China Syndrome

I have been drawn into a steady trickle of conversations recently that indicate a drift back from China.

The voices have come from many quarters and from France, Israel, Italy...

The evidence is thin. The volume is small. But the evidence is definite nonetheless.

There are stories of quality tailing off. Delivery times elongating. The cash demand of a long supply chain proving a bigger burden than anticipated (no surprise there).

But I wonder if something else is stirring out on the streets.

From the Brand side: If everyone else is buying "cheap" in China you can stand out from the crowd by stating loudly: I am not. And "cheap" is all in the mind.

Example: financial service companies who are now loudly trumpeting their UK call centres (yes I know the alternatives are in India not China but the principle is the same).

Similarly if a malaise sets in for all things cheap and China sourced... who wants to be caught in a malaise! And even if your goods are not manufactured in a horror story it makes no difference if a horror story breaks. You will be tarnished.

Also, in our era of everything that everyone wants is available. There will be a growing body of people who do not want to buy made in china because everyone else is. Some of us like to stand out and we will seek out the things that meet our preferences.

From the MD/CEO side of me: For those of us who don't believe in China, who never left in the first place, that there is a drift back is interesting but no surprise.

Jon, a drinking buddy, is a sourcing agent. He buys in China. "Why don't you bring your stuff in?" He asks. My answers run along familiar themes:

1. I like my cash in the bank... not in the warehouse, not at the docks waiting to clear, not on the water for six weeks, not at the docks waiting to be loaded, not in someone else's warehouse waiting to be shipped. And when I say bank I mean my account not the bank's tangled up with the complexities Letters of Credit.

2. Stock is the enemy. Demand is fickle. We have month's where demand for some items doubles or halves. If my supply chain extends from Somerset to Guandong...

3. If we were to shut the plant. Outsource production to China. Shed jobs. What happens? Our liabilities change. At the moment you could argue our liabilities lie with my responsibility for the people we employ. If we outsource, our liabilities will turn into stock at which point I start to repeat myself.