China Problems Loom
I just heard from one of our gift and hard good direct clients—one in a series of messages like this I’ve had lately. This latest is that their Chinese producers failed to deliver on goods, costing this small catalog $100,000 in sales even though they had purchase orders in and accepted with confirmed delivery dates.
Another client with sales of $600 million in inexpensive merchandise says that their Chinese resources will only quote on a single purchase order at a time and will not hold prices. Prices are going up at a rate of 10 percent several times per year. A third client of upper-end products has not had the problems of the other two. They seem to be holding prices.
Multichannel businesses and suppliers have painted themselves into a corner – it means developing other resources in a hurry. I hear comments about low cost production moving to Vietnam, Sri Lanka, India, Pakistan, etc. But while many of these countries have low-cost labor supplies, they don’t have the scale of manufacturing and the infrastructure in place to match the production output of China. And with most of our factories long since shut down, the machinery shipped overseas in many cases, and labor now mostly in other jobs in the service sector, you can forget about moving production back to the U. S.
China—even as it cracks down on protesters in Tibet or has air pollution that makes Los Angeles look pristine—is the “major player in town”.
But with the Chinese government having cut back on rebates, factories suddenly having to start paying attention to environmental laws and new regulations, a labor shortage causing production cutbacks, and the Chinese yuan having gained as much as 15 to 20 percent in value versus the American dollar in just the past two years, it appears inevitable that we will pay higher costs. How will that, in turn, affect our sales?
So readers, we’d like to know: What’s going on out there from your purchasing perspective?
Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory mangement, and benchmarking; Learn more online at: http://www.fcbco.com.