China Suppliers Up Ante on Product Safety

Following a series of tighter consumer protection laws, makers are emphasizing product safety while contending with the high cost of compliance.

Faced with stricter safety regulations in key export destinations, companies in China are allocating more resources to product testing and emphasizing high-quality materials despite the pressure these are putting on manufacturing outlay.

For most suppliers, adopting complicated and far-reaching directives is not the main challenge, but the high expense of compliance is.

Many of the new safety standards require makers to conduct more tests on a greater number of chemical substances. As a result, certification fees for some products have risen by as much as 50 percent, and even doubled in a few cases. CPSIA evaluation for toys, for example, can cost up to $1,000 per model depending on the complexity of the design.

The average toy company now spends $60,000 to $100,000 on examination fees every year. One of the biggest toy makers in China pays more than $2.9 million annually on testing, much higher than the yearly revenue of small suppliers.

Lamp specialist Heshan Mingkeda Industries Co. Ltd spends about $3,000 for SAA certification alone, which takes one or two months to acquire, according to the company’s sales manager Mini Yip.

In many instances, fulfilling safety requirements involves replacing infringing materials with compliant substitutes.

Suppliers of food-grade products, for instance, have already stopped using BPA, an organic compound found in many plastics. In a range of consumer goods, further modifications include the shift from PVC to POE, and from PC to phthalate-free PES, glass and nontoxic silicone.

Battery makers are striving to develop or source safer anode and cathode materials. Some have begun to replace conventional lithium cobalt oxide formulation with lithium iron phosphate, an alternative with lower environmental impact. Other efforts are aimed at improving protection against overcharging, discharging and heating.

But in most instances, “safe” alternatives are costlier than the originals. 3P PVC for instance, is 30 percent more expensive than regular PVC but is 30 percent cheaper than 6P.

Similarly, A5-grade melamine goes for $2,200 per ton, three times as much as the same volume of the A1-grade variant at about $735.

In some cases, imported materials, which invariably cost more, are favored over domestic equivalents. Imported PP, for instance, is 20 to 30 percent higher than domestic versions, at $1,800 to $2,100 per ton. Overseas-sourced organic fabrics, likewise, are 20 to 30 percent more expensive than local variants.

Despite the high outlay, some companies prefer to source abroad for consistent quality. Foshan Geuwa Electric Appliance Co. Ltd sources 80 percent of materials and components for its blenders and juicers overseas, while the rest are purchased locally.

Besides higher raw material expenses, makers have to contend with increases in indirect costs, particularly those related with monitoring the supply chain to ensure that all manufacturing inputs meet specifications.

According to Tim Corrigan, president and CEO of the Quality Assurance Institute, “The root cause of the problem (of product quality) is control of the raw material, application contaminations and subfactories. To fix this requires an overhaul at many factories. The solution calls for significant transparency, diligence and dedication.”

Generally, material vendors are able to offer third-party certification. But for those that cannot do so, companies need to send their own QC staff to supervise the production at the material suppliers’ factories.

More exporters are now limiting their sourcing to suppliers that can provide certified inputs. Still, collection and documentation of every component utilized requires time, effort and money.

In addition to testing and materials quality, manufacturers are also enhancing their in-house QC facilities.

Lai On Products (Industrial) Ltd, a Hong Kong-owned maker of crayons, modeling clay and paint has set up a microbiological laboratory at its factory in Shenzhen, Guangdong province. Certified by the China National Accreditation Service for Conformity Assessment, the lab is comparable to a chemical-testing facility. The supplier also sends its products to third-party agencies to ensure compliance with ASTM D-4236 and F963, Toxicological Risk Assessment, EN 71, CPSIA, California Proposition 65 and REACH requirements.

Some baby stroller factories are now equipped with wheel performance, dynamic durability and drop-testing facilities. At the same time, many stuffed toys and children’s garments makers are purchasing more needle detectors.

Any measure to comply with safety regulations undoubtedly adds to the cost of production. Suppliers estimate material and certification expenses have risen about 10 percent in recent months. Many companies try to absorb the additional expenditure, but this is not always feasible.

