Posts Tagged ‘China’

Counterfeit merchandise: Keeping it real

Published September 9th, 2010 by John Westerveld 4 Comments

Here are two Microprocessors.  They look the same.  They have the same part number.  One will work fine.  The other?

The other, while it appears to be the exact same part is a cheaply made counterfeit.   If you’re lucky, it will fail as soon as you put it in.  If you are unlucky, it will fail as it is being used by your customer.  Depending on what this chip does, the failure could simply result in a return and an unsatisfied customer.  However, it doesn’t take much of an imagination to see that if this chip is part of a critical component in an aircraft, automobile or healthcare product, the failure could result in injury or death.

As I started to look into this subject, I came to the realization that it is HUGE.  To help me keep things straight, I’ve broken counterfeiting down into two broad categories;  Counterfeit retail products  and counterfeit components.  Both have different risks associated with them and have different mitigation strategies that should be considered.

We’ll look at retail products first.    People have been selling cheap knockoffs for as long as I can remember; clothes, purses, shoes and jewellery ($10 Rolex anyone?), and more recently, DVDs and video games.  If counterfeit watches and DVD’s aren’t enough, we are starting to see counterfeit medication too.  Everything from Tamilflu to Viagra have been counterfeited and sold as the real product…at significant risk to the person using the drug.

Ominously, counterfeit products and components are making their way through the military as well.  Counterfeit components are finding their way into missile systems, fighter jets and nuclear submarines.  Recently, the FBI discovered 400 routers in use in military installations were counterfeit and likely have been used for espionage.

From the brand owner’s perspective, counterfeit products are very damaging;  they impact sales, they drive up costs, they impact your good name, and they can harm your customers.

It seems that protecting yourself from counterfeiters is devilishly difficult.  Options include;

  • Holographic labels (like you have on  your credit card)
  • Micro-print (I’ve seen these on cheques)
  • Unique / obscure marks (small dot on a label)
  • Serial numbers
  • RFID tags.

Unfortunately, counterfeiters keep coming up with ways of fooling the unsuspecting public. However scientists and engineers are also working to find ways to identify the real thing and have developed new ideas like  nano-artwork.

Let’s look at the supply chain side now.   Counterfeit components can range from relabeling of components (from a generic brand to a known brand), to a replacement of good parts with non-functioning mock-ups. A few months ago, NewEgg discovered that they had been shipping new Intel I7 processors that were in fact clever reproductions of packages that contained non-functioning models of the processor.  I’ve talked about counterfeit components of a different nature in an earlier blog post that talked about components manufactured on a ghost shift.

From the supply chain perspective, counterfeit components are a disaster waiting to happen. This disaster can occur at many levels;  counterfeit components intercepted and identified as part of incoming inspections has the least impact on your company.  If the counterfeit component is caught before your product leaves the factory, you have also been lucky.  Once the product containing counterfeit components gets into  your customer’s hands, failure of the component is your fault in the customer’s eyes.  A more distressing problem is what will happen when that component fails?  Will it just go pop?  Or will it burn like a poorly made lithium ion battery?

To avoid counterfeit parts, here are some ideas

  • Beware of prices well below market values
  • Know your suppliers
  • Test your components often.  Ensure your testers are well versed in counterfeit detection practices including x-ray imaging, solvent body softening, component de-lidding and jet or plasma etching (these methods allow you to see below the surface of a chip and compare to a known good item)
  • China is one of the leading sources of counterfeit electronic components.  While it’s difficult to avoid sourcing from China, be aware of the counterfeit risks.

Additional information on avoiding counterfeits can be found here, here and here.

Do you have a counterfeit story?  Do you have advice on how to avoid falling prey to counterfeit components or products? Comment and let us know.

Posted in Supply chain risk management

China…times they are a changin’!

