Addressing demand-side issues in Quality Infrastructure

During recent scoping missions for preparing Quality Infrastructure related projects in Pakistan and Vietnam, we have been asked not primarily to look at the current and potential future supply side of Quality Infrastructure services but elaborate more on the demand side. Colleagues and partners were interested to learn about the importance of the demand for Quality Infrastructure services and, in fact, understand what exactly we mean by Quality Infrastructure demand and how it can boost the quality of products and services.

The demand for Quality Infrastructure services ultimately results from the requirements of buyers and end customers. In value chains, the end of each link or the end of the chain specifies the quality requirements. To meet these requirements, a so-called conformity assessment is required. The conformity assessment services are provided, for example, by testing laboratories or certification and inspection bodies. All these Quality Infrastructure services are interconnected. 

Conformity assessment in value chains happens in different ways and is demanded by different types of customers. Value chain actors use standards and technical regulations to improve company performance, create competitive advantages, extend their market share, comply with regulations and align to global requirements. To prove the compliance with standards and technical regulations to clients, consumers and the regulator, value chain actors use testing services, product or system certification services and inspection programs. However, they can use only particular testing laboratories, certification units or inspection bodies. Such conformity assessment bodies need to prove that they are competent to perform their tasks, which happens through accreditation. Accreditation demonstrates competence, impartiality and capability of conformity assessment used to support trade. Thereby, it underpins the credibility of goods and services, improves risk management in value chains, enables product differentiation and increasingly serves as a “license to trade”. Similarly, metrology is integrated into the National Quality Infrastructure ecosystem, as it ensures the accuracy and reliability of measuring instruments that need to be calibrated and re-calibrated either by law (legal metrology) or as part of standards (industrial metrology).

In other words, there is not only one typical user of Quality Infrastructure services, but a whole network of users. While regular end-users are value chain enterprises, final consumers and the government, their demand for QI services creates a chain of follow-up demand in the pyramid of QI service delivery up to the top national level and even to the international level:

Figure: Demand for QI services in a country

As value chains typically function according to the demand-pull mechanism from downstream the market towards upstream the value chain, chain actors primarily produce what the final customer wishes to buy and for the price he or she is willing to pay. Low-quality demand results in low-quality supply unless there are technical regulations or mandatory standards imposed and enforced by the government due to safety, health or environmental reasons.

National Quality Infrastructure should ideally be also demand-driven and grow with the demand it faces. The more sophisticated the demand of end-users of Quality Infrastructure services, the more advanced the available Quality Infrastructure services will become.

The fundamental problem is that Quality Infrastructure bodies, especially public Quality Infrastructure bodies, are often established without an analysis of actual and potential demand. This creates a twofold problem. On the one hand, Quality Infrastructure institutions are not sufficiently consumer-oriented, meaning that their services do not satisfy the needs of their potential clients. On the other hand, the private sector is not adequately aware of the critical role of quality services as a prerequisite for consumer protection and their international competitiveness. However, an effective and efficient national Quality Infrastructure requires a minimum demand for services to refinance itself (PTB 2016).

Understanding and stimulating the demand for Quality Infrastructure services in developing and transformation countries is equally important as upgrading the supply side for these services. Hence, it is useful to have instruments and potential measures at hand to identify and stimulate Quality Infrastructure service demand directly or indirectly.

There are different techniques to determine the specific Quality Infrastructure demand of a country. Although market surveys are useful, they often generate a long list of expected Quality Infrastructure services that are often difficult to introduce and support. However, following the selection of priority sectors and identification of export potentials, a more focused value chain analysis can be a useful instrument to learn about the demand for Quality Infrastructure services. A value chain analysis combined with the CALIDENA instrument helps to map the Quality Infrastructure service requirement in a value chain in a participatory way. This approach will support a better understanding of the demand side of Quality Infrastructure services and – at the same time – stimulate more sophisticated demand for Quality Infrastructure services by facilitating an exchange between supply and demand sides around a specific value chain (Kellermann, M. 2019).

