'Made in China' brand tainted?

It has been a harrowing year for China, with product recalls damaging the "Made in China" brand. ProcurementAsia speaks to Joseph Tey, regional sourcing manager of services sourcing APAC at Nokia Siemens Networks, Yap Ong Guan, senior director of the industries and solutions group at SAP Asia Pacific and Frederic Gomer, supply chain consultant at iCognitive to assess what the damage is.

Gomer: Unfortunately, the ‘Made in China' brand has been tainted with milk products. It has already affected the country's reputation, which was [because of prior incidents], already not well received. While it will have an effect on the country, I think the companies from US and Europe already have assets in China and they will not remove their assets from there in any case.

Companies are already outsourcing the production of their goods to China; the next step will be to avoid these kinds of issues. Companies can take several different actions.

First of all, I think companies will need to put in place a more efficient supplier qualification process to ensure that the suppliers are able to fulfill their objectives in terms of quality, quantity, delivery and price.

There also needs to be more supplier performance evaluations. Ranking of suppliers will help in this area, and these can be done with scorecards and matrices that will help you efficiently evaluate suppliers.

Companies should also reinforce quality controls and audits of their suppliers as well as at the suppliers' site.

I think perhaps is that the best way to avoid the financial and consequences of a huge project recall is to define a robust crisis management plan.

Teh: We believe that we will be sourcing more from China moving forward because the infrastructure and the capabilities of the suppliers there are improving. We believe that while the 'Made in China' brand is affected by this milk scandal but in terms of quality, we will make sure our suppliers give us the best quality products, and we couple that with strict audits, we make sure that our suppliers comply with international standards and we continuously try to engage them and share with them what international best practices are.

Yap: There is without doubt a significant negative impact on the Made-in-China brand as well as on global brands of consumer goods companies that source products or materials from China.

In a poll by Harris Interactive, 55% of the respondents said they would change brands temporarily if faced with a recall, 15% would never again purchase the recalled brand and 22% would stop buying the company's goods. We can surmise that consumers are placing increased importance on reliability over low cost, which Made-In-China products are generally known for.

Already, the milk scandal has resulted in significant loss of business with some 25 countries banning import of milk-based products originating from China. Several countries are also threatening to restrict all of China's exports across the food industry. To regain confidence, the industry will need to take definite steps to improving health and safety standards to regain consumer trust and maximise opportunities in the market.

However, we do not believe the negative sentiments from the various product safety incidents have spread across the manufacturing industry. It is worthwhile noting that many Chinese manufacturers, especially in the automotive, electronics and apparel industries, have steadily moved up in the value and innovation ladder through the adoption and use of technology. Compliance to standards in these industries is generally high and products remain reliable and price competitive.