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Quality management for imports.

QUALITY MANAGEMENT FOR IMPORTS

One of an importer's first concerns is to make sure that the product that he plans to import is of the required quality and to check the quality when the product is delivered to him. To ensure that the quality is at the level required, an importer should undertake both "upstream" measures, i.e. before the goods reach the port of destination, which can be referred to as "preliminary measures," and "downstream" measures, or verification, to check the quality on arrival.

Ninety percent of the quality management activities in an import operation are exercised in the "upstream" part of the import process. To ensure that the quality of the products imported is correct, therefore, it is necessary to concentrate on the upstream, which consists essentially of inspection of the goods upon arrival.

The upstream chain of quality management activities for imported goods is made up of the following principal elements:

1. Products description.

2. Product and packaging specifications.

3. Product and packaging approval.

4. Ordering.

5. Following up the order; documentation.

The chain is completed by the activities typical of the downstream stage, namely: of the downstream stage, namely:

6. Inspection.

7. Quality report.

Product description

Every product is defined first of all by a name. Providing the name or description of a product is therefore the first step in identifying it for the purpose of a purchasing operation. The name may take different forms, such as a trademark, a trade name or a common name.

When describing a product, an importer should be as accurate and unambiguous as possible, without going into too much detail. For example, a description of a four-wheel-drive cross-country vehicle should state that it is a "4 x 4 cross-country vehicle"; wording such as "4 x 4 vehicle" would not be accurate enough, as it could mean a 4 x 4 sedan.

In addition it is often useful to specify the consistency of the product, that is, whether it is a solid, liquid, powder, paste and so on, especially in the case of chemicals or pharmaceuticals, where a difference in consistency may be the only means of distinguishing between two otherwise identical products.

Once the product description has been drawn up, it should be used in the same manner in all documents and all written or oral communications that the importer exchanges with the exporter and operators of such services as insurance or transport companies, as well as on all documents concerning the purchase circulated within the importing organization. This will prevent any misunderstandings and confusion.

The use of brand names should be avoided as far as possible in order not to favour or appear to favour a particular producer. If the brand or catalogue number of a supplier has to be mentioned to complete the description, the words "or equivalent" should be added to the reference. This is the rule in public procurement codes, and it should be extended to semi-public and private procurement to promote competition. In general, however, this principle applies only to documents and communications that are sent to all potential suppliers, such as notices and invitations to tender, and not to an order form or a contract with the supplier or manufacturer selected for the product in question. In this latter case, the use of the brand name or catalogue number is recommend as a means of making the description even more exact.

Product and packaging specifications

This element is crucial to import quality management, as it forms the basis of product quality. The specifications should be as accurate, clear and comprehensive as possible. Although they are usually drawn up the technical departments, the purchasing department needs to understand the specifications to be able to present an explain them to potential suppliers. This department can also help to refine the specifications in the light of its discussions with suppliers and its knowledge of the product's applications.

The product: Understanding specifications means being familiar not only with the technical language in which they are written but also with their purpose, that is, how they affect the performance of the product. Specifications must be compared with performance so that they may be continuously improved and the pitfalls of over-specification and under-specification avoided.

Suppliers and manufacturers have a large contribution to make in this respect, for no one knows their products and the applications better than they. It is not uncommon for a supplier's recommendations to lead to adjustments in the specifications that in turn bring down the product's cost without lowering its performance.

It is therefore in the importer's interest to have frank and detailed discussions with his potential suppliers about the specifications and their applications, not only to reach complete understanding on the manufacture of the product, but also to arrive at specifications for the product that are technically the most appropriate and will cost the least.

To be useful, product specifications should reflect what is necessary and sufficient (in other words, be neither too detailed nor too general), accurate and verifiable. This means they should include references to relevant standards and testing methods.

Packaging: An imported product is inseparable from its packaging and the means of transport. In the chain of import operations, the quality of the product is also insperable from the quality of the packaging and the mode of transport used. To ensure that a product's quality is appropriate on arrival, therefore, an importer should pay close attention to the packaging and the mode of transport. It is recommended that the quality requirements of these - especially of the packaging - be stipulated in the specifications.

All too often the packaging used for exports to developing countries fails to afford the products adequate protection because it has been chosen without consideration for the special conditions of climate and handling that the goods may be subjected to en route and at the port of destination, or without thought to local conditions of transport and storage that may be unknown to the exporter or inadequately specified by the importer.

