Turning a blind eye to product quality can be dangerous to your health. In June, the former head of China's food and drug agency became the ultimate object lesson: Zheng Xiaoyu, who ran the Chinese equivalent of the Food and Drug Administration for seven years, was executed for taking bribes and "dereliction of duty."
Chinese prosecutors maintained that under his watch a host of people in Panama died from cough medicine laced with toxins of Chinese origin and more than a dozen babies in China perished from milk powder with no nutritional value. His demise is yet another bombshell for global outsourcing.
The risk to Americans doesn't just come from goods imported here from China. Fifty-six percent of China's outsourcing came from orders placed by Japanese and Korean firms. Many of these products end up as components or finished goods sold in the states.
What happens in China matters to managers worldwide. Writing in The New York Times, David Leonhardt zeroed in on lead paint found in the popular "Thomas the Tank Engine" toy trains. A British company, HIT Entertainment, owns the brand and licenses it to a toy company in Shenzhen, China. Leonhardt reported how HIT is trying to distance itself from the slip-up, saying it's the Chinese manufacturer's problem. HIT is conducting a recall.
The enormity of outsourcing in places like Shenzhen can't be overlooked. In 20 years, that city's population has grown from 80,000 to 8 million. That makes it roughly the size of New York City.
In June, Fox News reported 60 percent of the product recalls announced by the Consumer Product Safety Commission this year come from one country: China. In recent months, the rogue's gallery of recall and contamination horror stories has been numbing:
• Contaminated pet food.
• Tainted toothpaste.
• Exploding and short-circuiting home appliances.
• Costume-jewelry items with an unacceptable lead content.
• Unsafe zippers or decorations on children's clothing that can come loose too easily.
• Unapproved chemical additives and antibiotics in seafood. (China is now the world's No. 1 fish farmer.)
Many large U.S. companies - manufacturing or service - outsource offshore. The costs may be lower, but the risks can be lethal.
Here are some questions you should be asking to make sure your company is outsourcing safely:
• Have you identified the key product-safety risks when you outsource? Experts point out that even central authorities in countries like China may be fully committed to quality. However, the regulators have their hands full with the blistering economic growth taking place out in the hinterlands.
• Do safety and production standards meet U.S. norms? The Associated Press recently reported a New Jersey company might need to recall nearly a half-million radial truck tires it imported from China. Reason: The bindings inside the tires might not hold. The company's counsel said it couldn't afford a full recall.
• Do you have a reputable testing laboratory in the United States that regularly monitors your product? Often the original specs are met. Then the offshore producer starts sneaking in low-quality, sometimes dangerous ingredients.
Dicey products are first half of the story. Unsavory practices are the second half. These can include using sweatshops and child labor. They can involve political strife, as with blood diamonds. If a deal sounds too good to be true, it probably is. Many a reputable company and celebrity endorser have been whacked on the backside because they didn't perform due diligence.
Just because some biggie in your industry trusts a resource, it's no automatic stamp of approval. According to the Times article, the Thomas train manufacturer in China also "makes toys for giants like Disney, Nickelodeon and Sesame Street."
When you buy into a deal, you buy into all sides of it. A supplier becomes part of your image food chain. It's easy to be swallowed up by your own false economies.
