PMAC 2012: How to go global

Despite risks, China still holds sourcing value

June 8, 2012
by Michael Power

MONCTON: For the most part, the quality of goods coming from China is “exceptional”, said Keith Carruthers, president of Strategic Sourcing International.

“It’s a fiction that the quality will always be bad,” Carruthers said during a session Going Global at PMAC’s annual national conference in Moncton on June 8. Stories circulate that suppliers in China provide a sample product of exceptional quality, only to make a shipment of poor quality goods later, such stories remain fiction. “That kind of stuff just doesn’t happen,” Carruthers told the audience. “The Chinese are really good at doing business. They’re really good at it, but you have to tell them what you want.”

The more clearly buyer defines what he’s looking for, the better, he said. Those doing business in China can’t make assumptions based on Western cultural values. Inferior vendors exist in China, but that’s the case in Canada as well, Carruthers noted.

“China not the magic pill for everything,” he noted. But developing strong relationships with suppliers there helps, as does having local contacts who speak the language.

Garland Chow, director, bureau of intelligent transportation systems and freight security and associate professor, operations and logistics division, Sauder School of Business at UBC, told the audience that while China’s value proposition has eroded, the country would likely continue to play a large role, especially for companies that already do business there. And while other countries in Asia have gained attention as sourcing destinations, many such places have disadvantages like unstable weather and poorly trained workforces.

“In terms of competent people ready to work, you just can’t replace China,” he said. Nearshoring to Mexico also presented potential problems such as supply chain is susceptible to disruptions due to political turmoil or drug-related violence, Chow noted. “If you want to source in Mexico, you have to do your due diligence.”

Mike Croza, managing partner with Supply Chain Alliance Partners, noted that with 500 million Chinese citizens predicted to migrate from rural areas to cities, that country will develop an emerging middle class looking for a similar quality of life as in western countries. “We’ve got to go global,” he said, adding that conducting a detailed supply chain and financial analysis, as well as a business case, to support offshoring was the key to success.

“And make sure its bullet proof,” he said.

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