Handling facilities vary considerably among seaports and airports, and care must be taken to ensure that the goods can be handled with maximum efficiency everywhere; hence the importance of suitable packaging. At some ports, for example, the opening in pallets are too small for the prongs of the local forklift trucks. In other cases the sling break under the weight of the contents when the sacks are raised by a forklift without a pallet. The importance of using packaging of a quality sufficient to ensure proper protection of the product and to enable it to be handled properly cannot be overstated.

It is consequently in the importer's interest to define the packaging required in liaison with his technical departments and in consultation with his suppliers. The packaging specifications should take into account the nature of the product and the conditions of transport, handling and storage.

Mode of transport: Product quality on arrival also depends on the mode of transport. At sea, apart from bulk for large shipments, the usual transport methods are the conventional means (such as cartons and crates) and containers. The use of containers shields the goods more effectively than conventional means, as it gives extra protection to the original packaging. The choice between conventional and container transport should, however, be made in the light of the fragility of the product, the quality of the packaging, the availability of services and the total cost, of which the main components are packaging, freight, insurance, handling, customs clearance and local transport. For example, it usually than a conventional shipment because the damage to container loads is usually lower.

When the specifications have been prepared, they should be communicated to the potential suppliers in writing, in a clear and accurate form. This step is highly important, as any error in relaying this information may have serious consequences on the rest of the operation.

It is therefore advisable to take the necessary time to check all details of the written specifications and to make sure that they are comprehensive, clear, accurate and unambiguous. They should also be given a reference number.

To ensure that the exporters understand the specifications, the letter inviting tenders should ask them to confirm in writing that the product they offer matches the specifications is every respect. It should be made clear to them that, if there are any disrepancies, these should be explained in detail.

Approval

Approval of the product and packaging is an essential step in the process of import quality management, but it is often neglected by importers in developing countries. The result is that importing organizations or companies buy products that they have not seen or tested from suppliers with whom they are unfamiliar, and they sometimes do not even know whether the suppliers are manufacturers, agents or middlemen. They therefore take a great risk on the quality of the products that they are to receive, as well as other commercial risks on an equal or larger scale.

Consequently, to be certain of the final quality of the product and packaging, importers should formally approve suppliers through strict analyses and tests, especially when raw materials and industrial equipment are being purchased. In the case of other products for everyday consumption, approval may be based on users' experiences in the importing country.

Producers and suppliers who are officially certified in their country of origin in accordance with national standards or the ISO 9000 series of stadards (on quality management, quality assurance an quality systems) should be approached first when new orders are to be placed.

The product: A distinction is usually made between "pre-approval" and "post-approval" of the product. Where pre-approval is practiced, the product and the potential supplier are approved by the purchaser before the invitation to tender is issued. In other words, they are already on the list of approved suppliers and products.

"Post-approval" is granted after the invitation to tender has been issued and, in most instances, after the bids have been received and studied. Since approval is a time-consuming and expensive process, it is recommended that it be undertaken only when a clear economic or strategic benefit is to be gained.

The steps in pre- and post-approval are the same, although they must, of course, be adapted to thes specific requirements of each product. The following steps are described by way of illustration; they apply to industrial raw materials:

* A representative sample of the product, its technical specifications and a certificate of analysis should be obtained from the supplier. The sample must be repsentative. In certain cases, for some products, it is best to obtain three or four samples produced at different times. It is sometimes desirable to require that the certficate of analysis be issued by an independent laboratory.

* The sample should be analyzed in the importer's own laboratory or in an approved one outside. The results of the analysis are communicated to the exporter together with the necessary comments.

* If the results of the analysis are positive, an industrial trial may be made. If they are not, the importer must decide whether to repeat the analysis on more samples that have subsequently been improved by the supplier in the light of the purchaser's comments, or - if the outcome is too far from the expected results - to forego any further informed of the results of the analysis and of the final decision.

* To obtain reliable results, the industrial trial should be carried out under representative conditions concerning handling of the product, manufacturing processes and methods of analysis.

* If the industrial trial yields positive results, the product may be regarded as approved, and the product name and supplier's name may be placed on the list of approved products and suppliers. If not, the importer must decide, in the light of the results, whether or not to hold further trials. Again, the exporter should be kept informed of the trial results and of the final decision.

* Once the product and supplier have been approved in industrial trials, it is sometimes wise in the case of certain products to treat them as having been only temporarily approved and to place them on a provisional list. This arrangement may last from six months to a year and be reviewed until the suitability and reliability of the product have been checked through normal use. During this period it is important to make sure that the quality is consistent, for quality is of no real value unless it exhibits as little variation as possible.

