Quality vs business decision

Some importers don’t grasp the distinction between quality decisions and business decisions.

When I was a grad student, my professor of marketing research was explaining how to interpret data. He said, ”statistically speaking, any difference is significant. However, managerially speaking, only certain differences are significant”.

In other words, an analysis of statistical results is necessary before drawing conclusions. What I am writing about in this article is a very similar idea.

A quality decision is taken by the QC inspector (whether in an independent agency, or in the buyer’s staff). It is based on passed/failed conformity assessments, that are themselves based on a QC checklist.

A business decision is taken by a manager working for the buying organization. It is based on the quality decision, and on the significance of the failures noticed by the inspector.

Let me describe two situations where this difference is very important.

Situation 1: taking a decision based on an inspection report

Less than 5% of QC reports are failed. Typically, many points are controlled, and it is the rare case when they are all passed.

I heard some buyers complain that third-party QC firms do everything they can to avoid taking responsibility. As long as their reports are not passed, the theory goes, they don’t risk claims from unsatisfied clients.

Why are some checkpoints failed?

    Some of them are not conform to the client’s specifications;
    Some others are not clearly failed, but are not clearly passed either. For example, the value found in production is not precisely right, but no tolerance was specified.

How to satisfy a client who refuses to take the business decision?

It is very hard for an inspection agency because they can’t adapt to every client’s standard. I can only think of two right ways to do it:

    One right way: define the QC checklist in the smallest details (of course, this is not a free service) and make sure the inspector has a reference sample in the factory. In this case, the QC report is quick to interpret. This is particularly valuable when the greenlight must be giving urgently for authorizing a shipment.
    The other right way: train extensively an employee from the inspection agency. That’s what my first client did with me: I spent 2 weeks in their offices, and I accompanied their technicians for probably more than 2 months in factories. Needless to say, this is not realistic for all importers.

Situation 2: deciding to work with a new supplier

A factory audit is usually based on a generic checklist (how many pieces can they make in a week, what products can they make, what are the holes in their quality system…). The auditor typically gives a score, so the buyer can rank factories from “safest” to “riskiest”.

But the importer needs to take many other factors into account: the price, the people they are in contact with, the competitive and IP loss risks…

The logic is exactly the same as in situation 1. Don’t expect a business decision from a service provider that you pay for a quality assessment.

If you need someone to take decisions for you, you should buy from a trading company. Someone else will know what is going on and will take decisions (not necessarily always in your interest).

But if you want full access to information, and independent reports about what the realities of production, you should accept that business decisions are your responsibility.

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