Most of Mr Midler’s work is coping with what he calls “quality fade” as the Chinese factories transform what were, in fact, profitless contracts into lucrative relationships. The production cycle he sees is the opposite of the theoretical model of continuous improvement. After resolving teething problems and making products that match specifications, innovation inside the factory turns to cutting costs, often in ways that range from unsavoury to dangerous. Packaging is cheapened, chemical formulations altered, sanitary standards curtailed, and on and on, in a series of continual product debasements.
In a further effort to create a margin, clients from countries with strong intellectual-property protection and innovative products are given favourable pricing on manufacturing, but only because the factory can then directly sell knock-offs to buyers in other countries where patents and trademarks are ignored. It is, Mr Midler says, a kind of factory arbitrage.
This is a rare insider’s view about what actually happening inside China: doing things impossibly cheap only because they want to cut corners or exploit fellow Chinese domestically or take advantage of knock offs.