Off-Shore Issues - Ensuring You Get The Products You Want
by Craig Morantz
Has this ever happened to you? You finally select a product for an upcoming promotion, branding
event or employee appreciation initiative, only to place the order and find out the product you wanted is out of stock!
It can be frustrating and nobody likes having to go through the process again. In the first half of 2010, the above scenario happened more than anyone would have liked and it was all thanks to a perfect storm of events — some good, some not so good.
The good: The economy took a quick turn sending suppliers running for more inventory. Many suppliers went from being 30 per cent down in the last quarter of 2009 to 30 per cent up in the first quarter of 2010 with most only planning (hoping really) for a 10 per cent increase in 2010. Demand for goods from China for our industry was reduced by two key factors in 2009: client
demand and suppliers’ reduced inventories.
When demand picked up dramatically in February, most (if not all) suppliers’ were caught off guard. The not so good: Supply out of China is dependent on raw material availability, factory production capacity and a stable labour force. When demand dropped in 2009, raw material production was cut back dramatically, many factories closed, hundreds of container ships were dry
docked and this year, more so than previous years, many of the workers did not return after Chinese New Year. It is fantastic that many Chinese workers are earning more rights, including an increase in minimum wage, a more reasonable work week, and better living conditions, but this in turn puts a strain on the supply chain.
The average increase in labour production costs is about 25 per cent, forcing many factories to
look for savings in other areas, again putting strains on the supply chain and often forcing delays in production. Why not look at other countries as sources for our products? Well, for one, China still remains the only country vertically integrated for the manufacturing of many consumer products. This includes raw materials, labour, technology for manufacturing, supply chain and logistics and quality control. One country may have the workforce, but not the supply for raw materials; another country may have the raw materials, but not the technology infrastructure for manufacturing. The skills of China’s labour force and its familiarity with the ways and expectations of North American companies exceed that of any other country.
When you get into the product selection process, here are a few things to do that will help minimize the risk of hearing those dreaded words, “Sorry, out of stock.”
• Have your distributor work with one, or maximum two, suppliers. Why? The fewer suppliers involved, the easier it will be to have multiple options from the supplier. Additionally, working with fewer suppliers means the vendors will be willing to make greater concessions if they are needed.
• Make first, second and third choices and give the direction: “If number one is not available, go with number two; if number two is not available, go with number three, without checking back with us. Just get the order in.”
• Plan in advance. If you are planning your event and promotion purchases a week or even days in advance and something is not available, it simply causes more stress. The longer the lead time, the more likely your product of choice will be available.