The supplier's quality-assurance programme is of vital importance in this context, and he should be asked about it. Without a quality-assurance programme there can be no expectation of consistent product quality.

Packaging: It has already been pointed out that the quality of the product is insperable fromt that of the packaging. This is especially true in foreign trade. Approval of the packaging is vital in ensuing product quality on arrival.

To approve a packaging, the best method is still that of subjecting it to trial shipment and storage. If such a trial is to be completely reliable, it should be carried out under conditions similar to, if not identical with, the conditions actually encountered by normal consignments. The container shipment will be irrelevant if conventional shipment is the norm, and vice versa. In the light of the results of shipment, the importer can judge whether the packaging is adequate or needs improvement in terms of its strength, degree of protection and handling properties. The length of a storage trial is usually the average storage period of the product on arrival in the port and at the importer's premises, plus one month.

Requirements on packaging quality must obviously take into account the mode of transport used. If, for reasons of cost or convenience, it is desired to swicth to a mode of transport that affords the product less protection - for example to conventional instead of container transport - a trial should be made first and the change effected only if the trial is positive.

Ordering

After the invitations to tender have been issued and the bids received, the bids are subjected to technical and commercial evaluation. Technical assessment consists of determining whether the specifications of the product offered match the specifications laid down by the importer, and evaluating the differences if any. Commercial evaluation entails determining the total cost, taking into account such factors as price, quality, delivery time, method of packaging and dispatch, and terms of payment.

The technical evaluation takes into consideration the data obtained during the approval procedure. The more strictly and systematically that procedure has been carried out, the easier the task of technical evaluation.

After the bids have evaluated, the order can be placed with the supplier or suppliers offering the best overall value. The order form is an essential document in a commercial transaction. It constitutes the written contract between the exporter and the importer, and therefore should be prepared carefully. The execution of the order and the final quality of the product depend on what is contained in the order form.

If the purpose of a purchasing operation is to obtain goods that correspond to the order, to the desired quantity and quality, to the price arrived at and to the agreed terms and conditions of delivery, payment and warranty, the contract or order form must include all of the information needed to achieve that purpose.

To make the order clear and the to avoid any confusion, an importer should clearly write the following on the order form:

- Full name and address of the exporter.

- Full name and address of the importer.

- Description of the product, with the brand name if any.

- Reference number of the order. A good method is to preface the figures by three letters denoting the purchasing organization or enterprises, for instance LKF - 100. This facilitates both external and internal communication.

- Full marking: gross weight, net wight, reference number, product description, name and address of purchaser, and country of origin.

to ensure that the quantity and quality requirements are met, an importer should clearly state:

- The required quantity in agreed units: kilograms, pounds, metric tons, gallons, litres and so on. Once the unit has been agreed upon it should be used consistently. It is not uncommon to find that an importer has received 50 pounds of a product instead of 50 kg as a result of confusion between the kilogram and the pound.

- The technical specifications of the product. If the specifications are long or include plans, they may be attached to the order form and it should be stipulated that they form an integral part of the contract. If they are known to the supplier, who is already in possession of the latest set of specifications, a note giving the exact reference number will suffice.

- The method of dispatch: by air, by sea or another made; by conventional means or container shipment, stating the quantity per batch or pallet load and per container. For some goods it is also desirable to state who they are to be stowed in the containers to facilitate the unloading operations.

To be clear about the price, the following should be stated:

- The currency (using conventional currency signs).

- The figures per unit and total, with attention to commas and decimal points.

- Any discounts.

- The terms (FOBS, CFR, CIF and so on, followed by the place of departure or destination as the case may be).

Lastly, concerning the terms and conditions of delivery, payment and warranty, the following should be clearly indicated:

- The exact place of delivery and the address thereof if it is not the same as the importer's address.

- The person to be notified upon arrival (address, telephone and telex numbers).

- The delivery date.

- The terms and means of payment, with details: banks, account numbers and so on.

- Detailed instructions on documentation. Since the documentation is often complicated full details on documentation and payment should be attached to the order or spelled out in the letter of creidt. In most cases these instructions, the terms and conditons of warranty and inspection, and the general terms and conditions can be standardized. These are often printed on the reverse side of order forms.

Since the importer's general terms and conditions often conflict with those of the exporter, it is recommended that the importer take the necessary steps to ensure that his terms and conditions prevail. The steps may ba as follows:

- Always include the terms and conditions of purchase in the invitation to tender, stipulating that these terms and conditions will form an integral part of any future order or contract.

