China : Myth Of Manufacturing Excellence

(Via Jeff)A forbes article captures the real state of small scale manufacturing in China. Michael Allen’s Jolida (joe-LEE-da) makes amplifiers and CD players that were burning out and breaking down; paint bubbled and peeled, volume knobs made buzzing sounds. Overwhelmed by returns of faulty products, in 2001 Allen was losing money, being hounded by creditors, struggling to make payroll and fending off his wife, who insisted he should flip the "off" switch on his crazy hi-fi venture and find something else to do for a living. "Americans think they're just going to start sending orders to some factory in China and bing-bang start getting whatever they want for 80% less,"says Allen, chief executive of Jolida in Annapolis Junction, Md. "It doesn't work that way.You're dealing with people who grew up in a communist system. Quality control?There is none." Chinese-made diodes, resistors and circuit boards were cheap, but 15% of them were defective. So Allen started buying parts from Germany,Japan, Malaysia and South Korea and shipping them to Shanghai. This adds $10 to the cost of an amplifier, but it cut the return rate from 5% to 1%. Definitely worth it for these costly appliances (priced from $350 for a 30-watt amp to $9,500 for a three-piece system that puts out 200 watts per channel). “A lot of American companies are propelled by fear "he says. "They think, ‘I've got to get into this lower-cost structure because everyone else is.' They imagine China is going to be just like here, that they'll just look in the Yellow Pages and find a good supplier. His message to U.S. entrepreneurs rushing over: Slow down Important read for all those interested in china.