Published June 23rd, 2010 by John Westerveld 5 Comments

I’ve recently been noticing a number of articles in Industry Week dealing with labor disputes and issues in China;

Foxconn, Honda, Brother have all been the target of labor disruptions driving higher labor costs.   Foxconn and Microsoft are both mired in reports of poor working conditions.  While China’s communist government doesn’t officially allow unions, they seem to turn their head at labor protests – so long as the protest doesn’t appear to be critical of government policies.  

Is it any wonder that this is happening?  Prices for electronics have been pressured downwards continuously over the past several years.  Just look at the cost of a laptop today compared to a few years ago.  Almost a 1/3 the cost.  While some of these reductions are due to economies of scale and improved manufacturing techniques, much of the savings is because of the low cost of labor.  Even still, factory wages are significantly more than a typical Chinese worker could make farming or as a laborer in the rural parts of the country, and so workers flocked to the factory towns.  As a result, China’s workers started having a disposable income.  Money for televisions, cell phones, bicycles and automobiles.  The same desire that drives consumption in the West, is starting to permeate life in China.  The Chinese worker wants the same things that you and I want.   Can you blame them?

So what do these changes mean for us?  To a certain extent, we will need to accept that things will get more expensive (in the case of electronics, the downward price trend will slow and perhaps even reverse).  Chinese workers will continue to demand fair wages and better working conditions (as they should!). But these changes can continue only to a certain point.  At some point (as it did in North America, Europe and Japan), the wage pressures are going to increase to the point that the advantages of doing manufacturing in China will start to disappear and China will transition from being a low cost supplier of goods to a net consumer of goods.   At this point work will be moved to the next hub of low cost labour (India?  Africa?). 

My advice for companies with manufacturing in China?  First and foremost, take notice of the working conditions in the factories.   It doesn’t matter that the contract manufacturer is a separate company with their own policies, it is your company name and brand that is attached to the product. Have a plan in place in case your manufacturing source (or their supplier) goes on strike.   Also, (and I’m sure this is something that you are doing already),  closely monitor the costs from your manufacturing operations.  At some point, costs will rise to the point where you will need to start looking at other sources. The sooner you recognize that point, the better off your company will be.  

Before looking for another low cost offshore location to manufacture your goods, consider bringing your manufacturing back to North America.  While labor costs would be undeniably higher, these additional costs might just be offset by reduced lead time, reduced transportation costs, improved quality, reduced risk and improved goodwill.   Just a thought.

Posted in Supply chain management

Supply chain 2015 – the blurring of operational supply chain planning and execution

Published October 27th, 2009 by Trevor Miles @milesahead 1 Comment

Dan Gilmour of Supply Chain Digest  in his newsletter for Oct 22, 2009 published a list of “things” that will change in supply chains by 2015.  There were a number of things that Dan identified that really boil down to the blurring of operational supply chain planning and execution.  We have been seeing this trend for some time, driven by the volatility of demand and outsourcing, which in turn drive the need for greater responsiveness.  My full response to Dan’s article is below.  I would welcome your comments.


Great article, Dan.

I liked your identification of the drivers, and wished that there had been more prediction of what the consequences would be.  For example, how will companies reconfigure their supply chain?  In this particular case, I think we only have to look at Apple and Cisco to see some direction.  Both of them outsource virtually all their production. And of course Apple, as you state in your article, is at the forefront of the “digitization” of the supply chain.

What really fascinates me is the rise of the brand owners in China and India.  I saw an article today in McKinsey Quarterly that China’s economy grew 8.9% in Q3 this year.  Even in the boom period before 2000, growth rates in the US fell short of this number.  Of course, this is even more startling when comparing the growth rate in China over a similar period.

I think we are missing the effect this will have on the Western brand owners such as Apple.  It might seem counter-intuitive given Apple’s record quarter and I have no idea of the product strategy, but I wonder how much they are designing products for the Western world and how much they are assuming the Eastern consumer needs are the same.

As you correctly point out, there will be huge impacts on “product design, pricing, logistics and much more.” I am fascinated by the growth of Eastern brand owners such as Acer, Lenovo, and Huawei.  We have weathered the storm of the Japanese companies in the 1980’s – Sony, Toshiba, Toyota, Matsushita, … but those were different economic times when those companies were designing products for a western market.