The demand for Quality Infrastructure services is often difficult to generate directly. If, on the other hand, the integration of companies, especially SMEs, into (global) value chains is promoted, the need for Quality Infrastructure services is virtually self-evident. Similarly, establishing a well-functioning food safety regime in a country can trigger more advanced demand for Quality Infrastructure services. A food safety regime entails sanitary and phytosanitary (SPS) measures, technical regulations, licensing processes, inspections and voluntary certification. Getting food safety right not only provides a country with a more effective and efficient food safety system while enhancing the competitiveness of the food industry, but it can also become a significant factor in supporting exports (Kellermann, M. 2019). The Quality Infrastructure has a vital role to play in such a reengineering process and will face the challenge to improve and become more demand-oriented. In this respect, such an oblique approach to demand promotion is a promising option.

Besides, there is also a bundle of potential measures and instruments for direct demand stimulation of Quality Infrastructure services, which include (UNIDO 2018):

  1. Quality awareness campaigns to raise knowledge and awareness on quality in the society in collaboration with industry associations or chambers of commerce and industry;
  2. Promotion of quality tools to improve products and services through the creation of annual national quality awards;
  3. Support consumers and consumer organizations to disseminate knowledge and information about standards and quality;
  4. Create and train a pool of national consultants in quality management services who can support domestic producers; 
  5. Include quality requirements in government procurement contracts to encourage suppliers to apply standards and demonstrate conformity;
  6. Encourage the top Quality Infrastructure institutions (metrology, accreditation, standardization) in a country to organize events with groups of enterprises from a specific sector or association to present their service offers;
  7. Encourage the top Quality Infrastructure institutions to publish regular newsletters sent to industry and secondary Quality Infrastructure institutions plus to update their websites regularly.

Finally, demand orientation requires a stronger economic perspective, which is often a particular challenge for the predominantly technically trained staff of the institutions of the Quality Infrastructure. In this respect, a targeted strengthening of the understanding of markets and business models within the Quality Infrastructure is required.

References:

PTB 2016. Calidena Handbook 2.0, Braunschweig

KELLERMANN, M. 2019. Ensuring Quality to Gain Access to Global Markets. A Reform Toolkit. World Bank Group / PTB, Washington D.C. 

UNIDO 2018. National Quality Policy. The Myanmar Draft Quality Policy, PowerPoint Presentation, 9 March 2018

Featured picture by iStock.com/metamorworks Ulrich Harmes-Liedtke

This entry was posted in Conformity assessment, Demand-side, Quality Infrastructure by Christian Schoen. Bookmark the permalink.

About Christian Schoen

I am an economist and co-founder of mesopartner, a knowledge firm that specializes in territorial development, competitiveness and innovation. I am currently based in Hanoi, Vietnam and work on short- and medium-term consulting contracts mainly in Southeast Asia. Previously, I had worked with the German applied research organization Fraunhofer in Germany and Indonesia and with the engineering consulting company Dorsch Consult. I hold a Masters degree in Economics.

3 thoughts on “Addressing demand-side issues in Quality Infrastructure

  1. Quality assurance in infrastructure is of paramount importance, especially in the building of RDP houses, as well as road infrastructure in South Africa. More and more of these houses are built sub-standard. The same with roads
    How can this be really enforced?

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    • Dear Helena, I agree with you that the quality of basic infrastructure in any country is important for both economic and social development. However, the blog post here (and in fact the whole blog) is about Quality Infrastructure (QI). QI is not related to pieces of basic infrastructure, such as roads, water supply or sewage, or housing infrastructure. QI is about the system of institutions, legal provisions and normative documents that try to assure the quality of goods and services in a country. If you are interested to look deeper into the internationally excepted definition of QI, I suggest reading the first post in this blog where we try to define what we understand by QI. These definitions are the foundation for the whole blog.

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  2. Very useful post, thank you — especially the point that “The fundamental problem is that Quality Infrastructure bodies, especially public Quality Infrastructure bodies, are often established without an analysis of actual and potential demand”. Please note that the Calidena links didn’t work (both lead to ‘access denied’ notices).

    Like

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