October 21, 2009
Industrial Manufacturing Times, San Jose 

John Adams, President, AMREP Supplier Management Services Inc. in a presentation to Chinese suppliers and his US customers said that quality management of suppliers has to be beyond just dependence on suppliers’ making quality better or through sporadic enforcing of suppliers’ compliance to customers expectations.

Bad times provide opportunities for reinventing supplier management approaches. A “Win-Win” approach with cost and productive gains to both suppliers and customers are in great need now. Customer, he says, are now moving towards working with suppliers on a “when needed” and “on demand” basis with greater reliance on the suppliers to be in-tune with the customers’ changing inventory needs. Conversely, the suppliers feel they cannot fulfill their customers’ new purchasing approach while trying to manage production controls and the layers and batteries of components suppliers.

Mr. Adams says that China is moving towards the “second gear” of industrialization. It is now moving technologically upwards in manufacturing. However, it does not mean that the industrialized Chinese technical force has upgraded upwards rapidly to match the quality and technical demands of the high technology product manufacturing demand of the suppliers and US customers.

AMREP Vendor Inspection Services (AVIS), originating from Singapore and starting out with the supply outsourcing revolution of 1980s, had the experience of moving into different emerging countries with suppliers and the ability to track the changing demands of outsourcing supplier quality management. Where suppliers continue to remain in the first phase of outsourcing manufacturing, supply quality control is basically revolving around final product inspection, random audits and pre-shipment inspection.  AVIS work in Singapore, Taiwan and Japan evolved into higher levels of supplier-customer-3rd party interactive quality management and feedback.

This evolution from just plain supplier’s product inspection into Customer/ AMREP participation into the supplier’s design, material, technology, production processes, quality management and feedback loop processes was a big threesome Win-Win loop. Consequently the suppliers gain from interactive involvement and interference in their design and production; the customers gain from confidence in supplier’s reliability and dependability; AMREP gain as an impartial and independent useful instrument, tool and bridge for buyer and seller.

China, being such a big country with ever increasing, changing and moving suppliers, requires a bolder way of making the changeover from just quality inspection to a tri-party supplier management method more effectively, says Mr. Adams.

The AMREP Technological Center (ATC), China is the AMREP way of making the Tri-Party Win-Win formula work well in a changing business times and a changing country with changing suppliers.

Launched in Y2007, ATC began providing its key customers with technical and quality specialists in its China operation in Bao An, Shenzhen municipality to work with contracted suppliers on selective BOM, material quality, design and manufacturing processes reviews, work in progress inspection and improvements. All these services were executed through a rotating hand-in-hand collaboration on a Tri-Party basis.

Apparently, the formula has been tested and is working well according to Mr. Adams. While non-disclosure agreements prevented Mr. Adams from revealing which major US corporations are using the ATC Tri-Party formula, it is not difficult to gather information from key suppliers as to which customers ATC is working hard for.

Mr. John Adams has declined to provide more details on what ATC is doing in the business of Supplier Management Services in China for reasons of “privacy and confidentiality”. 

Last week's announcement by Pacific Brands that 1850 Australians were to lose their jobs to China spread gloom among workers at large-scale local manufacturing industries. But in reality Chinese migrant workers are faring much worse. More than the equivalent of the whole population of Australia, 20-30 million people, have already lost their jobs and thus also their housing in the factory towns.

They travelled from their rural homes where they had long been underemployed, barely scraping a living, to stay for extended periods in dormitories in factories in coastal cities, making goods mostly bought in the US, Britain and elsewhere in the West.

Credit and confidence have collapsed in the West, and so has the demand for the clothes, the toys, the plasma television screens they make.

About 60 per cent of China's exports are made by foreign-owned or foreign-invested companies, chiefly from Taiwan and Hong Kong, and some simply locked the doors after giving their workers their tickets home for their annual leave at Chinese New Year a month ago.

Most had made profits for years, but were confronting ever-narrowing margins as costs rose and the big buyers, such as Wal-Mart, kept screwing prices down.

And they lacked access to financial support. China's banks, all state-owned, rarely lend to the private sector and especially not to small or medium businesses.

The rural communities that have depended on the money sent home by the women and men working away -- about 200 million in all, 15 per cent of the population -- are deprived of the income on which they had grown to depend. Many now also have to sustain an influx of adults who have not lived there for years.

The Government is especially anxious the downturn does not provoke better educated people to join up the dots and create a protest movement that can gain national traction, as happened in 1989 over inflation and corruption.

Thus it is suspending the requirement for China's cities to insist that new graduates already possess a houkou -- a permanent residency permit for the city -- before they can be hired. About nine million students graduate annually, and this means they can travel widely to find work and may be less likely to stay at home, jobless, stirring up trouble.

In the meantime, Beijing is trying to please the farmers by subsidising their purchases of whitegoods, such as airconditioners. At the same time, this contributes to the big economic aim of boosting domestic consumption and thus enabling the factories to survive by reorienting themselves to newmarkets.

Rowan Callick | March 02, 2009

Article from:  The Australian ( edited version)

As a 3rd party Supplier Management, AMREP is a company of last resort for urgent corrections of defective product quality. It is hard to solve product quality problems when the problems are created by a customer's rush into production. Experiences lead to knowledge and minimization of anticipated engineering, design, quality, production and marketing problems. We used this knowledge through skilled and think-out collaboration with the customers and its suppliers.

