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OUTSOURCING NEWS

Sidebar: Preventive Measures to Offset Outsourcing Risks

Manufacturers looking to outsource must seriously consider the quality regulations and standards governing the manufacturing process within the country to which they are outsourcing, according to an American Society for Quality (ASQ) report. In light of recent Chinese product recalls across many industries, much of the responsibility for quality problems lies with inadequate oversight by U.S. importers, say ASQ’s product experts. (For more on this report, see the sidebar, “Preventive Measures to Offset Outsourcing Risks.”)

“Companies are used to dealing with suppliers that comply with their specifications. [T]hey aren’t taking into account that the whole concept of quality systems is a radically new thing to many foreign suppliers in countries [such as] China,” says Randy Goodden, chair of ASQ’s Product Safety & Liability Prevention Interest Group.

Differences in language, culture, and business operating models can pose a problem for outsourcing companies. In addition, companies sourcing from developing economies are encountering an unfamiliar legal climate that may not provide recourse for failure to uphold terms of a contract, document forgery, or protection for intellectual property, according to Goodden.

William Barthold, chair of ASQ’s customer-supplier division, has noticed a major difference in suppliers according to types of ownership in foreign markets. “We tend to find lackadaisical attitudes from government-owned suppliers where management staff gets a paycheck regardless of performance,” says Barthold. “Privately held companies are the best bet [because] they are investing in their future with new equipment and more processes and controls.” He adds that private companies with foreign management, such as Taiwanese owners who bring in their own managers and work styles, are the ideal combination right now in China.

Goodden and Barthold agree that importing companies need to take more responsibility for their inadequate assessment of risks in dealing with foreign suppliers, insufficient supplier development activity, and a lack of discipline in applying quality basics with suppliers.

For more information on ASQ’s recommendations, visit www.asq.org/cs/index.html.