Page last updated at 23:10 GMT, Wednesday, 12 September 2007 00:10 UK

Cutting the cost: A view from China

Shubham Agnihotri works for a company in Guangdong province that produces parts for international manufacturers in the automotive and electronics industries.

Shubham Agnihotri
In his view, the main reason for the lower quality of Chinese-made products is the pressure that western customers put on Chinese contract manufacturers to reduce costs.

There are many contract manufacturers in China, just like my company, and they get all the blame for the low-quality of Chinese-made products. But that is not correct.

As an export director, I have personally experienced pressure to reduce costs by hook or by crook or lose big contracts that are vital for the survival of our company. I have seen contracts being assigned on the condition of the contract manufacturer having to offer stipulated discounts on a year-by-year basis.

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The result is that there is a huge difference in the quality of products manufactured under strict quality controls abroad and those made in China. We, as contract manufacturers, get the material, apply the paint and prepare everything for mass production. But if the big brand comes back to us and asks us to cut costs, our only option is to compromise on materials.

You cannot reduce the cost of the process of applying the paint, for example. But you can choose lower quality paint, that's produced locally and costs less.

There are no safety tests - it's all about appearance. If basic design is correct and the colour appears good, then the product is good to go

By using Chinese paint we can save 10%. And that's all that matters to our customers.

There are no safety tests - it's all about appearance. If the basic design is correct and the colour appears to be good, then the product is good to go.

We know that quality gets compromised. Our customers know it too.

We employ 5,000 people in our company. A contract ensures the survival of our business. If we don't get a contract we lose our jobs and we can't provide work for our workers.

Of course we'll use cheaper paint if we have to. The situation is the same everywhere, and with so many contract manufacturers in China I am convinced that the recalled products we read about are not isolated cases but are indicative of the quality of Chinese products in general.

Flawed process

Another problem is that most of the big brands have local offices in China and perhaps with the exception of the most senior staff, the team is made up of a local workforce.

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While the big boss is not aware of all the processes involved in every stage of production, the locally-hired workers are not familiar with the numerous, strict international quality standards. Their job is to meet the demand of their employer - to reduce costs.

The whole process is flawed. The big brands use outsourcing and hire different companies to do different things - one produces particular kind of parts, another applies the paint and a third assembles all the components.

Where is the control? Who does the quality planning and makes sure that everything in this process is up to high international standards?

Then when there's a problem, the responsibility is passed down to the small guy. He speaks no English, he has no internet and no website - he has a workshop in a corner of a street, trying to make a living.

If the international quality standards were applied as robustly in China as they are in the West, then quality will be improved. But that means that international manufacturers should be prepared to cut their profit margins.


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