While investment in facilities can be recovered in the long term, the same cannot be said about testing fees. When order quantities are low, as in the current environment, makers are often unable to recover money spent on certification of specific models. Shorter product life cycles due to fast-changing customer preferences also give manufacturers a narrower time frame to recoup compliance outlay.

Some suppliers try to negotiate bigger orders or ask buyers to shoulder the cost for certification. But clients are averse to both options in view of the current economic conditions.

Typically, tier 1 manufacturers are able to comply with regulations more seamlessly due mainly to their stable financial resources.

“Enterprises that cater to major OEM customers likewise have the easiest time adjusting to the new rules as they have better access to information,” said Cody Wang, chemical testing deputy general manager at Intertek. “They are usually able to make the necessary changes months in advance of enforcement deadlines.”

But for small and midsize factories that have less capital to invest in equipment and prohibitive testing fees, conformance can be a daunting task.

Testers can also be partners

The professional testing industry is booming amid the rising safety trend. With the increased need for product evaluation, the past few years have seen an influx and expansion of third-party laboratories in China, including SGS, TUV, BV, Morlab and Pony Test. These organizations also provide free training on the latest regulations, and inform companies on which merchandise needs testing and how.

Regulatory agencies in the US and the EU have likewise been active in helping suppliers get up to speed.

Workshops on the new EU Toy Safety Directive have been organized, with the support of the EU-China Trade Project and the Directorate-General for Enterprise and Industry of the European Commission.

In October 2009, the third CPSC-AQSIQ Summit was held in Wuxi, Jiangsu province. With a theme of “promoting best practices by Chinese manufacturers and US importers to maximize product safety”, the summit was attended by CPSC chair Inez Tenenbaum.

In her keynote address, Tenenbaum reported that in fiscal year 2009, toy recalls went down to 40 from more than 80 in the preceding period. The information exchange between the CPSC and AQSIC about recalls of China-made goods was emphasized, as well as the need for frequent training sessions.

The AQSIQ has been educating China toy makers about safety requirements in the US and on strengthening quality controls. The CPSC has arranged to set up an office at the US embassy in Beijing to help promote compliance with US standards among local suppliers.

Local governments and trade organizations are also vigorously pushing companies to bolster the image of “made in China” products.

At the Canton Fair last fall, the Ministry of Commerce distributed export quality and safety manual to exhibitors.

Organizations such as the China Council for the Promotion of International Trade have been sponsoring seminars for business owners and local government officials on product safety in Southern China.

Regulations getting tougher

The safety bar that China suppliers must hurdle is getting higher by the year as new international and domestic standards are put into place.

In December 2009, the European Chemicals Agency announced the addition of 15 chemicals to its candidate list of substances of very high concern (SVHC) under REACH. Among the inclusions were diisobutyl phthalate, a commonly used plasticizer, and lead chromate, a coloring agent.

REACH has wide-ranging impact in the EU as it requires disclosure of information on hazardous substances contained in every product. The directive is on top of specific regulations such as RoHS for electronic goods, EN 71 for toys, and Regulation 1905/2004/EC for materials that come in contact with food.

For toy makers, the CPSIA/HR4040 in the US and the EU’s New Toy Safety Directive or 2009/48/EC amend existing rules substantially and impose greater restrictions on suspicious chemicals. The latter regulation limits 19 metallic elements. It also bans 55 fragrant substances and warns against a further 11 types.

Other baby and children’s products and toys must pass the standards for EN 71, CE, WEEE and EMC in the EU, ASTM-F963, CPSIA, FDA and UL in the US, AS/NZS/ISO 8124 in Australia and New Zealand, and ST2002 in Japan.

Following the US and EU’s lead, Japan, Australia and even Malaysia are modifying their existing toy safety regulations, particularly on flammability and the use of phthalates and lead.

Lithium battery exporters have to comply with UL1642 for cells and UL2054 or FCC for battery packs in addition to EMC and RoHS. Designs shipped by air are also obligated to undergo UN38.3 testing. In markets where FCC, UL and RoHS approval are not necessary, passing the UN38.3 is sufficient.

For products that come in contact with food, companies have to comply with assorted standards such as UL, CB, CE, GS, ETL, CCC, FDA and LFGB. Most EU countries recognize Germany’s LFGB because of its stricter requirements.

