I had an interesting call yesterday from someone who has made a business sourcing industrial products, mainly nuts and bolts for use in the automotive industry, out of China for the past 30 years. The company seems to be successful judging by their website and the fact that they have a sourcing office in China ( that is no small investment). But the owner of the company told me he was growing weary of the rigid quality standards for his industry, where the standard is quickly approaching 0 defective pcs/ppm (Parts Per Million) It used to be that an acceptable rate for defects was 1% per PPM. And then it went up to 0.1 %. Now an acceptable defect rate in the automotive industry is 00.25 %/ppm . In other words if you have 26 defective bolts in a 1 million pc production lot, you risk a chargeback from your buyer. But according to “Robert” the guy who called me yesterday the industry is moving to 0/PPM. That does sound stressful. So he was asking me about manufacturing and/or sourcing commercial products out of China where, obviously, such rigid QC principles as 0/ppm do not apply. As an example of something he was thinking of doing, he told me about some hammocks he had seen at Costco and the thought occurred to him that maybe he could start bringing hammocks, or some equivalent product out of China and selling to the big boxes. I told him two things as follows:
1.) He will confront the same stresses sourcing commercial product in China as he faces sourcing industrial product. Big Box retailers have their own standards and although the concept of PPM does not apply, the quality standards can be pretty rigid. In an AQL inspection, and let’s take as an example a production lot of 10,000 picture frames, you risk a chargeback if you have just 25 damaged pcs. And remember these frames are made by hand where there is a much greater likelihood of error than if they were made by machine. So industrial manufacturing vs. commercial manufacturing is, as I see it, six dozen of one, half dozen of the other. I have worked for many people who have lost many nights of sleep over a major order for a department store or big retailer.
2.) Getting into another business is fine. But you really have to identify what you are interested in and where your passion lies. You cannot just walk into a store and see a product and think to yourself “ I should start selling those.” In fact I have never met anyone who got into a business this way. All of the companies I have worked in or for were established because someone used a product, saw something that was missing and found the passion in themselves to invent the missing piece, so to speak. I would add that most consumer products are very technical, belying their simplicity, so you really need to know something about what you are investing in. I cannot for example just start a business tomorrow selling lamps I source out of China because, although I have a lot of experience in home decor, I really do not know much about lamps, beyond some basic things.
In the end I told Robert he should be more “Zen” about this. He asked me if I knew a mountain he should go sit on. A good idea, I said, But when he does come up with an idea, we both agreed China will be the place to do it for many years to come.