How do inspections in China work?

You, the buyer, want to make sure your goods are free from defects and made to a high standard of quality before you pay for them and they are shipped half-way around the world. It doesn’t make sense for you to travel to the factory to inspect these goods. In short, you need a third-party inspector.

But how do inspections work? What do they really tell you? And who can you trust?

First and foremost you need a clear, independently verifiable definition of “good quality,” “pass/fail” and/or “defects”. Having a physical approval sample is a great start, but what is your tolerance for differences against the sample? If the straps are 5mm too long is that a defect? What if the red material looks a little orangey? Does that plastic seem a little softer than before?

If you’re serious about quality, you need scientific definitions and tolerances, even for the most mundane products. Think: “The strap should be 150mm long +/- 5mm from seam to seam,” “The red material should match Pantone 185C with a 10% acceptable tolerance,” “The plastic hardness should be between 60-70 degrees, using a hardness meter.” These quality specifications or “specs” can be compiled into a checklist, “tech pack” and/or arranged by seriousness (major/minor defects, for example). Armed with these quality specs, any inspector should come to the same conclusion about whether a unit of your product is defective or not.

An example of a “tech pack” or quality “spec”
An example of a “tech pack” or quality “spec”

Next, you need to decide when to inspect. Will you inspect the raw materials as they arrive at the factory? Will you inspect mid-production to check progress and components before assembly? Or will you only inspect after the product is complete?

Usually these decisions are made as a balance of risk and cost. The ultimate in micro-management would be to hire a proxy to sit in the factory for the duration of the procurement and production process, but that would probably be cost prohibitive. On the other extreme, you could roll the dice with a trusted factory and figure that even if you lose 5% of your order to defects you have saved more than that in the cost of inspection. All things being equal, the higher the price of product, the greater the quantity and the greater the risk of defect, the more valuable the inspection is to the buyer.

INSPECTION VALUE = RISK OF DEFECT x COST OF PRODUCT x QUANTITY

Third, you must decide how the actual inspection will be conducted. In exceptional situations, you might order a 100% inspection, but in most all inspections some version of Acceptable Quality Limit (AQL) is used to extrapolate the results of a random sample onto the entire lot (“lot” is industry jargon for all the units that make up an order). If less than a certain percentage of defects are found in the sample, then the entire lot is passed. If more than a certain percentage of defects are found, then more samples are inspected and if the defect rate is constant or grows then after a certain number of samples the entire lot is rejected. Your inspector should be able to explain AQL and suggest a procedure, based on tables that look like below. If they can’t, beware!  

An AQL table
An AQL table

Finally, who can you trust? You need someone to execute the inspection(s) in a way that achieves your goal: commercially reasonable assurance that your goods are well-made before you pay for them and they set sail for your warehouse. In my experience a trustworthy person (or company) in this scenario is someone who is:

  • Technically capable: They must be able to understand and apply your spec.
  • Professional: They must be be patient with details, record results accurately and report in a timely manner.
  • Properly incentivized: This person must value your future business over bribes and the warm glow of attention and power they will inevitably receive in the factory.
Factory floor inspection
Factory floor inspection

So, in sum, inspections work like this:

  1. Define the goals of the inspection and a scientific definition of pass and fail.
  2. Weigh the cost of inspection(s) against the likelihood of defects times price of goods
  3. Decide on a reasonable AQL percentage to inspect.
  4. Find a capable partner who has your interests at heart (or at least in their economic best interests)

I’ve assembled the Thayer inspection team with the above in mind.

Thayer Inspection Team
Thayer Inspection Team

We’d love to hear from you,

Joe Burnett

joe@thayer-consulting.com

www.thayer-consulting.com

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