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<h1>Outsourcing to China - Avoiding the Hidden Costs</h1>

In boardrooms across the country, executives are frenzied about
the opportunity provided with outsourcing products from high cost,
high overhead manufacturing facilities in the United States to the
low cost region of China. In an effort to contain costs, many
organizations are flocking to China to harvest the fields of low
cost labor. When you think that they pay $150.00 per month to an
employee working six, 10 hour days you shake your head in disbelief
and say "sign me up". The outsourcing strategy to China is a sound
one and needs to be utilized by anyone who is involved within
manufacturing. The decision to outsource is one that should be
analyzed thoroughly and to realize the true savings is to
understand the true costs.
There is an unbelievable number of factories in China capable of
producing all kinds off different products, with new plants going
live everyday. Past experience has proven that the contract
manufacturers in China have a definite niche within manufacturing
and there competitive advantage is insurmountable within their
niche. Their niche centers around the mass production of an easy
part. An easy part is the product manufacturing equivalent of a
slam dunk in basketball. An easy part has low complexity, a static
design and tolerant to special cause variation. Tolerance to
special cause variation indicates a product produced that is not to
design intent will perform as intended without, a significant
reduction in reliability and is not noticed by the customer.
The characteristics of a complex part is the basketball
equivalent of a three point shot. The part is complex, has a
dynamic design that continues to change and improve and worse yet
offers little latitude for process variation. The fluctuations in
process variation and introduction of special cause variation
translate into noticeable reductions in performance and
reliability. If your strategy is to outsource a difficult part to
China, you can do it successfully, you need to modify you current
quality system to ensure success.
As quality systems evolved in the United States, a
transformation occurred from a vertically integrated inspection
based operation to a systems based core competency operation. Years
ago, the quality initiative was a dedicated group of inspectors who
policed a production focused environment where designs were
completed in obscurity and tossed to manufacturing at the last
minute to meet launch dates. We have matured to the point where
most of the problems are identified and corrected in the design
phase by incorporating FMEA's, Design for Manufacture and the input
of all affected functional areas. We incorporate metrics to monitor
our processes and indicate when improvement or corrective action is
needed. Not all US manufacturer's quality systems are at the same
level, but on average the maturity and effectiveness of them has
increased over the years. Subsequently, when dealing with a
domestic supplier you have a general understanding of what you can
expect.
A Chinese supplier has a quality system similar to those
prevalent in the United States in the 1960's. They are extremely
production motivated, heavily inspection based with little or no
effort focused on process improvement, data driven decisions or
process control. These obstacles are not insurmountable with
adaptation of a quality system to counteract these issues.
A system must be in place to monitor the process and product
constantly, from design phase through launch and throughout
production. The design phase requires a group to work with the
Chinese supplier to gain an understanding of their process
capabilities and key features of the design. At the launch or pilot
build, you should have representatives there to monitor the product
and process. Evaluation of process capabilities, test results, data
analysis and process improvements is the focus of this team. Once
production is approved, you must execute some level of surveillance
that includes periodic visits to review the quality system, data
reporting, test results, process change validation and component
changes.
In order to facilitate the successful launch of a difficult
product with a Chinese contract manufacturer, you must allocate
various resources to their facility to execute the quality
activities that would normally be completed at your own facility.
Doing this minimizes your added costs of outsourcing to a Chinese
manufacturer.
There will be numerous costs added when doing business with a
Chinese supplier. Cost number one is inventory. You are not
shipping this stuff from two states away, it is literally on a slow
boat from China and there will be lots of it. Cost number 2 is sort
and rework. Depending how well you execute the quality activity
mentioned above determines how much cost you absorb here. If you
neglect communicating and interfacing with the Chinese during the
design, pilot run and ongoing production and allow their quality
system to drive the results, you should budget generously in your
sort and rework account.
Cost number 3 is shipping. Again, this is not coming from across
town, are you accounting for that cost or is it buried in your
abyss of overhead. Cost number 4 is obsolescence. With a dynamic
design, the changes are inevitable, however the Chinese are not
purchasing components on a small scale and when a change is made
they cannot react quickly without obsoleting already purchased
components.
Sourcing a difficult part to China can be achieved with the same
quality system approach you would utilize at your facility. You
must go over there and see it through. It will not happen on it's
own and they will not utilize the tools and techniques necessary to
ensure a new product launch and ongoing design changes occur
without issues.

<div>Author Info 
Robert Badner is a freelance writer for Innovations for Quality,
LLC, who specializes in live, interactive, online training. You can
visit their websites at 
<a target="_new" href="http://www.iso9000training.org">http://www.iso9000training.org</a>
and 
<a target="_new" href="http://www.asqcertification.org.">http://www.asqcertification.org.</a>
</div>

Article Source: <a href="http://www.innoarticles.com" title="Your #1 Source For Quality Articles">InnoArticles.com</a>
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