When "Made in USA" Means Trouble

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A DKN Research newsletter released a couple of years ago commented on the quality of products made in China, reporting that most do not trust the quality or workmanship of anything labeled “Made in China." But, if a foreign brand name is printed on the package, consumers assume the manufacturing is controlled by foreign standards. Even manufacturing companies that outsource to China do not completely relinquish control of the manufacturing process due to quality issues. The Chinese consumer prefers more expensive foreign made brands for the same reasons. 

The shoe may be on the other foot now. News media in China and Japan are reporting on an American company charged with selling subpar food products. Apparently, an American meat dealer in China has been selling expired meat to distributors. Instead of pulling the outdated product from the supply line, thecompany is re-labeling the meat with a new expiration date. Many restaurants and food companies use this American-based supplier because of price and product availability. A manager from a meat distributor was recently interviewed by a local newspaper and said, “We have doing business this way for years. Everybody in China does business the same way and no one has been killed eating our meats.” Unfortunately, consumers have no choice when purchasing meat products if they want to save money.

The news sent shock waves throughout the food industry in Japan. Companies are reevaluating their purchasing habits from distributors in China and the parent company of the American supplier in question has ordered them to stop shipping expired products. Many customers have stopped purchasing products from the American dealer and are looking for alternative vendors in China.

One of my business associates trades frequently with Chinese companies and shared his experiences with me. He is the president of a mid-sized electronics company in the U.S. All their products are custom designed based on customer’s requests. The company has no manufacturing facility in the U.S. and relies on sub-contractors in Asia. They prepare detailed drawings with exact specifications, including a strict quality assurance process and test method, and have branch offices in China to assure a level of quality control from their sub-contractors. Even with all these safeguards in place, his company still tests every product that arrives at their plant in the U.S. My friend showed me several large trash bins filled with NG parts that could not pass the quality control testing process. These are the additional costs needed to maintain quality and are priced into the products bottom line.

The “Made in China” label can be found on almost every item in the world, not just products from the electronics industry. Still, Chinese manufacturers pay little attention to putting out a quality product. Foreign companies in China maintain the same quality level as their parent companies, but are overwhelmed by the low-cost business culture in China. Price still drives sales in China. The bottom line is this: If you pay cheap, you get cheap!

Dominique K. Numakura, dnumakura@dknresearch.com
DKN Research, www.dknresearchllc.com

*To view past issues of the newsletter, click here.



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