I am not yet convinced that Western brand owners are paying sufficient attention to the needs of Eastern markets.  These have been very Western focused, but I suspect as the pride in their countries economic performance grows, so will their confidence and demand for products to meet their specific needs.

We have a number of customers who are the forefront of the blurring of operational supply chain planning and execution.  Of the 10 things you identify, I think this is a consequence of many of the others. And you are correct, this blurring is reaching up into tactical planning too with more and more companies running S&OP on an as-needed basis.

The factors you identify, specifically reduced inventory levels and pervasive visibility, are driving this blurring.  We all know that inventory has been used as a buffer between the demand and supply chains.  Reduced inventory levels require a much more agile supply chain that is very responsive to change.  And of course the supply chains need to be reconfigured to be more responsive.

Dashboards are of course a necessary precursor to understanding whether or not one is on-track to meet future objectives and any deviations need to be addressed before they become “actuals” and appear in a scorecard.

Once again, thanks you for a great article.

Posted in Milesahead, Sales and operations planning (S&OP), Supply chain management

What’s your bet on China?

Published September 2nd, 2009 by Francini Ortiz 2 Comments

China is such an interesting subject! There is so much going on out there, so following the recent news about its stock market instability, I decided to share my thoughts on some developments.

During my 2-week visit to China last May, I got a sense of how the economic downturn is impacting the ‘awakened dragon’. After talking with several entrepreneurs, market experts, government representatives, University professors and multinational senior managers there, I realized that their hunger to grow hasn’t diminished and they are looking around to find alternatives to pick up the slack of a weaker export sector.

At the same time, Chinese citizens are becoming more educated and the consumer market is growing, with more consumers and higher incomes. Here are my thoughts on some particular changes:

Diversifying alliances: Tiananmen Square decorated with the national flags of China and Brazil to receive the Brazilian president.
Diversifying alliances: Tiananmen Square decorated with the national flags of China and Brazil to receive the Brazilian president.
  • There is a high level of unmet domestic needs, especially given the internal mobility (people moving from country side to larger cities), so Chinese companies are turning internally to support growth. The economic crisis is only accelerating this process.
  • China is also looking to expand partnerships and trading agreements with countries in Latin America and making inroads with other developing countries worldwide.
  • The government wants to transform the country from a manufacturing hub to one of more value-added activities, like services and alternative energy (they are the #2 wind energy producer today).
  • Chinese are giving more importance to development of their own brands rather than manufacturing goods for multinationals. See examples of Lenovo (“Global Company with Chinese heritage”, wants to be #1 international brand for computers) and Huawei.
  • The market is demanding that Chinese manufacturers meet environmental, health, and safety standards (better quality and control from products made in China). American corporations that have supply chain ties to China want to keep and attract consumers with green awareness. For example, Wal Mart has announced that the top suppliers in China will need to become 20% more energy-efficient by 2012 (“Wal-Mart: Making Its Suppliers Go Green”, Business Week 14 May 2009). More educated Chinese citizens that are beginning to protest against pollution and environmentally unfriendly practices, which is also another factor to increase pressure in pro of the green mandate movement.

All of these changes will have some impact on Supply Chain practices, including plenty of opportunities, whether you are operating in China or not:

  • Multinationals have the opportunity to review their strategy to serve the Chinese market, but they need to understand its complex environment first
  • Incentives for manufacturing might not be as attractive as in the past, unless it is in an industry in which China lacks knowledge and that the government is targeting for development (like energy and services)
  • It’s becoming expensive to establish manufacturing in the more developed provinces; some companies are looking to relocate to more remote areas in the country
  • Increasing competition will require Chinese companies to improve quality and productivity. In general, software systems are still not well developed and there are a lot of opportunities for software firms to sell to local companies (inventory control, manufacturing execution, supply chain management systems to name a few categories)
  • In the short term, the “green mandate” may increase cost and force some companies to look for sourcing alternatives. Companies interested primarily in competitive prices may have to look for new suppliers. Could this benefit other countries, like Vietnam?

