Chinese factories ALWAYS sub work out to other factories. (And no, I’m not exaggerating. Always is the right word.) But they never do QC. I have not, in 7 years, ever had a factory do quality control before they accepted product from a factory that they’ve subcontracted work out to. They always act so surprised that we reject sub-standard product that comes from someone they’ve “cooperated with for many years.”

Is it true? Yes, 99% of Chinese factory owners would dream of sub-contracting all their work to cheap workshops and pocketing the margin. But they have to have some kind of operation going on, to show what they can do and get some orders. So, with a factory in place, technically they have to do some of the job in-house. Then they sub out some work when it is more cheaply done outside, or when their capacity is full. Without advising their customers, of course.

I remember a factory boss explaining to me that he would not outsource the production of those of his customers who did not expressly forbid it in their contract. But the others, naturally, would not have that luck. He framed it like it was a huge favor to his most experienced buyers…

There are two big problems with this behavior:

-1- As noted above, a Chinese factory does not check the quality of its subcontractors’ work. Once again, it is not true 100% of the time (maybe 98% of the time?). I have seen factories that were organized more like traders (or rather, traders with a workshop) with QC people traveling around.

Why this absence of QC? As Dayton writes, “if they did that, they’d lose face and damage relationships with their sub-suppliers”. It’s the same lack of enforcement that caused Mattel to recall millions of toys: the toy supplier would not check on his own paint supplier, for the sake of good relationship!!

-2- The importer often visits a nice-enough factory, and his production is completed in another place. This other workshop is generally less organized, and the average outgoing quality is usually worse. Why? Because the “main” factory wants to buy for the lowest cost!