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Survey: Testing Affects Price

March 29th, 2008

The Wall Street Journal ran an article on an American company producing quality suits in China. The suits are nearly as good as high-end suits you find made in Italy. Interesting piece, but let’s set aside so that I can introduce a survey.

Williams Loft, a distributor of mattress products, ran the recent survey. The company sent out requests for quotation (RFQ) to twelve suppliers in China. Each was given the exact same set of specifications. The company did nothing with the quotes, but went back to the same factories six weeks later. On the follow-up, they mentioned in passing that they would be verifying quality through a testing agency. Guess what the impact was of mentioning a third-party tester: Ten out of twelve factories immediately moved to raise prices by an average of 20%. Why would a factory raise its prices after learning that customer would be checking quality?

Back to the WSJ article where the idea is that quality is up. I’m not so sure much has changed. Manufacturers have for some time now been in the position to make a product at virtually any quality level. The bigger variable is whether the customer is getting what has been ordered.

Links:

H/t: China Law Blog

Forbes: Dealing With China’s ‘Quality Fade’

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