- Include in the general or orer a clause stating that these are the general terms and conditions of purchase that apply and that they take precedence over all other terms and conditions.

- Ask the exporter to return to the importer a copy of the order or contract, signed and dated to signify acceptance.

Following up the order

Once the order has been sent to the exporter, steps shold be taken to follow up the order. This is particulary important in the case of tailormade products.

Follow-up is both a technical and a commercial process. It comprises the following:

- Receipt of the copy of the order form signifying acceptance.

- Communications on details of delivery

- Communications on details of documentation.

- Communications on details of payment.

- Communications and documents on the timetable of manufacture (and the test porgramme for capital goods).

Follow-up is essential to ensure proper performance of the contract and the quality of the product. Yet this activity is often neglected, with serious consequences such as great delays in delivery, the delivery arriving unannouced, and inadequate or wrong quality and quality. Such shortcomings are particularly costly because they always come to late for any corrective measures.

With regard to quality in particular, it is important that the following items of a quality control. programmed receive attention when the order is followed up:

- For complex products or expensive equipment, one or more visits should be paid to the factory to check on production in progress. These visits should coincide with the execution of the required test programme.

- The test programmed should be strictly complied with in all cases.

- For all deliveries a certificate of quality should be obtained from the exporter. This document certifies that the product supplied matches. the specifications in the order form or contract. For some products, especially chemicals and food. it is recommended that a certified or analysis issued by the supplier's laboratory or an approved independent laboratory also be obtained. Such a document gives the detained results of the tests, showing that they match the specifications.

Inspection

A distinction should be drawn between inspection before shipment and inspection after shipment or at the destination. Pre-shipment inspection is an upstream activity, while post-shipment inspection is a downstream one.

Post-shipment inspection still predominates in international trade, but pre-shipment inspection is increasingly widespread. It has the advantage over inspection on arrival that any defects are detected before the goods are shipped, thus avoiding the cost of returning and redispatching them and the loss of valuable time if they are rejected at the destination.

Inspection is often entrusted to an independent inspection and/or surveillance company. Inspection does not, however, guarantee quality. It is merely one stage in the control process. It should nevertheless be entrusted to a reputable company of known integrity and competence. This is especially important because inspection companies do not regard themselves as responsible for any consequences arising out of their certificates. Standard clauses included in the certificates state in so many words. "the inspection has been carried out to the best of our knowledge and ability but entails no responsibility on our part," or "the certificate does not release the supplier from his contratual obligations."

It is therefore recommended that the inspection and/or surveillance company be chosen with be considered case by case in relation to the products, the suppliers and the total value of the goods. When an inspection company is called in, the job to be done and the standards of reference to be applied should be clearly and accurately defined. This means that appropriate technical specifications must be avaible.

Even if the inspection takes place before shipment, it often has to be repeated on arrival, especially when a long and difficult journey is involved or special circumstances so require. Such circumstances might include, for example, damage to the goods in transit or at the port of destination, with risk of loss or contamination. Inspection by an independent surveillance company will be needed to assess the damage. If an insurance claim is made, the company's report will in any case be required by the insurer.

The quality report

The quality report contains qualitative data obtained throught analyses made of both the product and its packaging on receipt and in use. It is current practice to draw up a comparative table showing, in column A, the specifications with their standard values and, in column B, the qualitative data on the products and packaging received. All discrepancies can then be noted and commented on.

If the discrepancies exceed the tolarances, one alternative is to reject the goods if the differences make them unfit for use. The other is to accept them with reservations, leaving open the possibility of financial compensation.

The discrepancies observed should be communicated to the exporter, who should be asked to provide explanatins and apply any necessary corrective measures. If a financial claim is made, the calculations used to arrive at it should be communicated to the exporter.

The quality report is an essential link in the chain of import quality management, for it keeps suppliers informed of the market performance of their products and thus enables them to continue to make improvements. It is therefore of benefit to the exporter and the importer alike.

Conclusion

Import quality management is often regarded as essentially matter of inspection. As has been seen above, this is not the case. Ensuring the quality of imported goods calls for a methodical and comprehensive approach. It takes in all stages of operations in quality management, which form the links in a single chain. To be unaware of, or to neglect, any one of those links leads to a break in the quality chain.
COPYRIGHT 1990 International Trade Centre UNCTAD/GATT
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Import Quality
Author:Nguyen, Van To
Publication:International Trade Forum
Date:Jul 1, 1990
Words:4040
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