Aside from international regulations, suppliers have to follow domestic guidelines for a number of goods.

Garment trimming makers, for example, need to comply with three sets of requirements for cords and drawstrings to be used in children’s clothing. Issued by the General Administration of Quality Supervision, Inspection and Quarantine, and Standardization Administration, the GB/T 22702-2008, 22704-2008 and 22705-2008 are based on US’ ASTM F 1816-97(2004), the UK’s BS 7907:1997 and EN 14682:2007, respectively.

In addition, some existing national standards for trimmings have been revised and now have provisions that monitor and prescribe allowable levels for harmful substances that are even lower than European regulations. The GB/T 17592, for example, keeps azo content at 20mg/kg whereas it is 30mg/kg in the EU’s EN 14362.

Likewise, the China government issued a new standard for melamine-formaldehyde products used as food containers and packaging materials. This comes after several foreign markets banned low-end models due to potential chemical leaching.

The regulation seeks to ensure safety by prohibiting the use of urea formaldehyde resin as the main material. A1 and A3-grade melamine dinnerware pieces, which contain 70 to 90 percent of this substance, tend to melt at high temperatures and may cause a health hazard.

To ensure compliance with the safety code, the government has required suppliers to obtain a production license from the General Administration of Quality Supervision, Inspection & Quarantine.

General Wholesale – First Step to Make in Starting a General Wholesale Clothing Business

At present, general wholesale products are widely distributed all over the world with use of the great innovations of technology. The internet has served millions of businessmen, being a useful tool of increasing the reach of their trading market to the different potential customers around the world. Like wholesale clothing, these products can now easily be sold and purchased online. Wholesalers started by choosing the right products to sell, become part of a wholesaler group, and finally promote their products. In their products’ promotions, they do not have to do it all by themselves. They have all planned out and have chosen every vendor or promoter, negotiated with product manufacturers, and already had their reliable suppliers. After all of these, they start selling their products. And in selling their products, they have already differentiated their own original price to the general wholesale purchasing price.

Beforehand of getting themselves started in selling and launching their products, they always put into consideration the products they are selling to their potential customers. There are still a few things that they need to sort out.

In a general wholesale clothing business, they have to decide first between selling general wholesale clothing products and selling wholesale clothing under a specific niche. Wholesalers selling general clothing products mean that they can sell all the different kinds of clothing regardless of age, sex, and niche. While in a business having a specific niche, wholesalers need to have a different set-up and have to focus in a specific group of customers.

Right after deciding what to sell, wholesalers need to visit the source of their products. They need to meet up with their chosen manufacturers, distributors, and suppliers. They have to check out the processing of the products and its quality level. Wholesalers also need to reassure themselves that they have chosen reliable services from their partners. After tackling with these tasks, they need to engage in reassuring the products’ qualities, the restocking charges, and the return policy. Then, they need to gather more advices and helpful information regarding their business. Finally, they need to meet up with their clients and clear all the ideas within their business.

Now, they can start taking the first step of the operation of their business. Everybody always starts small in order to grow big, and that is one of the exciting features of having a general wholesale business.

General Motors will Succeed – Here’s Why

Although General Motors saw a 2.5% slide in sales for the month of February, things are looking better for the automaker than they did just a couple of months ago. The biggest worry for General Motors in the 4th quarter of 2005 was the possible strike of Delphi workers. Delphi is General Motors’ largest parts supplier and a strike would cripple production and leave GM assembly lines at a stand still, almost certainly putting the worlds largest automaker into bankruptcy. However, as Delphi and the UAW continue to work toward a solution this seems far less likely than back in early December. General Motors has also made progress with the UAW in terms of health care and other legacy costs.

At a time when GM is aligning its production capacity with its market share, the General is investing more money into R&D. Clearly General Motors understands that the best long-term solution is to build great cars that people actually want to buy.

On the product front, the long anticipated Chevrolet Tahoe and GMC Yukon are selling extremely well. So well that General Motors is having a hard time keeping up with demand. This is a great sign for the new line of pick-up trucks GM plans to introduce later this year. Pontiac is riding high on strong Solstice sales, and Saturn is getting ready with a product offensive that should move the brand into a more up-scale position, while also attracting new buyers.

