Latest China Sourcing Trends
Sourcing from China has evolved from a straight-forward, cost-driven approach to more elaborate and strategic varieties. While the recent product recalls did not seem to have impacted Chinese exports based on overall figures, however we have come across anecdotal evidence suggesting the otherwise.
Undoubtedly the initial sourcing interest was triggered by China’s notorious low costs, both direct (such as those for labor and land or rent) and indirect …
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June 11th, 2009 at 3:15 am
Our business relies soley on China remaining low cost producer of cheap promotional products, do you see this industry moving to Mexico?
June 13th, 2009 at 2:43 am
Valvert,
First, thanks for reading and responding to my article (written and posted so long ago that I had almost forgotten about it :-).
The simple answer to your question is no, not necessarily.
Without being specific or overly discerning, sourcing from China is still alive and well, and shall continue to be for some time to come. (N.B. If it were ever to be stopped in its tracks prematurely, the odds are — it might not be for cost reasons, at least not for them alone.)
That said, however, please keep in mind that although the word “China” refers to one country, one can never treat China as one singular scenario, especially in business dealings.
In my opinion, going forward, the sequels to the saga known as “China Sourcing” may be better represented with names like “Anhui Sourcing”, “Hebei Sourcing” or “Sichuan Sourcing”…
My basic understanding of the nature of your industry (i.e., promotional products) is that it thrives on volume as well as low cost (the pair are inseparable to me it seems). Therefore, if only judging by an individual company’s internal costs (i.e., labor, materials, real estate, etc), other LCCs (low-cost country) like Mexico may stand a chance to potentially unseat China as a supply source.
But I don’t think Mexico would be strong enough a contender if we were to look at the entire sphere of costs determined by the economies of scale of the entire industry chain. In the interest of time I am not going to elaborate on this here. But please just allow me to just use a simple example to illustrate my point:
I am looking, at this very moment, at a Star Trek toy spaceship that my 3-year-old had brought back from the McD’s. Its “end-manufacturer/assembler” in China must have only made the injection-molded plastic casing (and perhaps also the push button as well as the TPE conductor underneath it too — i.e., anything injection-moldable) themselves with molds that they might or might not have had another mold-maker make for them, but sourced the cell batteries from a supplier, the screws from another, the PCB from yet another, the wires…the speaker…the chip…the printing…(easily a dozen such 3rd party suppliers in total).
And the chances are: they must have found every single one of them within a 10-mile radius, all thriving on volume and low-cost (i.e., economy of scale) of each other, not to mention ease of communication and logistics…
You may only be able to find this kind of clustering nowhere else but IN CHINA.
For a while at least…
Although the “clusters” may gradually move around within China (generally from the south to the north, from the east to the west) and some may have “branched” out into places like Vietnam and Thailand, it will still be some time before the country runs out of space in its inland regions to accommodate these “clusters”…
I hope this hurriedly-thrown-together answer of mine makes sense and is somewhat helpful. Feel free to email me at info(at)meetchinabiz.org if you wish to continue this discussion or need any help.
Cheers,
Shawn