Feature Article : Managing Quality in India with 3PQ
By: Michael L. Hetzel, Vice President / Americas, Pro QC International
Anytime a company extends its supply chain across a national border, they have crossed a cultural border as well. The differences in cultures can be minor, such as between the USA and Canada, or they can be major, such as between the USA (or any other Western country for that matter) and India.
Efficiently managing quality at great distances requires assets in the source country to represent the interests of the buyer in quality and conformance. In some cases the buyer will employ expatriates, in others they will hire locals, and in many cases they'll charter the services of a Third Party Quality (3PQ) Services firm such as Pro QC.
Fortunately, the cultural differences are well known and there are methods that can be applied to optimize the outcome for both buyer and seller. As a specialist in representing Western interests in India (and in more than 30 countries altogether), we're pleased to share some of these methods with our clients.
It's important to note, however, that India is a large country with many diverse subcultures and dialects. There is no single 'rule' for anything in India. Some Indian business people are very Westernized but others are not, so be ready to adapt these guidelines and your cultural research to the character of the specific suppliers that you'll be working with.
The Primary Issues:
There are several primary issues to be addressed in managing product quality in India:
• Understanding the culture and language, along with translations of expectations and concepts
• The purchasing agreement or contract
• The product and/or tooling specifications
• The proper introduction of a 3PQ (Third Party Quality Services Provider)
Culture and Language:
India has a long history of British occupation, but this doesn't mean that your dealings in India will be anything like with the British. The British have been gone for a very long time and, other than some relics of the occupation, the Indians are their own people and culture. Note that there are 'traditional' and 'westernized' Indians, so be sure to determine which you are dealing with in each case and adjust your communications accordingly.
English is the language of business in India, but not necessarily the language of the shop floor. Although Hindi is the official language of the central government, you need to do your homework and determine which language the factory workers who will be making your product speak. Many Indian states and regions use different languages and dialects. Remember, the people on the factory floor make your products, not the executive who speaks perfect English and obtained a masters degree in the USA.
Although the caste system was officially eliminated in India, it is functionally very much in effect. The strict hierarchy affects operations within factories and is a 'silent' rules structure that must be understood and accounted for. There are also challenging employment rules in India that make it very difficult for employers, particularly with more than 100 employees, to replace underperforming and even nonperforming workers. The situation at any particular supplier can and will have a profound influence on your results and the amount of oversight that you need to exercise.
The Purchasing Agreement or Contract:
Whatever form of documentation memorializes the product that you intend to purchase along with the cost, schedules, terms and conditions, expect major differences in the perception of the documentation between India and the West.
In India, a contract is viewed in a manner similar to British common law, but that's where the similarity ends. The Indian legal system is glacial, and contracts can be ignored or violated with functional impunity. There's a well known saying among Indian attorneys; "you file the action, your son wins the judgment and your grandson collects". As with China and, frankly, everywhere else, you need to develop a good relationship with your suppliers where there is a genuine desire on both sides to meet the obligations of the contract or agreement. Once you invoke the legal system, or even arbitration, the relationship has already failed.
The purchasing agreement or contract should be used to identify the responsibilities of all parties, including the 3PQ, as well as the authority vested in each party such as the ability of the 3PQ to order a non-conforming shipment to be held and not shipped pending a determination by the buyer regarding corrections needed. It should also define the ideal shipping dates and related expectations along with expectations surrounding price.
Learn what the Indian expectations for the contract or agreement are and then profile your program accordingly. Those expectations will most likely be different for most, if not all, of your suppliers there.
At Pro QC, our Western and Indian staff members are skilled in the translation of your expectations across the cultural and language boundaries.
Product and/or Tooling Specifications:
The major problem we've observed with Western companies manufacturing products in India, and everywhere else for that matter, is to construct the specifications the same as they would for a Western supplier. This is a recipe for disaster.
Workmanship standards, processing standards, cycle times, definition of acceptable performance of tooling, machinery used for production and the definition of quality not only vary between India and the West, they vary greatly within India. Further, what the average Indian factory worker is accustomed to as a retail or industrial product is not going to match Western expectations of a quality retail or industrial product. You have to detail every expectation formatted for the workers, not the factory owner or sales person.
We'll set aside corruption and deception for the purposes of this guide. Just as in any other country in the world, there are corrupt and dishonest companies in India. The aphorism 'good supplier good result, bad supplier bad result' applies everywhere. Let's assume that you've found the good suppliers and verified this as well as possible through factory audits and other means.
Westerners often perceive material and component substitutions as some attempt at deception, while Indians may make substitutions (at least in many cases) as a result of supply chain limitations. Part of vendor qualification must be an examination of their supply chain since inland logistics in India are extremely slow and can leave your supplier isolated from the materials that you specify.
Detail everything in the drawings. Define everything. Make no assumptions of shared perceptions of workmanship, performance or appearance. Leave nothing out of the bill of materials, drawings, tolerance schedule and other specifications and the inspection and sampling plans.
Define your specifications and drawings in metric. We see many companies who furnish imperial specifications to Indian companies, however India, like the rest of the world except for the USA and UK, has been officially thinking and operating in metric since the 1960s. There are still some 'old timers' who think and work in Imperial and some industrial pockets of Imperial usage such as construction and tire rims, but don't count on this - ask each supplier. You should also understand the Indian numbering system of crores and lakhs. Since imperial-to-metric conversions can lead to un-measurable dimensions and tolerance stack-ups that will exceed functional limits, you must retain control of your product by having your own engineers control the conversion process and furnish metric or dual standard specifications to the suppliers.
Introducing a 3PQ to Indian Suppliers:
Although the Chinese are famous for their concept of 'face', or 'mianzi', no supplier in any culture wants to feel that you don't trust them. Every culture has their own version of 'face' for you to manage.
They key aspect of keeping your supplier from losing face because of the introduction of a 3PQ service is that it must not be based, or perceived as based, on a lack of trust or confidence in their honesty or abilities. The proper introduction, and frankly the best reason to use 3PQ in any case, is to invest in the mutual success and lowest cost and risks of doing business for both parties.
The 3PQ will function as the interpreter of expectations and the reporter of actual product conditions at the factory rather than as policeman. Good suppliers will replace defective products that they send you, but with 3PQ the products will most likely be identified prior to shipment and, therefore, the cost and time involved to rework or replace these items will be greatly reduced for both parties - a mutual benefit.
This positive outlook for 3PQ results in a very cooperative reception for the inspectors, since both parties are benefitting from the buyer's investment in 3PQ services.
Bear in mind, however, that 3PQ service is not an indemnification of the shipment or any other insurance product. It's a method of reducing (not eliminating) the risk of nonconforming products from shipping. Therefore, if nonconforming products are shipped it's still the factory, not the 3PQ provider, who is responsible for all replacement or rework activities and costs. When the 3PQ arrives to inspect a population the factory is effectively asserting "here's a conforming shipment of product that we would ship right now if there wasn't a 3PQ inspection required" not "here's a shipment that may or may not conform and you have to find any defects or it's your fault they don't conform".
The 3PQ is exclusively responsible for the quality of the inspection service; the factory is exclusively responsible for the quality of the product.
This short tutorial provides some of the background that you'll need for the successful introduction and application of 3PQ services, in order to reduce your risks of conformance failures and quality defects in purchasing goods from Indian suppliers as much as possible.
Pro QC Account Managers are well trained and experienced in working with you throughout the process, from introduction to the supplier through the ongoing planning and deployment of services, to help you achieve the best possible procurement outcome.