Of course some areas still need attention. GM is working to beef up its sedan offerings. The new Impala is a great start, though it lacks the design chutzpah that Detroit was once known for. The Cobalt and Pontiac Pursuit are a definite improvement over the Cavalier and Sunfire. However, the Cobalt and Pursuit benchmarked the previous generation Volkswagen Jetta which has been replaced with a more sophisticated offering.

This leaves the Cobalt and Pursuit a generation behind in terms of vehicle dynamics and engineering. You only need to look at the Honda Civic to realize that even small cars have to be smart and sophisticated. As Toyota prepares to introduce the next generation Camry with available hybrid technology, General Motors will have to invest significant resources to bring its hybrid program up to speed. Even without the hybrid option, the 2007 Camry looks like the 800 pound gorilla in the family sedan category. With the availability of a 3.5L V6 producing over 265hp, the Camry hopes to shed its image as a boring family sedan.

Buick is in serious trouble and GM knows it. Some inside the company want to “Oldsmobile” it. The brand shouldn’t be dropped. Get some of the guys and gals from Cadillac over to Buick ASAP. It’s a brand worth keeping but only if they go after a younger audience. Buick has lost its confidence and the only way they’ll get it back is by building a competent, exciting family sedan with rear wheel drive and a strong V6 or V8. The Chrysler 300C would have been a hell of a Buick. As for Saab, some say get rid of it. I say keep it. With sales growing on the back of the “born from Jets” ad campaign, Saab is ready for prime time. The Saab brand has a strong identity but it needs a strong line-up to get competitive. Stop offering hand-me-downs from other divisions and start investing some time and effort into the brand. With sales of Volvo surging over the last few years there is no reason why Saab can’t grow as well.

It’s time for General Motors to let the designers create cutting edge cars, and let the engineers develop industry leading technologies. All said and done I know General Motors has the talent and ability to design and build good products. Over the next 12-24 months I think we’ll see a company that has come back from the brink, becoming leaner and meaner, ready to take on the best automobile manufacturers from around the world. Good luck!

Generalizing: Learn the Lessons of History, But Which Ones?

A few months before Katrina, I caught one of the early Mardi Gras parades in a rural town outside New Orleans. Race relations there seemed different from those here in Northern California. Blacks were more outgoing and friendly to whites, and yet there also seemed to be more racial segregation. At the parade, the floats and teams were strictly segregated. The only integration I saw was a few clusters of black and white teens. I watched a policeman go out of his way to harass a black youth who was hanging out with some white girls.

As I was heading back to my car I saw one group by a 7-11 and thought to ask them directly about the state of race relations. A white girl spoke for them all, “Oh, it’s getting better. The police still give you a hard time but it’s not bad.” I thanked her and walked toward my car feeling pleased and hopeful; it was good to hear from a like-minded youth who was transcending past bigotries.

The girl called me back. “You say you’re from San Francisco?” she asked.

“Are they still letting gays marry there? ‘Cause I think that’s so disgusting.”

OK, not entirely like-minded. She had learned a lesson about bigotry, but she hadn’t generalized it. Me, I’ve seen enough instances of destructive bigotry to extrapolate to a universal pattern. Bigotry against blacks, Jews, the Irish, the Italians, the Chinese, gays-I get it-no bigotry is acceptable. What you don’t do to blacks you don’t do to gays either.

In this election I’m hoping a disenchanted nation will do some careful generalizing. Too much focus on Bush and Cheney’s bad character distracts us from questions about what makes them bad. If we conclude that they’re just bad apples, then what’s to stop equally counterproductive people with different names and faces from taking their places?

Everyone says, “People who don’t learn the lessons of history are forced to repeat it,” but if that statement doesn’t miss the point completely, it just barely grazes it. Sure, we should try to learn lessons-but the real question is which lessons, what generalizations? From Stalin and Hitler should we generalize to no more leaders with mustaches? No more short people?

What we want, of course, is to generalize lessons from history that end up paying off in the future. Unfortunately, although that’s a great goal, it’s useless as a rule of thumb. The future isn’t here yet, so you can’t use it directly to guide your generalizations.

“Son, my advice to you is buy low, sell high, and always learn today what worked tomorrow.”

