Saturday, July 12, 2008 Batuhan: Band-Aid waiting for a cut (conclusion) By Allan S.B.Batuhan Foreign Exchange
SO what indeed happened to the Scottish factory that my former employer used to own, the one that was implementing the UK forerunner to what is now the ISO 9000+ series of quality standards? Well, the factory became a shopping mall, and all the standards that it documented came to naught, as the Brits themselves like to say?
But why? Didn’t the adoption of leading edge quality standards ensure its survival? And if it did, why did the factory shut down? Of what use where the standards that it implemented in the first place?
Well, in this case—as they were quality standards for manufacturing and not for a retail business–not much, as it turns out!
At this point, it is perhaps useful to have a bit of a background on what was happening to the industry at the time.
The late 80s and early 90s were years of radical shifts within the global clothing and apparel industry. Prompted by rising costs of production in western markets, producers and consumers alike looked offshore for cheaper sources of raw material and finished products. And find cheaper sources for both they did.
This was the time when the Philippines and its neighbors were sharing in the spoils of the Asian garment manufacturing boom. Led by the large American retailers, every other importer of clothing and apparel into western markets was sourcing from Asia, South America or the Caribbean—all low cost locations from where imported components could be put together into the final product.
This was also the time that the factories of the industrializing economies of Asia—most notably those of India and China—begun turning out cheaper and cheaper textile products, to compete with those produced in the factories of the West—factories similar to the one in Scotland which I had described.
Sure, the products being produced by the factory in Scotland were of a much higher “quality” that those produced in the Far East, but this did matter in the end? Well, it might have, but not if the price differential was significant enough.
True, textile products made in China and India were of perceptibly lower standard. But because they were priced to the customers’ satisfaction, this fact mattered little to them. As far as they were concerned, the slight drop in absolute quality was more than compensated for by the significant reduction in price.
In other words, in relative (to price) terms, the Asian products were made to a much higher standard than the European ones.
This is where, to me—looking at it from an objective customer’s standpoint—BS 5750 (or today’s ISO 9000+ series of standards) did not properly address the problem that the factory was facing. Conversely, this was also where the Far Eastern factories were better able to satisfy Western consumers’ perception of value than their competitors based in the West.
One of my former professors at the Asian Institute of Management (AIM) once put the logic of the implementation of quality standards in very simple terms. He said: “If you have a design that calls for a house with the roof on the floor, and the floor at the top, and you want to have a manufacturing system that allows you to build such a house in the thousands, with each unit made exactly like the one before it – then implementing a manufacturing quality standard is exactly what you need.”
It seems that in trying to apply the generic solution of “quality” to a problem that was really one of strategic fit to Western consumers’ changing perception of value, the Scottish factory was addressing the wrong issue.
And the price it paid for that mistake was a costly one indeed.