There are certainly many changes happening in China and although we don’t know what will happen given the number of variables, one thing is for sure: everyone has an opportunity to succeed. Others have already blogged here about the fact that outsourcing to China is not as easy decision as it used to be due to the rising costs over there, so I did not even include this other important change in this discussion. It’s important to be aware and reflect about how the local and macro changes are impacting China and your business – how are you reacting? What’s your bet?

Posted in Supply chain management

Sourcing in China? Might not be such a good deal.

Published June 24th, 2009 by John Westerveld 10 Comments

AMR Research recently published an article that about a study they have been working on which indicates that companies are starting to look near shore when making sourcing decisions.  In the study, risk was one of the key drivers for this trend.  Companies surveyed identified the following risks in dealing with China.

  • Intellectual property infringement
  • Product quality 
  • Regulatory compliance
  • Supplier Failure
  • Commodity price volatility

The article goes on to point out that many companies are planning to increase on shoring activity (an interesting shift from a few years ago!). 

Supply chain risk isn’t the only issue driving this trend.  Over at the IBF Blog, Tom Wallace, in a recent post, discussed a Business Week article that identified that the China price advantage has eroded from 22% to 5% cheaper at the port of entry.  This is driven by the increase in prices China charges for their goods and increasing transportation costs.  As Tom points out, higher risks in addition to the reduced savings makes it difficult to rationalize the other costs of doing business in China; 

  • Longer, more variable lead times (which drive the need for higher inventories)
  • Quality concerns
  • More complex engineering change logistics

In addition to Tom’s comments, what we’ve seen is that visibility and control over the supply chain can be a challenge and communication can be difficult due to language barriers.   And let’s not forget the “green factor”.  Moving goods around the globe simply isn’t environmentally friendly.  Also, China’s record on environmental issues isn’t exactly stellar either.

I have to admit, as an “old manufacturing guy”, I would be happy to see the on shoring trend continue.   While this may come with a slightly higher cost for our gadgets and clothes, I think it’s better for us, better for the environment and maybe even better for those living in China.

What do you think?  Do you currently outsource to China?  Have you been reviewing your outsourcing strategy?

Posted in Supply chain risk management

Recession or reset?

Published June 23rd, 2009 by Trevor Miles @milesahead 1 Comment

Much of the rhetoric of the politicians in the West when “selling” their economic stimulus packages to a skeptical public has been focussed on returning to economic conditions that existed in 2003-2006.  There are many sceptical voices across the political and financial spectrum, some based upon wishful thinking, some based upon analysis.  Some of the analysis is country specific and some of the analysis takes broader trends into consideration.  I am not an economist or a politician, so I am sure there are many that can argue with my analysis.  I am also not an innocent bystander having seen my net worth shrink by 40% in a 6 month period from September 2008.  I would love to return to an economy that would restore my net worth to its original value.  I just don’t see it happening.  Macro-economic trends coupled with the historically high levels of consumer debt in the West point to a long period of readjustment and a reset of expectations.  In a world economy where an economic rate growth in China in excess of 5% is seen as a disaster, while in the West this growth rate would be celebrated and the central bankers of the G7 applauded for their wise stewardship, we can only pause to consider what this all means.







In a study just published by Boston Consulting Group (BCG) titled “Globally Advantaged Manufacturing – Winning in the Downturn and Beyond”, the authors point out that China, India and other rapidly developing economies (RDE’s) contributed only 25% of global GDP in 1990, compared with 51% for the G7 industrialized nations.  By 2007 the RDE’s share of global GDP grew to 42% and is projected to overtake that of the G7 by 2009, much of this driven by outsourcing and off-shoring by companies based in the G7. One caveat is that this analysis predates the current recession.  More importantly though is the surge in demand for goods and services in the RDE’s.  This is the tipping point.  As the BCG authors point out, “For many products, RDE demand already outstrips that of more developed markets in terms of volume”.  Perhaps the most telling remark in the article is that “Given the price sensitivity of RDE markets, products often must be designed and manufactured locally to meet the necessary price points.”  However, many brand owners in the West have outsourced manufacturing to RDE countries in order to reduce the cost of production of goods destined for markets in the West.  They don’t have the knowledge of local demand nor the manufacturing capabilities in RDE’s.