Still, our society’s accelerated progress over the past few centuries is largely a product of culture realizing that right generalization is the name of the game. Science and engineering are largely attempts to systematize the process of effective generalization. In the hope of promoting that process, however slightly, here are a few generalizations about generalization applied to the coming election.

Undergeneralizing: Sometimes we fail to learn because we fail to generalize at all. Bush voters who now criticize the president tend to defend their votes. Yes, Bush turned out to be a lemon, an exception to the otherwise fine products of the conservative movement. Gore, Kerry, and the whole liberal agenda would have been much worse. McCain will fix things. Abu Ghraib? A few bad low-level soldiers. There’s nothing to learn, no generalization to be drawn.

When McCain said the economic problem was caused by greedy people on Wall Street and that the answer was to fire the head of the SEC, he sounded like unsophisticated leftists I knew in the ’70s. The problem is a few greedy people leading big corporations. Replace them with un-greedy people like me and it will all be groovy.

Overgeneralizing: Litmus-test radicals think they’ve found the one or two factors from which you can generalize to everything you need to know about a candidate. A Christian? Anti-abortion? For gay marriage? Divorced? A loyal spouse? For change? A traditionalist? The Sufis say, “He who’s burnt by hot milk blows on ice cream.” Not all dairy products will burn you. And not all Christians are great leaders. To litmus-test radicals on the left or the right, expert status isn’t earned through careful analysis but through passionate self-certainty. They’ve found the one cause that matters. It’s a priority not because they’ve compared it to other issues but because they can make an impassioned argument for its intrinsic and isolated merit. “But don’t you see, it’s a fundamental right!”

Motivated generalization: An alcoholic ponders what’s causing those daily hangovers. Monday: gin and tonic; Tuesday: vodka and tonic; Wednesday: whiskey and tonic; Thursday: rum and tonic. Clearly it’s the tonic.

Generalization serves two masters. One is, of course, our future selves. We hope to learn history’s real lessons so we don’t have to repeat them. The other is our present gut instinct, which definitely prefers some lessons to others. The alcoholic’s future self wants to avoid future hangovers, but the alcoholic’s gut doesn’t want to discover that those hangovers are caused by alcohol rather than tonic.

Most Republicans don’t seem to want to consider the possibility that they’ve had a substantial chance to try their ideas out in the real world and that in general those ideas don’t work as well as they had hoped. Just this week, days after the $700 billion bailout was announced, I was probing a right-wing friend about the core values and principles that drive his beliefs. He’s for the bailout as the lesser of two evils. On core values, though, he proudly told me one thing he knows for sure. Liberal efforts to regulate the free market have failed over and over and should never be tried again. No mention of the possibility that conservatives have anything to learn here.

This same friend tells me that he relishes arguing with liberals like me because our arguments are so weak and implausible. He’s the second conservative to tell me that this month. In other words, we generalize poorly. We’re either slow learners or we’re driven to our generalizations by our gut instincts, not our rational minds as they are.

Psychological research* indicates that we all generalize through two parallel systems, the rational mind and the gut, and that the gut predominates. The gut is faster acting than the rational mind. It’s often right or we wouldn’t survive. But there’s plenty of evidence that the gut gets it wrong consistently on crucial matters.

Ideally, therefore, we’d be rational about when to use our gut instincts and when to be rational. Among the more troubling findings therefore is strong evidence that most of us assume we’re more rational than we in fact are. We interpret gut instincts as rational instincts. Guts have the upper hand. Our guts tell us our rational minds are telling us that our rational minds are generalizing from the evidence and not our guts. We generalize incorrectly about our generalizing performance and skill.

Me and all my Obama-supporting friends included. We assume we’re the rational ones. Given the psychological evidence regarding everyone’s ability to interpret their interpretive prowess, we’re disqualified as authorities on the subject of our own rationality. So are our equally gut-motivated Republican detractors. Indeed, posterity gets the final word on whose generalizing skills were best. It alone knows how skillful we were at generalizing to the right lessons of history to learn and not the wrong ones. Unfortunately it was unavailable for comment at the time of this writing.For a great new survey of the findings, check out Nudge: Improving decisions about health wealth and happiness.