Deaths and Supply Chain Practices in China – What You Don’t Know Can Kill You

(Editor's Note: This article was written by Thomas Kase, senior analyst at Spend Matters US, and published last week on that site - I thought it was really interesting...)

The human and cultural aspects of procurement are typically ignored (such messy, qualitative issues!) and instead we assume that apples bought in Kansas or in Germany or in China are all the same.

From a personal perspective, as an engineer and an automotive enthusiast, I buy only German-engineered cars – but why? In my experience, from driving cars in over 30 countries around the world on either side of the street (sometimes both at the same time, as in Turkey) I have seen that the best drivers in the world, from my perspective, are in Germany. It stands to reason that German engineers are the best driving engineers as well, and that cars designed in Germany will thus be outstanding.

This theory held up during my seven years working as an engineer in Japan, where great attention (maniacal) to detail and systematic execution created products with superior consistency and quality. It was a marvel to behold. Nothing anywhere else comes close in execution, and I have been to over 50 automotive plants across the globe. The downside was that design took a back seat to execution. Witness Toyota's brilliantly executed mediocrity; cars that meet your A-to-B transportation needs, but miss your wants by a wide margin.

It's the same in procurement. You can structure your procurement activity around KPIs all day long, but you might still miss what matters by a wide margin. The exact same specs given to both a German design team and a group of Japanese engineers will result in quite different cars. Culture cannot be ignored.

Similarly, a person's understanding of what is safe or acceptably unsafe will differ between cultures, and individuals will act on this understanding in their daily work. This in turn results in quite different execution depending on if you are purchasing (superficially) the same thing from a supplier in Germany, Sweden, Korea, Russia, or China.

Suppliers are shaped by the culture they live in. Again, going back to my years in Japanese industry, where I knew that once specs had been conveyed to Japanese subcontractors (yes, this typically involved a lot of consensus-building) I could stand in front of Congress and (without knowing the actual outcome) swear on the Bible that the execution had been flawless. In Korea, when I managed the same activity, this involved a lot more supervision and less trust. In my experience, the Japanese and the Koreans, in turn, trust Chinese suppliers even less.

Enough background. Regarding sourcing from China in the present day, the AP reports that 75,500 people died in work-related accidents in China last year. Contrast this with the USA, where a total of 4,690 workers were killed on the job in 2010. By comparison, China has 1,347 million inhabitants, which is almost 4.3X that of the USA's 314 million population.

If the same accident rate had held true in the USA, we would have seen over 20,000 work-related deaths. For comparison purposes, we saw 32,000 traffic fatalities in the US last year, the lowest number since the rationing days right after WWII. China, on the other hand, (likely) experienced 250,000 traffic fatalities in the same period – "likely" since an exact number is difficult to ascertain because of egregious under-reporting.

Try to take a step back and imagine the situation of engineers operating in the different environments. The safety factors incorporated into their designs will differ, as will the attitudes of the QA engineers involved. How can you live in the middle of so many product related deaths and not become numb?

No wonder Disney (and probably many others) have a procurement ban on anything related to safety (for use in their amusement parks) from China. This staggering lack of respect for human life likely cuts straight to quality control and product design.

Similarly, an advance copy from ProcureCon regarding their conference in Singapore in February next year shows that product quality and other aspects of supply chain risk, including CoC issues, is at the top of the agenda. Their wording is less strong than mine, but the message is similar.

President Reagan was fond of saying, "Trust but Verify," regarding the reduction in nuclear stockpiles and other activity with the Soviet Union at the time. Given the situation in China, constant verification around safety, quality and the like should come before trust.

Also, next time you visit China: buckle up!

Voices (3)

  1. Chris C:

    I don’t accept the oft-repeated criticism of Japanese car design – the problem is that they often make frankly bonkers cars, eg http://en.wikipedia.org/wiki/Toyota_WiLL that are simply not seen in overseas markets. What they do lack is heritage/charisma. As an automotive lecturer once said of a certain German brand, Bullsh*t Marketing Works.

    China actually has some very advanced policies/legislation, eg environmental, but problems there include its extraordinary rates of expansion and structural change along with blinkered apathy from overseas customers interested only in low cost. This situation could be very different in less than two decades time.

    1. Sam Unkim:

      Hi Chris
      I think we all appreciate the Japanese can do wacky.
      The point Thomas was making about “missing his wants by a wide margin” is that ze Germans have a long tradition of making rewarding and involving driver’s cars rather than re-skinning Corrollas.

      Regarding the Chinese
      A quick look at Ebay, where a 12 month old Chinese motorcycle will sell for less than a 12 year old Honda C90, shows they still have a long way to go before shedding their “only fit for £1 shops” image.

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