Numerous news stories this past month have focused on concerns about the quality
and safety of certain Chinese exports. In this opinion piece, Paul Midler, founder and
president of China Advantage, a services firm that provides outsourcing and supply
chain management to U.S. and European companies, discusses what he calls quality
fade in China, which he defines as the deliberate and secretive habit of widening prof-
it margins through a reduction in the quality of materials.
Recent media reports detailing a series of quality problems with Chinese-made exports
pet food tainted with prohibited chemicals, toys covered with lead paint and tires that fall
apart at high speed have understandably alarmed the American public and resulted in
a number of international product recalls. But supply chain professionals not directly
affected by these recalls remain unusually calm. Everything will be all right, said one U.S.
importer on a buying mission to China. As the country continues to develop, the quality
of its products will naturally rise.
Its the sort of comment that sounds logical, but is not necessarily true. Quality does not
always rise over time, as Chinas own history shows. At the end of the 19th century, the
West rushed to buy Chinas beautiful silk products. Demand quickly expanded, and new
players moved into the market. As competition intensified, manufacturers began to cut
corners on quality, and silk products out of China soon gained a reputation as inferior
goods. By the beginning of the 20th century, traders were already looking elsewhere, and
Japan, which had been building a reputation for delivering a more consistently high-qual-
ity product, became an attractive alternative. By 1930, Japan was exporting twice as much
silk as China.
One of the problems facing China is that manufacturers continue to engage in a practice I
call quality fade. This is the deliberate and secret habit of widening profit margins through
a reduction in the quality of materials. Importers usually never notice whats happening;
downward changes are subtle but progressive. The initial production sample is fine, but with
each successive production run, a bit more of the necessary inputs are missing.
What is maddening to importers is that quality fade often occurs in the last place an
importer thinks to check. One American company had been importing a line of health and
beauty care products for over a year when the cardboard boxes that held its product sud-
denly started collapsing under their own weight. There was no logical explanation for the
collapse except quality fade, and the supplier in this case blamed sub-suppliers for replac-
ing an acceptable cardboard box with ones that were inferior.
THE CASE OF THE MISSING ALUMINUM
Some quality issues are not all that serious, but others are downright frightening. One of
Quality Fade: Chinas Great
Published: July 25, 2007 in Knowledge@Wharton