Sometimes the Price IS Too Good to be True

A former client of mine worked in the import business for many years. He mentioned that many component parts can be imported from the far east for one-forth of the cost in the US. Taiwan controls thousands of manufacturing facilties in China and other locations. A US business person can visit Taiwan and find access to hundreds of goods. ‘Sounds great! But there is a downside: quality control.
“Matel Inc.’s recall of nearly one million lead-tainted toys shows the challenge Chinese companies increasingly pose for US partners: how to benefit from low-priced goods without getting torpedoed by safety and regulatory risks.” China makes 80% of the toys that come into the US.
Imagine the fall-out. First, your largest supplier may not be reliable. This may require Matel to find a new supplier, possibly at higher prices. Second, the recall is a public relations nightmare. Consumers are angry about the defective toys. They may stop buying any toys from Matel- even those that were never suspected of being lead-tainted.
The Lesson: Sometimes the price is too good to be true. If you receive an unusually low bid from a supplier, consider how the bid price can be profitable to them. Can they make a quality item and still profit at the price quoted to you? If not, why not?
Your Homework: Have you recently changed suppliers? What caused you to make the change? What did the change mean to you financially, or from a quality standpoint?
(Source: “Toy Recall Shows Challenge China Poses to Partners”, St. Louis Post Dispatch, 8/1/07)