The COVID-19 pandemic is having a major impact on not only the health of entire nations but also on the health of the world economy.
At first, when China shut down its factories to control the outbreak, importers in the U.S. and Europe were concerned about how soon their suppliers’ doors would reopen. They wanted to get their products made and replenish their inventories as soon as possible.
Then, as Chinese businesses reopened and factories began playing catch up, outbreaks popped up all over the world, demand dried up, and new orders stopped coming in.
How did these factories respond to the lack of demand for their products?
Some started producing Personal Protective Equipment, or PPE, like masks and respirators, and some started making ventilators. There are challenges associated with making medical products, and since factories had converted their production lines so quickly, some weren’t able to put appropriate quality control measures into place.
Other factories either decided to cut staff, cut hours, or shut down temporarily. Some factories had never even reopened in the first place.
So, how does all this impact importers? And why is quality control in China more important now than ever?
The One Thing We All Know: The Future is Uncertain
Everything is up in the air right now. Let’s take a look at some examples:
#1) Many Chinese factories are no longer making the products they did before the pandemic and recognize there is very little demand for them right now. Will they be able to keep their businesses open?#2) Raw material prices are volatile at the moment and some types of materials are increasingly hard to come by.
#3) Demand in the West has gone down, with Italy and Spain hit hard, and with “stay-at-home” and “shelter-in-place” orders in effect for many U.S. states. Earlier this week, President Trump extended his social distancing guidelines through April.
#4) Brick and mortar retailers are unable to have people in their stores. When will they be able to reopen?
#5) Buyers in the West are now asking their factories for longer payment terms – often requesting 100% payment 90-120 days after shipment – and factories are pushing back, uncertain about whether they will ever get paid.
#6) Many store shelves in the U.S. are empty as consumers have bought up months’ worth of supplies. Should stores rush to replenish their stock, when consumers are so overbought for certain products?
#7) In late Spring, factories typically start making items for the holiday season, like Christmas trees and decorations. Will there be demand for those products, come Fall and Winter?
There are so many things up in the air right now and so many unknowns. And this impacts quality control in China. Let’s talk about how.
The Impact of Uncertainty on Quality Control in China
With the fate of the entire world economy in limbo, factories will worry about whether or not they can achieve or maintain profitability. This might push them to cut corners and save every nickel they can.We’ve talked before about the phenomenon of quality fade, which is a slow, gradual degradation in product quality over time. It is a phenomenon that is common in low-cost countries. It is exacerbated by importers trying to push factories too low on pricing.
In the current environment, with buyers pushing manufacturers toward less favorable terms, as well as a lack of product demand, there may be pressure to sneak in lower grades of materials or make other slight modifications to your products without telling you.
This means that when placing orders, buyers need to put extra effort into quality control. You can do this by increasing the number of third-party inspections you conduct and having products lab tested.
It also means that you need to maintain open and candid discussions with your factory.
If they bring up the possibility of a price increase, take note, talk about the reasons for the increase, and see what adjustments can be made. And certainly don’t push them to lower their pricing without making design changes. The added pressure could lead to unintended consequences.
Stay vigilant and stay healthy. We wish you the best in these uncertain times.
What are Your Thoughts?
How has the COVID-19 pandemic impacted your ordering? What have you heard from your manufacturers? Are you planning on stepping up your quality control efforts?
Let us know in the comments below. ⤵️