In another BCG study titled “The 2009 BCG 100 New Global Challengers” published in Jan 2009, the authors look at companies emerging from the RDE’s to not only take major market share in their countries of origin, but also in the Western economies.  Many of these are still in the “boiler room” and have not necessarily gained market presence in consumer markets, but this is only a matter of time.  We have only to look at the bankruptcy of Nortel and the emergence of Huawei in telecommunications equipment, and the purchase of the IBM PC division by Lenovo, a largely unknown PC manufacturer in the West with a dominant market presence in China.  Who in the West would have imagined in 2000 that Jaguar would be owned by an Indian company, or that Volvo’s car division might be bought by a Chinese company?  The authors point to some of the advantages these companies have, including “… privileged access to high-growth markets and resources, freedom from legacy assets in high-cost, slow growing countries, and access to low-cost labour pools”.  And of course the outsourcing of manufacturing to RDE’s by companies in the West has only served to develop a skilled labour pool in the RDE’s.  These companies are now looking for ways to expand into Western markets, and the recession has provided many ready opportunities for cash rich RDE companies.  Just as an aside, something very similar happened in the .com bust in 2000-2001 when much of the fiber-optic bandwidth was bought up by RDE companies, especially companies from India, when the likes of Worldcom filed for bankruptcy.

industrial-capacityLooking closer at the US economy specifically, Steven Hansen, in his blog Seeking Alpha, wrote an article titled “This Recession Is a Reset to a New Normal” in which he states that “We will exit this Great Recession in the New Normal. It will be a world of overcapacity in many sectors of the economy, poor employment conditions, abandoning of innovation, and credit abuse.” The graphs in Steven’s article were particularly startling and revealing given the long period over which the data is plotted, although as a semi-skilled applied statistician I think some of the trend lines are suspect.  Nevertheless what is apparent from the graph is that growth in both capacity and output from US based manufacturing has dropped markedly since 1999.  Perhaps more importantly the gap between capacity and output has increased.  Clearly this is a result of the outsourcing and off-shoring of manufacturing to RDE’s, which in turn has led to the emergence of a middle class and hence a consumer market in the RDE’s, the very point that BCG is making.

Yet there are quite a few voices that paint a different story.  In an article titled “The BRICs: An Analysis” in Nouriel Roubini’s blog on, he points out that “… India and China are net commodity importers, while Russia and, to a lesser extent, Brazil depend on commodity exports” .  Commenting on each of the BRIC countries, Nouriel makes the following observations:

  • Brazil – “The expansion of the middle class and strength of the nascent housing sector require large investments in infrastructure and education and adequate micro-planning. The expansion of potential growth will only take place if this appropriate framework is built.”
  • India – “Increasing the potential growth rate from the current level will therefore require raising infrastructure and energy investments, agriculture yields, government savings, education spending and implementing labor law reforms. But most of these reforms are politically challenging and will happen at a snail’s pace in the coming years.”
  • China – “The real question: Can China pump up domestic demand soon enough? Chinese private consumption’s share of GDP fell steadily over the last decade to around 35%, meaning it may have a long way to go to pick up the slack of the export sector and export-oriented investment.”  

These are all true statements.  While the GDP of the RDE’s has grown rapidly, much of this has been through outsourcing by Western companies to satisfy Western demand. The consumer demand in the RDE’s has not begun to reach the levels required to sustain the growth rates experienced in the RDE’s over the past decade.  However, as pointed out by BCG, this is less of a problem for RDE based companies because of their lower cost base, and a major issue for Western companies used to designing products for affluent consumers.

