Re: "Consider This -- Riskiest Place May Be Your Comfort Zone," January 2010
I strongly disagree with some of the statements made by the author Steven Cook.
I have been in purchasing management for over 20 years and for the last many years, my specialty has evolved into offshore sourcing. I extensively source out of China, Malaysia, Taiwan and Thailand and am responsible for millions of USD annual spend offshore. I make frequent trips to these countries and spend more time in China than any other country besides here at home in America. The various types of components I source offshore range from machined stainless and carbon steel items, plastic injection molded parts to stainless and iron castings fully machined.
Cook makes comments about how the tide is changing for U.S. manufacturers competing with low-cost Asian countries. He says China is losing its appeal because of some of the following reasons:
Value Added Tax
This is an old issue, back around 2008 if I recall, long enough back that it's not even a real factor anymore. All pricing was adjusted back then and items re-evaluated at that time. I am currently sourcing millions of dollars annually out of China and I can tell you that I have not had one single occurrence in probably a year and a half where the VAT made any price change whatsoever to my standard quoted piece price coming out of China.
Uncertainty of Long Term Business Climates
Are you kidding me? China is purposely positioned to be the dominant global manufacturer and they are not stupid enough to do anything to disrupt the growing business and manufacturing currently going on, and still being acquired there. The economies of our two nations are too tightly intertwined and dependent on the other for either nation to do anything drastic enough to disrupt that. For stability of long-term business climates, China would rank at the top! Probably even ahead of the USA because we have to deal with changing politicians and policies depending on the current domestic political climate. China does not have that issue. China is more stable than we are in that regard because bluntly, they don't care about everyone else, they are looking out for themselves, and as long as you understand that and their interests fit with what you're doing there, you're fine doing business there.
Fluctuating Exchange Rates
All I say about that is simply take a look at the exchange rate history. I keep 18-month history charts of seven currency exchange rates on my wall in the office; the RMB is more stable than any other exchange rate I track. The reason is because the Chinese government props it up to support a long-term business climate. By the government stabilizing their currency, it makes guys like me more comfortable approving new tooling projects with factories in China. That's why they do it.
Vietnam is Emerging Due to its Competitive Pricing and More-Skilled Laborers in Comparison to China
Seriously? Vietnam has a population of about 85 million, compared to China's 1.3 billion. He says Vietnam has more skilled laborers than China does. I seriously doubt that statement is even close to the truth. China probably has several hundred factories to Vietnam's one.
One last point to make, further in the article, he mentions that the con for U.S. buyers in Eastern Europe is tariffs and logistics. I would submit that the real con is the exchange rate with the USD vs. the Euro. That is why I don't source anything from a Euro nation, not due to tariffs or logistics issues. Don't get me wrong, I am a passionate American and wish that manufacturing jobs could come back to the United States, but I also think that disinformation about the issues does not help the situation. I think that only when we as Americans wake up and see what the Chinese are doing and how they are doing it better than we are will we as a nation ever be able to find a solution to it. Meanwhile, I will continue to do what I get paid to do, and that is source globally for the best value of product I need, wherever in the world that may be.
Steve Royse
Purchasing Manager
Great Plains Industries
