Full Spend Matters Coverage: The China Sourcing Controversy
Over the next couple of days on Spend Matters, you're going to see aggressive coverage on the future of China Sourcing. Because of significant VAT export rebate changes and what appears to be a smear campaign in the major US and Canadian media against China quality and safety in the past couple of weeks, the future of China sourcing looks uncertain. But will these changes and news impact your business directly? Along with my coverage, I'll be joined by a number of experts in the field who will try to answer a number of questions which I'm already being asked by Spend Matters readers (a number of whom who have been running around frantically interpreting the changes in the past few days before it impacts their total cost bottom line).
In this series of posts, we'll try to tackle a number of questions. Should companies continue to pursue China sourcing aggressively? Will you face price increases from China going forward? Should procurement and supply chain teams look to implement new supplier quality and performance management programs with their Chinese supply base? These are just a few of the questions we'll begin to tackle in this Spend Matters mini-series. And in addition, we'll provide background information on what's really going on from a factual perspective (e.g., commodities impacted, specific cost increases, etc.). So stay tuned. We promise to make Spend Matters a critical stop for information and insight on what's really going on in the region so that you can make the best decisions as you evaluate if China still makes sense as the centerpoint of your global sourcing strategy.
- Jason Busch
In this series of posts, we'll try to tackle a number of questions. Should companies continue to pursue China sourcing aggressively? Will you face price increases from China going forward? Should procurement and supply chain teams look to implement new supplier quality and performance management programs with their Chinese supply base? These are just a few of the questions we'll begin to tackle in this Spend Matters mini-series. And in addition, we'll provide background information on what's really going on from a factual perspective (e.g., commodities impacted, specific cost increases, etc.). So stay tuned. We promise to make Spend Matters a critical stop for information and insight on what's really going on in the region so that you can make the best decisions as you evaluate if China still makes sense as the centerpoint of your global sourcing strategy.
- Jason Busch
Looking forward to this, and I know others are as well.
I have been covering this on my blog All Roads, and I was beginning to think I was the only one who saw China's recent VAT rebate restructure as a critical event.
As for the pet food, tires, and other issues.. all I can say is that it companies are going to outsource, it is their responsibility to ensure their suppliers produce to the same quality that they would produce in-house.
Looking forward to the debate
Rich
www.allroadsleadtochina.com
Thank you JFR
In the U.S. interest rate are going lower, Gold is going higher, Oil is going higher, inflation is going higher, the dollar is going lower. What is wrong with this? Everything! At some point the FED is going to have to raise rates bigtime. We are in a very, very, precarious situation at the moment. I think Gold will tripple to over $2,000 an ounce when the market finally wakes up and sees the real inflation. Last I checked a lower dollar = higher import prices. There is no inflation deflator here. With commodities on fire you can forget about that. Bernanke should have never lowered rates last week. However, the Fed might be doing something that few have talked about. Maybe the Fed has abandoned the dollar to crush the trade deficit. Good luck, it will take 20 years to correct our 6% of GDP trade deficit and move it back to under 1% of GDP, unless you want to seriously disrupt the global economy. We are in for tough times people. Very tough! The FED will not be able to save housing with lower rates. We are in for a 10 year decline in home prices. It is called a cycle!
The U.S. cannot sustain 800 bilion a year trade deficits. We cannot export our way out of this mess. The only answer is a sharply lower dollar to drive manufactruing home and to lower the trade deficit. The dollar has much farther to fall. What you are seeing is a long term effort (it will take 20 years) to get the trade deficit back under 1% of GDP. We are currently running a trade imbalance of nearly 6% of GDP. No nation can do this. The IMF would be stepping in to help any nation if its trade imbalance went to 6% of GDP becuase its currency would collapse! The U.S. is different, but still, we cannot sustain a trade deficit of this magnitude. People must understand that when we buy an item from say China, we pay in dollars. The Chinese company we just bought from them goes to an Exchange Bank in China and converts those dollars to Yuan. The Chinese banking system (Chinese Government) is now sitting on those dollars. They can either 1, buy oil, 2, buy Treasuries, 3. buy U.S goods, 4. buy U.S. Corporations, 5. other. Over time if we (the U.S. ) continue to run a trade deficit we could simply be completely bought and controlled by foreigners. Warren Buffet has explained the situation as being like a rich Texas farmer who loses a small piece of his land year after year and never notices for a while. When he then notices, tragedy sets in because he no longer controls his land. So in sum, we need to get the trade deficit way down. This is why the Fed has abandoned the dollar. It wil be going down for the next 20 years. That is how long it is going to take to correct this imbalance mess. Bottom line: Lower, much lower dollar will equal higher inflation and higher GOLD prices. Much higher!
I am a novice in the world of blogs, yet an old hand at China sourcing.
Reading most of the blogs, I find they concentrate on businesses that work by structured supply management systems, employ market analysts, "predict" commodities cost etc.
Our sourcing world concentrates in the gift, decorative accessories and related products, servicing very small, established businesses, (if you accept the definition of Small business), start-ups and the like, with limited resources, who require personal attention and service. We take them from idea to sample to product, require small quantities with a view of being their source as they grow.
The Mattel fiasco taught us an important lesson, namely that the lack of knowledge of this case has created a media histeria and that the reciepients of this histeria are not equipped to analyze it.
In short, we are a small provider, proud of our ability to help small companies grow.
Since our business is based on referrels and confidentiality is a cornerstone, I will keep its name and site "under cover" for now.
Respectfully,
Eli