A good number of interesting articles were published recently. The first three address heavy trends in the sourcing world.
Steve Dickinson wrote a great piece about a consequence of ever-increasing costs. Lower margins along the supply chain mean higher pressure to avoid mistakes.
In the early days of buying product from China, the price was so cheap that these non-compliance issues and their resulting costs were simply absorbed by the foreign buyers at each stage of the purchase chain. However, in the current environment of tight supply chain management, the disruption is normally quite costly and cannot be tolerated by retailers already financially stressed by the current economic environment. As a result, retailers are imposing strict standards on their direct suppliers. The strictness of the controls and the magnitude of potential losses mean that foreign buyers can no longer simply absorb the costs of non-conformance by the Chinese manufacturers.
How do importers do when their margins are getting thinner AND retailers are charging them back for every problem?
- They try to have the Chinese supplier bear as much liability as possible (that’s how lawyers can help);
- They look for a way to improve their key suppliers’ operations, for higher reliability and efficiency.
What is the fate of Chinese factories in labor-intensive industries? The same as American textile factories thirty years ago, according to Mr. McKay.
This timely article draws a clear conclusion: those manufacturers that won’t improve their operations will be wiped out. And that means most of them, for reasons that I wrote before.
Etienne Charlier reviews two articles that explain why the “reshoring” movement — production moved back from China to the US — is far from a clear trend.
It has been over-hyped in the media over the last 6 months, based on purely anecdotal evidence.
Andrew Hupert, a specialist of negotiations with Chinese counter-parties, gives us a breakdown of possible situations.
He starts with a general negotiating classification, and then applies it to the realities of China. Very insightful.
[While you are at it, check out another article, also by Andrew: US-Chinese Business Negotiation – From Beginning to End. You will learn why the two main differences between Chinese and American negotiation happen at the beginning and end of the discussion.]
Jacob Yount gives great advice to help reduce the number of mistakes in quotes from suppliers, and how to keep a supplier motivated throughout the process.
If you often ask new suppliers for quotations, make sure your team has read this article, as well as its predecessors on Jacob’s blog.