Quality and Social Compliance: Exploring the Link


Quality and Social Compliance: Exploring the Link

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According to the US Department of Commerce, the recall rate of Chinese manufactured products in the USA in 2016 was a staggering three times higher than any other nation.Chinese manufacturers are faced with rising labor costs and falling productivity. This is a deadly cocktail which is taking a toll on an industry once associated with low cost, high quantity production and a highly available workforce.

So what could be the root causes for these quality issues?

Employee turnover is one of the most significant problems
the industry is currently facing.

It is thought that the rate of turnover in Chinese factories is as high as 20%, according to Aon Hewitt. That’s equivalent to replacing an entire factory workforce roughly every five years. The resulting costs, both direct and indirect, are understandably huge.

If we look at why factories are facing this problem, we see that the reasons for high employee turnover actually go hand in hand with the factors causing low quality production, the biggest of which being poor social compliance. NGOs regularly expose appalling working conditions in Chinese factories. Workers are subjected to long hours without breaks in hazardous working environments for meager returns. Tragically, some workers even resort to taking their own lives.

Fortunately, some companies are taking steps to address these issues. To encourage workers to remain in their jobs, some international brands are opening child friendly spaces during school holidays, allowing parents to spend quality time with their children. In 2017, the Center for Child Rights and Corporate Social Responsibility (CCR CSR) reported that five factories had set up child friendly areas the previous year. As a result, they saw a 26% increase in workers who were satisfied with their employers, and perhaps most significantly a 33% rise in the percentage of workers planning to remain at the factory for two years or more.

                                      So this would suggest that improving social provisions                                             can help to reduce employee turnover.

But can it also improve productivity? According to research carried out for the Nordic Council of Ministers, it can: ‘Working environment/work wellbeing is positively correlated to productivity’. Responsabilitas also carried out an experiment, comparing for 11 factories the score of social audit with the product quality inspection results (on 388 inspections). The result was a positive correlation.

                                                     Factories scoring higher on social compliance                                                      also pass a greater number of quality inspections.

Meanwhile, a study for the International Journal of Innovation, Management and Technology determined that poor facilities and excessive workload result in worse quality of work.

China had the highest productivity growth rate of any nation globally between 2012 and 2017, according to Total Economy Database, yet it’s per employee productivity rate still trails far behind many western countries. There is huge potential for Chinese manufacturers to bridge this gap with its western rivals. The only way to do this is for employers to follow the evidence, taking the right steps to provide a safe, fair and honest working environment for workers.

Written by Cameron Atkinson

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