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The Financial Times published an interesting article ("An accident shows how China treats consumers") that describes the view of Chinese state-owned enterprises (SOEs) regarding the export of unsafe products. They represent a large chunk of China's economy, and many have been exporting for decades. The article tells the story of an SOE whose products (firewords) nearly killed a US citizen. When sued in an American court, its representatives didn't even deny the facts, but tried to show that … [Read more...]

I had an interesting conversation with a Chinese friend who works for local district’s government (in Shenzhen city). He explained to me how "the Chinese legal system does too little for society". No recourse against factories closing suddenly One of his examples was about factory owners who disappear with the cash, and leave millions of RMB of unpaid invoices and wages behind them. Some factory bosses are actually not the legal representative of their company—one of their employees is—so … [Read more...]

In Hot, Flat and Crowded, I read that the exact cost of oil delivered by air-borne tanker to the US military stations in Irak is... $42 per gallon. Here are the elements to add up: Commodity price of oil + cost of delivery + cost of protection along the way + cost of casualties from transportation. The total is the fully-burdened cost (or total cost of ownership). This calculation convinced the army to work on improving energy efficiency (e.g. improving thermal insulation of air-conditioned … [Read more...]

Some large retailers purchase their goods directly from Asian manufacturers, who in turn buy the components and process them. That's about as "direct" as it can get. It allows buyers to avoid the margins of all kinds of middlemen. According to this view, very large retailers would buy everything directly in Asia, right? Actually, the trend among American big-box retailers seems to be just the opposite. They buy more and more from intermediaries who go through all the trouble of Asian … [Read more...]

Twenty-five years ago, the companies that imported from Asia were mostly large structures. Some have set up local offices to conduct quality control. Others have secured the quality of their imports by working with large 3rd party QC companies. Together, buyers and QC firms have organized the supply chain to fit their needs: Most of the inspections take place at the end of production, just before shipment. These large buyers can afford to put pressure on their suppliers. If an inspection … [Read more...]