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In this week’s episode, I share, along with my co-host Kevin, some valuable insights and pointers that could really help you – especially When Inspections Fail.” 

Of course, we spoke in general about Product Sourcing from China, services available in China, and how doing business in China works.  But we also touched on some key points, as outlined below: How entrepreneurs expand businesses.

  • You can’t inspect quality into a product
  • It is better to catch a problem at the source factory
  • What is the “Best-Case Scenario” when an inspection fails?
  • What is a “Commercial Release?”

If you’re short on time, you can read the whole transcript below.  

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Interview Transcript

David

[00:00]Hey guys. Welcome to this week’s podcast. I’m really happy to bring it to you today and I’ve got Kevin here, say hi Kevin.

Kevin

[00:13] Hey, how are you doing David.

David

[00:14] Great. Great. Great. So those of you who don’t know, Kevin is my co-host on the show and it’s really great having a co-host on the show I must say just makes it more conversational and stops me rambling on about things and getting to the point. And Kevin asks great questions that kind of hopefully extract some more juicy value out for you guys.

Kevin

[00:34] You make it very easy to do that because you know I’m also a learner on this side of the mic so looking forward to the episode today.

David

[00:43] Excellent. So today’s episode I think is going to be quite useful for a lot of people. It’s a question I’ll get asked a lot and what are my options for rework when my products fail inspection. And for those of you ongoing inspections on your products before they leave your factory in China. That’s a big no no you really need to be doing your inspections and we can talk about that. You can always give me a call if you guys don’t understand what that means. But before anything ships out of China at the factory you got to send people in check the goods before they ship.  Now every just to give you some kind of background to some of the questions I get asked around this is cause I think it is a misunderstanding in the industry really. Kevin and you know I kind of get asked things like: should I inspect my products, what do I do if my products fail inspection, why would my products fail inspection, should I even expect them to fail inspection, and just what do I do if they fail. What are my options really, how do I deal with this. So hopefully I’m going to address some of those topics today and give some practical advice.

Kevin

[01:50] Well I am, like I said I’m looking forward to diving into this a little more because, and before we get started how often you know give me a kind of a ballpark about the percentage of how many shipments you know would you say would fail on a percentage basis.

David

[02:10] Kevin I would say, almost every inspection we do on our product there’s always something that we kind of revert to what we call a commercial decision. So, you know we always expect there’s going to be something that we pick up because it’s just not a perfect world: factories make mistakes, there’s always production problems or some type of issue. So, I think every inspection we do is what you call some fail points and some pending points. Really what happens then is we take that information that we get reported back from inspectors and we have to start looking at it and making some decisions.

David

[02:48] Now firstly, the first kind of things we ask ourselves or is it a safety concern or is it just a what we call kind of a minor or major issue. That maybe I should just touch on that a little bit. You know every inspection you do you get a list of findings right, issues that the inspectors picked up and found wrong with the product, based on the tests and checks that they’re going to do. And they’ll report those findings in. And, the important thing is just to really classify those findings and say is it a major issue or is it a minor issue.

David

[03:24] And then you make commercial decisions based around that. So, you know for example: if you’ve got a product that there’s a safety problem you know maybe it’s overheating for example and you check when you’re testing it, that could really be a safety issue or a liability issue so you got to deal with it. If it’s a minor scratch on the surface of the product you might look at that and go well, it’s not ideal, but we have to. We’re going to do what we’ve got to commercially release it. 

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David

[03:55] And that’s kind of a phrase that we use a lot because you never want to go and say, “Okay at this point these findings failed and we’re passing it now and accepting it.” Because that’s kind of setting the precedent. What you really want to say and use that terminology with the factories OK we’re not happy about this. But we’re doing a commercial release. And “we’re doing a commercial release” means it doesn’t make sense to hold the shipment back. It doesn’t make sense to rework it. And you know based on time, cost, or maybe handling the goods again it’s just going to do more damage than good.

David

[04:31] So, you say well if it’s really minor we should make a commercial release we’re going to accept it this time but we want a running change on the next order or the next production run. So, kind of that’s the first decision you really need to make is do you just do a commercial release or not. Not just on that I want to say it’s not uncommon. I get so many people who say, “Oh it’s not inspection it’s exhaust what am I going to do?” you know it’s normal it’s really normal right. What matters is what how you treat it and how you make those commercial decisions.

David

[05:06] And it’s not always a case of being too difficult with the manufacturer. I think you got to be practical. You know sometimes to unpack a package and unbox everything is a lot of handling; and that can really sometimes do more damage than good. So, if it’s something really minor you ought to determine what the risk to your business is. And then to add to that to a commercial release or do a rework. So, I think Kevin some of the things that you know get isolated as well, what are your options if it is a major problem?

David

[05:36] So, I thought you know I’ve just kind of run through a couple of things. There’s two things. There’s two scenarios I should say. The one scenario is that products fail during inspection and still at the factory in China. And there is a scenario where you pick up a problem in your home country. After the goods have shipped and those are really two different scenarios. From my point of view if you catch something at the factory before it ships is the best-case scenario.

David

[06:10] You’d much rather want the factory to rework the goods before they ship than having to do it in your home country it’s going to be a lot more expensive, you might not have the materials, it’s just going to take a lot of time, and you might even have experience expertise. So, just getting it done at the factory is always the best case. And when those kind of events happen, you want to just deal with it right there and then get the factory to rework it.