In his blog, “Supply Chain Matters”, Bob Ferrari writes about US based auto suppliers struggling to find new markets, in which he refers to an article in the Wall Street Journal titled “Auto Suppliers Attempt Reinvention”.  The central point in Bob’s article is that addressing new markets is not a trivial matter, specifically that companies “… may well have the design and production capabilities related to product technology, but the other open question is whether you have the supply chain business process capabilities to compete with other existing players in your new industry venture.”  While much of Bob’s article is focussed on auto suppliers satisfying local demand from OEM’s, many of the points he makes can be readily applied to Western companies trying to address the needs of the consumers in the RDE’s.  In a separate article, Bob refers to a book “Poorly Made in China”, and analyses many of the issues that arise from outsourcing manufacturing to one of the RDE’s in which legislation and social norms are very different from those to which the which the Western based companies are accustomed.  The lessons to be learned on the supply side are only a precursor for the knowledge that needs to be gained to design, market, and sell products in the RDE’s.

The other day I came across a case study on Nirma that exemplifies for me the way in which Western manufacturers need to respond to the challengers of adapting to the new normal.  Many Western-based washing powder manufacturers have been marketing and selling their products in India for many years, largely to the more affluent city dwellers.  The manner in which the products where packaged and sold was very similar to that used to Western consumers: Large, half-empty boxes with at least 500g (1lb) of washing powder.  In many cases, even the formulation of the washing powder was the same, despite the fact that much of the washing is done by hand and not in washing machines.  The rural poor were not a target market for the Western based companies because the concepts of packaging and distribution and margins available were deemed not to be profitable.  An Indian company, with much greater knowledge of the local market, particularly the rural poor, started selling washing powder to the rural poor in small paper packets of about 25g through local merchants.  The financial outlay for each purchase was much lower and the packets were much easier to transport than the bulky boxes of other products.  In no time at all they had gained a large market share, not only amongst the rural poor, but also amongst the urban poor.  And the company was making a profit too.  Hindustan Lever, an Indian division of Lever Brothers, studied Nirma’s approach for some time, including studying ways to reduce their own cost base in order not only to sell to the poor in India, but to do so profitably. Hindustan Lever has been able to claw back market share from Nirma and now both have approximately 40% of the washing powder market.  I have heard the Procter & Gamble also studied Nirma and brought the practice of selling much smaller quantities in compact packaging back to the US to address the “seniors” and “empty nesters” markets more appropriately.

I believe it will be a long time before demand in the West returns to 2006 levels, so Western companies have little option to regain revenue other than to address the demand in RDE’s. Much has been written about how outsourcing and off-shoring of manufacturing by Western companies has made supply chains a lot more complex, but this body of work has focussed on getting products to Western markets, not on addressing global demand, much of it in RDE’s. The concept of the long-tail, focussed on providing a wide range of products specific to as many market segments as possible, exacerbates the issue of supply chain complexity even further, and adding geographical dispersion of demand across country and cultural boundaries adds even more complexity.  As pointed out by Bob Ferrari in the case of the auto suppliers, moving into new markets requires a lot of study and learning to be successful.

While there are many strategic issues to be addressed, companies will need many of the tools and capabilities being used to address the lack of visibility and coordination caused by outsourcing. Top on the list is visibility into their operations on a global basis, especially demand, to monitor their financial and operational performance, and the ability detect and respond to changes very rapidly.  This is especially true if the company is used shared manufacturing capacity in the RDE’s to satisfy both Westerns and RDE market demand.  Without the ability to balance demand and supply on a global basis, and to respond to changes in a rapid and effective manner, the risks of addressing RDE consumer demand are enormous.

Posted in General News

Dealing with supply chain risks

Published October 7th, 2008 by John Westerveld 0 Comments

I recently read a blog post by Bob Ferrari at his Supply Matters blog.  The post, entitled A Key Takeaway in Supply Chain Risk Management , described some of the quality issues plaguing China (tainted milk scandal, contaminated pet food, contaminated heparin) and Mexico (Salmonella laced tomatoes).  I posted a comment at his site, but have also included it here.