We hope this modified extracted article is useful to you in planning your marketing, product development and supply production. AMREP did not write this article nor is Microsoft our customer. More details on this article is obtainable on the Google Search for this page.

The Truth about the Xbox 360 - A Hurried Launch

A desire to win the console war and design compromises lay behind the “red ring of death” debacle that cost Microsoft $1.77b, says Dean Takahashi, Livewire, The Age, Dec 4, 2008.

The infamous Xbox 360 “ring of death” (indicating a failed unit) has caused Microsoft and its customers untold pain in the last three years since the console's launch in 2005, can cost it US$1.15 billion last year. Microsoft has never said publicly why the console was plagued with faults. It seems that poor production was at the heart of the failures and all round problem with no single cause except impatience on the company's part as it tried to become the leader in the video game console. Even though early testing showed that production machine had flaws, Microsoft didn't delay the launch because it believed the quality problems would subside.

In the hurried design process, Microsoft decided later to add a hard disk drive, and then wireless controls. The hard drive blocked airflow on one side of the machine; the wireless modules had to have enough space to avoid electrical interference. The console shell was poked full of holes to ensure air flow. In the end the machine was a series of compromises.

“It turned out in the end that this was all going too far, too fast” a source says. “They were adding too many features after things were knocked down. That incremental feature adding just made it fragile.”

Some of the defects were latent, potentially not showing up for some time after the machine was used. Up to 50 percent of all defects can be latent. And production yields, the number of machines coming of the production lines that passed the testing were low. In August 2005, the machine's aggregate defect rate from Microsoft's contract manufacturers Flextronics and Wistron, in their factories in China was allegedly just 68%. In a memo dated August 30, 2005, the team reported overheating graphics chips, cracking heat sinks, cosmetic issues with the hard disk and the front of the box, under performing graphics memory chips from Infineon (now Qimonda) and more. “There were so many problems, you didn't know what was wrong”  a source says. Shutting down production to debug everything properly might have delayed the launch in Europe or Japan. Microsoft responded to this story (in full at http://www.venturebeat.com.ly/xbox360) with a statement that it has already acknowledged an “unacceptable number of repairs” to Xbox 360.

The warning signs were present even before Microsoft shipped any machines. According to the Consumer Electronics Association, the average return rate for products where the consumers get their money back is about 2 percent. Microsoft internal data assumed that in the long term about 7 percent of the consoles would be defective before shipping into the market – a yield of around 93%. The rate of return was expected to be low as well. The rate of return was expected to be low as well. But even after 2005, Microsoft struggled to ship enough units. The yield was typically only around 70% far short of the target until May 2007. By the end of March 2006, Microsoft said it had shipped more than 3.3 million consoles to retailers. But there was a growing “bone pile” of more than 500,000 defective consoles in a warehouse at Wistron and a repair centre in Texas.

In September 2006, Microsoft conceded that the quality of the consoles made during 2005 was not as high as it expected in July 2007. There was no single reason for the failures. In January 2007, Microsoft shut down manufacturing of the console and did not build any more machines until June.

Industrialization goes through cycles from one stage to the next. The financial crisis of today and the collapse of the US/China export drive have generated a new thinking in supply and manufacturing management in China. To be nearer its US customers Chinese companies needs to buy or absorb engineering and design expertise, customer relationships and distribution channels. Customers like Caterpillar not only demand lower costs year after year. But they also want a supplier that can provide components “just in time” and respond quickly when it needs a special order of part which cannot be done 10,000 miles away in China.

There are alternative and opportunistic options for Chinese suppliers:

• Concentrations on non-assembly manufacturing operations in China.
• Build final assembly operations in Mexico or in the US by-passing the old costly employee/employer relationships in Mexico and USA.
• Launch a planned strategy for market penetration and forward jump into North and South America utilizing the time advantages for development arising from these crisis.
• Absorbing affordable engineering, design and quality experiences of weakened core companies in core businesses in the US which were previously too expensive.

Generally the quality of products made in China is still weak comparable to same products made in Japan, US, and Germany. Advantages of production costs aside, the key issue facing Chinese companies and other overseas suppliers is the question of competition inside their markets of choice. Chinese suppliers are still focused on low cost production in the first stage. The second stage of industrialization for reasons of market penetration and competition will require Chinese suppliers’ understanding that the major differences between “strong and weak, best and worst" is in a supplier’s commitment to “best practices” and focus on process excellence. Best Practices are implemented good management tools, business culture and business engagement. Technology is inserted to enhance and improve the process performance. Unfortunately, most Chinese suppliers inserted advanced technology without improving the fundamentals of production management.

AMREP Supplier Management through its AMREP Technological Centers in China and Mexico work aggressively with selective outsourced suppliers and customers on the sharing concepts of “collaborative product development, collaborative product design and design chain management”. Basically, the change in the economic and business environment has enhanced the need for creative competitive thinking beyond its current manufacturing model.

Contributed by Mike Jason, Supply Management Advisor, and AMREP Supplier Management Services.

For more information on his work, contact Isabel at 1 954 4430046 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it