David

[06:39] Now, so the way I look at it your options are really make the factory rework the goods if they can, if it’s something major or really important to you make the factory rework goods. That can rework a number of ways depending what the problem is you talk to them, you negotiate with them, you get their view on how to fix it in a quick, fast, and easy way. It’s very important to maintain your relationship with the factory through these processes because it does cost them time and money and not to get upset that you got this bit wrong to me and get all emotional about it, it really doesn’t solve the problem. 

David

[07:12] What you really want to do is work with them to fix it, to find the most cost effective way to rework it, and maintain the relationship because you won’t have a good relationship because suppliers don’t try and be that tough guy. “That’s it, I don’t care. I want it 100 percent. I’m not taking risks.” Because nobody going to come up short. Just be as practical as possible and make sure they do things you know better the next time around. And it’s really, really not uncommon.

Kevin

[07:44] Is that more true in the area of the world you’re working in? Is it more true in say East Asia than it would be in other parts of the world? To really kind of not, not come off as this you know kind of the jerk that wants them to completely redo everything and yelling and screaming and being the tough guy motif or whatever so.

David

[08:04] I think that I think it happens everywhere and it really is this misconception that it is not perfect, I’m not going to take it, then you just can’t do that you’ve got to make commercial decisions, you’ve got to accept running changes if something’s kind of minor let it go. And you know another thing we do a lot is sometimes we request discounts or something I say, “OK you know what, rather than rework it just give me a couple of percent off and I’ll deal with it in my country” or you know be practical about things.

David

[08:37] We’ve in many cases also managed to get suppliers to give us free stock if we feel is going going to be replacement issues or something like that. Or if it’s packaging we second print extra packaging we’ll swap some out. Another thing we often do with manufacturers – and this is I think great advance for everyone listening – is we sign declarations of conformity and warranty with the manufacturers. So, what that means is sometimes we’ll pick up a problem with a product or it might be kind of a, bit of a, matter of opinions we think it’s not a good situation they might say it’s actually not a problem at all.

David

[09:15] And suddenly we can’t really check or verify because it takes time, you know the best stress test of quality is time on reliability is fundamentally how long does something last? There’s just no way you can inspect that. You know my favorite saying Kevin is, “you can’t inspect quality into products.” You know no inspection is going to make it a good quality product, it’s got to be produced with quality. And sometimes what we will manage to negotiate with factories and I encourage people to try to do that, is create a declaration of conformity and warranty which says, “OK you know Mr. factory if you think this is right you know,

David

[09:57]  I’m not 100 percent sure, I can’t say with certainty it’s going to be a problem, but I feel uncomfortable about it. Would you give me a declaration of conformity or warranty and warranty to state that you will undertake that if I have a problem on this issue in the market you’ll facilitate to return or a rework or some type of compensation?” And we use that a lot in terms of materials because you can’t always test the material, right? You just can’t tell unless you take a sample into labs and go into a lot more detail.

David

[10:31] So, what we’ll do is we’ll have the manufacturer give a declaration and make that undertaking that this is correct, we’ve used the right materials, or you won’t have a problem related to this issue, and if you do we’re accountable. And that’s actually by the way a declaration of performance in warranty if you do it right, is actually a legal binding document in China. Most people don’t understand that, not that you’re going to litigate in China, it’s another nightmare but it’s something that I take pretty seriously.

Kevin

[10:58] Right. And it gives you a certain, I guess, assurance or comfort level you know moving forward with the product as well I would think.

David

[11:05] Exactly. And you know, I always like to wrap these shows up by kind of reflecting on these different scenarios and kind of say is it a success or is it a failure, right?  The kind of these journeys. And I think really a product failing inspection is not a failure at all. And I don’t want people to feel that I want the guys listening to think if product fail them to get all nervous and get all worried. The best-case scenario is to identify as many problems before it leaves a factory in China.

David

[11:39] Make sure you double check, get it fixed, or just know what you’re dealing with because once it’s shipped it’s way too late. So, a product failing inspection is not a terrible thing. It’s how you deal with it and how you manage it there after that’s really important. And if you all, want to say that’s very clearly if you are, If there is a major problem then you do need to get the factory to rework the goods. And you don’t be shy about that.

David

[12:07] Just encourage them and motivate them you want this support to do it. Don’t try that iron fist hammer you will do this you will do that. They’re going to runaway costs in time and money. And all you want to do is not have a blaming game but have them motivated to help you. And that’s really important.

Kevin

[12:24] Yeah, and I think as a vendor you know you want to have a relationship where they’re there.  You virtually view them as a business partner in this endeavor with you not just a you know a vendor – I’m paying somebody and they’re doing whatever I, my bidding so to speak. But I really love the idea that you know be creative on how you resolve the issue whatever the remedy is for the problem that you know it’s not just it’s not black or white it’s not zero or 100. I mean there are other alternatives like you mentioned.

David

[12:54] And don’t say pass or fail sometimes just like “commercially released” – exactly. And I guess the other really big takeaway for me is you can’t inspect quality into a product. It’s got to be designed and built like that from the beginning. And my next episode actually I’ll give a quick highlight to everybody listening it’s actually all about accountability. And a lot of that is around about how you front load that information and how at the end of the day you’re ultimately accountable. But that’s a whole other episode.

David

[13:26] Hope you guys enjoyed this and listen and the next episode is going to be all about accountability and why you’re usually wrong and not the manufacturer. So that’s going to be a good one to listen out for.

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