** My comment **

Good comments.  To me, the key takeaway was that Supply Chain Risk Management is something that no company can afford to ignore.  Of course, I couldn’t agree more.  However, while Bob’s focus was on quality, I want to make sure that we also focus on the flow of materials within the supply chain.  Not having any product to ship due to a supply chain problem will also have a negative impact on your company.  Let’s take a look at some of the events over the last little while;

  • This year, the Olympics were held in Beijing.  The Chinese government put extremely strict limits on factories and on transportation in and around Beijing running up to the 2008 Olympics in an attempt to reduce the air pollution in that region.  If that region was part of your supply chain, you would have been impacted
  • Earlier this year, there was a significant Earthquake in China.   While less important than the loss of life and the pain and suffering brought about by that event, several factories were destroyed.  Along with those factories sections of several supply chains were also destroyed
  • In March of this year, the LG Chem factory in Ochang, South Korea burned, causing laptop battery shortages for Dell and HP
  • In February of this year, year, the Lite-On LCD factory in Dongguan, China burned, impacting Dell, HP and Lenovo amongst others
  • There are many other examples, some of which may have impacted you.

In addition to these catastrophic events, strikes, business closures, extreme weather and global shortages (and excesses) can all impact your supply chain.

So how do you identify and manage the risks in your supply chain?�
It starts with visibility.  You need to be able to see what suppliers contribute to your end product (and how much).  You need to be able to identify which suppliers supply unique components – components you can’t get from any other supplier.

Then you need to have analytic tools.   You need to be able to model your entire supply chain.  You need to be able to report results in ways that are relevant to your business.

Next you need to be able to simulate supply chain events.  What would be the impact if this supplier cut production by 50%?  What if I couldn’t get any of these components?  What impact would this have on my corporate metrics.  What would be the impact of a 10% downside? What would that do to my inventory position What about a 15% upside?  Could my supply chain cope?

Finally you need to be able to simulate potential solutions.  How long would it take to bring on another supplier? What parts could be substituted if I couldn’t get this part? What alternate routes could be leveraged to transport these goods?

I’ll leave you with this thought.  The difference between those companies that are significantly impacted by supply chain events and those that can ride them out is the extent to which they have anticipated and planned for the possibility of these things happening.  Which will you be?

Posted in Supply chain risk management

China to eclipse US in total manufacturing

Published August 21st, 2008 by Randy Littleson 0 Comments

Bob Ferrari on his Supply Chain Matters blog discusses recent stories projecting the timing of when China will eclipse the US in total manufacturing output (see his post here).  Bob goes on to discuss the implications of this shift.  I commented on his blog and have added my comment below as well.

** My comment **

Bob – I agree with your views.  First, I think it’s inevitable that China would surpass the US in total manufacturing given their size and recent track record of growth.  Their domestic market alone is enormous and I think we’ve all seen how global everything has become and we know the potential for them to export.  I know my kids already think everything in the world is manufactured in China!  As these articles point out, that is hardly the case.

As you suggest, I don’t think that should be a core concern of the US.  What we are seeing is not a unique situation.  For generations products have moved to different regions of the world to be produced, following markets, skilled labor, lower costs, etc.  Certainly we’re seeing this on a broader scale given China’s size, but the core issue is not unique.

What is critical for the US is, as you suggest, being the leader in innovation.  What are the next generation products that only the US can produce because of its unique assets (capital markets, skilled labor, R&D, etc.)?  That is the key for the US.  The standard of living for the US will continue to climb if we continue to be the innovators for new, high-end products in demand by the rest of the world.  In this area, the US is still doing exceptionally well and still has ample opportunity in front of it to lead.

All boats rising is not the challenge for the US.  The challenge is to develop innovative products in demand by the world, to train its people to manufacture them and to establish market leadership in these evolving markets.

Posted in General News