Sunday, January 23, 2011

Before & After Chinese New Year: Manufacturing Talking Pts.

Talking points atmosphere “out East” from JLmade’s perspective; focusing on the promo and retail industries.  

Labor Scarcity / Sourcing / Be Selective in your Projects

Holiday approaching & these folks have more
on their mind than just your low-cost merchandise
 Labor Scarcity:  From the inside-China point of view, I believe this is talked-up and over emphasized.  We have not handled an order or campaign where labor shortage had direct affect.  That’s not to say the shortage not real…so where are it’s affects?

 1-  South China:  rise of labor costs has the greatest effect on South China’s Guangdong Province.  According the article link below, it also affects Zhejiang, which we have not seen (the article mentions Yi Wu, but interesting to note, Yi Wu is a wholesale city, not a manufacturing city.  Goods sold in Yi Wu are manufactured in the smaller surrounding cities, usually by workers who are from that city). 

2-  Chinese New Year:  as with every year, workers do rush home for the major holiday.  This is no surprise.  My advice: by November start working with your clients and brands in light of Chinese New Year.  If you don’t have an order in by early December, you should seriously calculate the cost if worth doing.  You risk, missing your delivery time and delaying post-holiday..this could be disastrous.  Workers rush jobs out before the holiday.  If you scheduled a shipment right before the holiday, you are risking quality compromise. 

Sourcing:  Get smart with your sourcing.  Partner up with the proper trade company that has a pre-established bevy of factories to use; factories that are stable, but not mega-factories.  

Many overseas companies source one of two ways:

-From trade companies that specialize in foreign service, therefore they specialize in high price.  Trade companies that exhibit at the Guangzhou fair are higher-priced businesses.  Find a partner inside of China (mainland) that is a balance of both; small enough to prioritize your business but still offering a solid service.  Unless you need their patent designs, I would suggest avoiding Hong Kong trade companies, which also very high priced and very far removed from the factory.     

-From the top tier factories:  If you are working factory direct (which in the promo biz is not the majority of the time), then you’re probably buying from high-level international factories, that may offer good quality but it is also priced with a premium.  (if you’re working with a factory and they speak good English…you’re paying for it.)  
Hong Kong: wonderful city but very far
from the actual production factories

If you’re a distributor and want to see a difference in your margins, now is the year to get bold and stat testing the waters.  

Be Selective in your Projects:  Be choosey and deliberate in projects you decide to take offshore.  Remember, just because a quantity or dollar value is large to you, it’s not necessarily large to the factory.  They are making a lot less than you on a single order.  The factories work off volume and quantity and many overseas businesses in the promotional industry are doing smaller-end one-off orders.  When you get the factory quote, it may look like a ton of savings, but once the factory flubs the quality, because they didn’t care about the order in the first place, you’ll wish you stayed local or declined the job.

Article of Interest & similar rants (that means click here!):

It’s a New Year and a Newer Chinese Year is coming. Time to cut out the fluff.  If you’ve been working with the same trade company or sourcing company for years, it may be time to start evaluating if you’re getting what you need to stay in today’s economic race.  If you’re in the promo industry and working offshore and the “labor shortage” comes up…are you working with South China and if so, may be a good time to come further inland?  

That’s my thoughts on a Sunday:  want to hear some feedback, rebuttal, comments, praises….

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