Is your manufacturing operation free of corruption? How about your product inspection reporting?
If you’re a conscientious buyer of products made overseas, you’ve probably had some occasional concerns for integrity. Whether you’re wondering about the social compliance of your suppliers or the accuracy of reports issued by your product inspection partner, integrity is a hot topic in the manufacturing industry.
With that in mind, I wanted to talk with an industry expert about the importance of integrity in product inspection companies. I met with Andrew Reich, InTouch’s Managing Director, to talk about integrity and the related signs a buyer can look for when selecting and evaluating a third-party QC partner. The following is a transcript of that podcast interview:
The Implications of Integrity in Product Inspections
John: Working in quality control and working in product inspections, you’ve had a chance to see what makes for a good product inspection company and what lends to higher quality service from these kinds of suppliers. Integrity is obviously a big issue there. Can you tell us a little bit about integrity?
Andrew: Yes, absolutely. Just taking a step back for a second, I do get a lot of questions from time to time from friends of mine, from potential clients, from people in the industry who might not necessarily be wanting to work with InTouch as a QC company but they are out there looking for a QC company and they are sort of wondering what questions to ask and what things to look for. And that’s really where we came up with this idea, John, that we should determine what the key indicators are for a good product inspection company.
Like you touched on, the number one is integrity. Integrity has a lot that goes with it, but it is absolutely one of the most important things when selecting a QC company because of the issues that we’ve seen in QC companies over the years in China.
The main issue that we’ve seen with QC companies and the quality of the service in China over the past few years, actually over the past 10 to 20 years, is that it’s very easy for the factories to influence the decisions of the QC inspector with something as outright as a bribe of money, but also some things that are more subtle like taking the inspector to dinner or taking the inspector out for extracurricular activities or just becoming friends with the inspector outside of the workplace, all in an effort to influence the inspector’s decision-making process when it comes time to do the inspection.
Corruption Can Take Many Forms
John: Yes, I think that a lot of buyers think that when we talk about corruption in China, their thought is maybe a red envelope or actually a direct exchange of cash from the hands of the factory management or staff to the hands of an auditor performing the inspection. But actually, what you’ve said, and I think I’ve seen a little bit myself as well, is that corruption can really take more subtle forms. I think that’s good for the buyer to understand as well.
Andrew: Yes. It’s actually the more subtle forms of corruption that are the most dangerous. Outright bribery is slowly becoming less of an issue in China, especially in QC inspections. But about influencing the inspector, by becoming closer and closer to them – you got to think for a second. Inspectors may be at far away locations in the middle of China somewhere. It’s cold, and they’re working late at night. And if they’ve been out to dinner day after day with this factory, having drinks with this factory, when it comes time to make a really tough decision about an inspection on whether to pass it of fail it, and the factory is right there staring them down and they see that person maybe a little bit as their friend, then it just becomes like the lines are blurred. That’s what we have to prevent through integrity controls.
Sign #1: Internal Auditing of Inspection Staff
John: As we get to the key points here, the nuts and bolts of corruption prevention and ensuring that there’s integrity with a product inspection company, what kinds of things would a product inspection company have in place to prevent that sort of thing? What sort of visible aspects of the company would a buyer be able to see when looking for a product inspection company?
Andrew: There’s a bunch of things that come to mind. I’ll take you through some of the most important ones. Number one is how does that inspection company audit their own people to be 100 percent certain that no breaches of integrity are happening?
The best business practice that we’ve seen, that we’ve adopted ourselves at InTouch, is actually having independent auditors within the staff that go out and check first-hand, on-site at the factories that the inspections are being done correctly.
That can be anything from going along with the inspector to make sure that the inspector knows the procedure and knows how to carry it out properly to actually waiting outside the factory until the inspector leaves the factory and then going in and checking to make sure that all of the boxes that were supposedly opened were opened and making sure nothing is actually taken from the factory like gifts or anything like that. That’s what we call internal auditing and that’s something that should definitely be a part of any QC company’s regimen for controlling integrity.
Sign #2: A Culture of Integrity
Andrew: By far the most important thing that you want to look for is the culture of the company. What you’re going to want to do is you’re going to want to ask the management in that company, “What is the culture of your organization and how do you build and maintain the culture of your organization?”
I can give you a few examples from InTouch. We know it’s difficult to get everybody together and on the same page because our employees are located all over the country and, actually, all over the world. But every year, we take two occasions to bring the entire team – from the U.S., from Vietnam, from China and elsewhere – altogether to a location in China. That’s twice a year that we all get to sit down with each other and stay with each other for a few days at a retreat, do some training together, eat some meals together and really get to know each other. That’s really important in terms of building the culture of an organization.
Our culture, of course, comes along with other aspects, such as training and other HR initiatives. But it’s really important to look at what kind of culture does this company have and is that a culture of integrity.
John: Great, I think that part of bringing people together as well is sort of cultivating this kind of family togetherness, collectiveness of the company. That’s probably a big part of the initiative as well. Would you agree with that?
Andrew: Exactly. Culture can mean different things in different companies. We want our culture to be high integrity. But yes, one of the ways that we do it in InTouch is nurturing that family aspect of the company.
In China, family definitely comes first as it does in many places in the world. When you treat people like your family and you build a culture of family at a company, integrity and ethics come together and come into that as a natural process.
Sign #3: A Code of Ethics
Andrew: Along with company culture comes ethics. I touched on that a little bit before. You do want to ask, “What is this company’s code of ethics?” When you go into the company’s office, is their code of ethics right there in a place where everybody can see? Do all the inspectors sign off on the code of ethics? Do the factories sign off on the code of ethics?
You want to take a really good look at that code of ethics and see what it’s preventing against and what it’s allowing.
In some companies, believe it or not, especially in some of the larger inspection companies, I’ve heard that it’s even acceptable for the inspectors to get some presents around Chinese New Year time from the factory, just because it’s so common, but just as long as it’s not over a certain amount.
You really want to take a hard look at that company’s code of ethics, how it’s maintained and how it’s disciplined.
John: Yes, I think those are definitely important measures – to look at the actual documentation of the ethics laid out for employees and for factory staff as well to sign off on whenever there’s a product inspection.
Sign #4: Hiring Practices of a Product Inspection Company
Andrew: There’s just one more thing that I would touch on today and that is hiring practices. Hiring is where it all starts. If you’ve got a rotten apple in the batch, it’s not going to get any better once you get it into your basket.
What you want to do is you want to look at:
- How does that company hire?
- Do they do background checks?
- Do they check references?
- Do they put the employee through a training program?
- And do they do a probationary period where they’re watching over that employee and checking to see that they’re following along the lines of integrity that the company has in place?
If I had to touch on one last point, I would just say hiring practices, and that the QC product inspection company that you’re talking to should be able to answer these questions pretty clearly.
Integrity is important to the buyer because low integrity could result in poor, inaccurate reporting and, in turn, substandard products.
Take a close look at the following areas of your product inspection company to evaluate integrity:
- Internal auditing
- Company culture
- Code of Ethics; and
- Hiring practices
Keep these four signs in mind and make sure your QC partner has your best interests at heart!