all). Last but not least, without record keeping, the inspectors are much more eager to place everything with a label “ok for packing” rather than “to repair”."
Many Chinese manufacturing companies have begun to standardize production processes, but somehow they have not met the western standards about safety and environmental protection. Companies start adapting to higher standards than those that the Chinese Law mandates, and they often apply for certification of the management process (ISO9001 and ISO14001 in particular) because in the end the costs for the company will be much higher if problems with safety and environmental protection become serious. A venture should not gain short-term benefits at the expense of its long-term reputation. This does not mean you are too strict on the quality control standards (although higher number of rejected products generate greater costs for the factory).
The final goal wanted to achieve after the visit
A good idea is to ask the engineering team enough questions for them to help you identify any alternative manufacturing options that can help reduce the price, since engineers rarely think about business strategy but more about the manufacturing processes.
A great example of cooperation is when both you and your Chinese partner are more focused on engineering, then the “price killer” elements of a new product can be eliminated to reduce the cost for both parties.
The ends justify the means. The goal is a resolution of a problem, correct production, and a finished quality product. Who cares if it is not done the same way that you would do it back home. You should not intervene unless the quality check is performed. Let the Chinese do it their way. Remember, in the West time is money, but in China time (labour) is still affordable and less expensive than in Europe and most factories would rather sacrifice more labour and time for a problem than additional materials or technology, as they may have a different concept of efficiency from the western one. The point is that they do it differently but can often achieve desired results. You just need to control the quality and let them do their job.
The ultimate goals are to improve quality and business practices in your business partner's workplace. Conducting quality audits-on site is a good method for achieving such goal, so do audit companies that supply you with raw materials (their quality at the manufacturing site) and your packaging materials as well as any other suppliers, in all locations.
To wrap up, focus on your aims (standards and position) and get what you came for, but remember the goal is also cooperation, so, sometimes allow the Chinese achieve the desired results with their own methods. Finally, nod to the idea that we have to "make ourselves Chinese" again!
ISO Codes retrieved from: http://www.chinalawblog.com/2011/08/china_quality_control_qc.html
Mr. Cesare Romiti, President of the Foundation Italy China, his phone interview with China Daily International Edition on the 11th of June, 2015.
Harney Alexandra, “The China price : the true cost of Chinese competitive advantage”, New York : London : Penguin ; 2009.
Midler Paul, “Poorly made in China: an insider's account of the tactics behind China's production game”, Hoboken, N.J.: Wiley, 2009.