Sourcing from China: How to Cover Your Patriotic Bum
September 7th, 2007 | by This is China! |In December I’m serving as a co-chair for the ATLAS-SFI Conference on “Legal, Tax & Financial Strategies for Doing Business in China.” I began to get the sense that running such China Business Conferences in the States is becoming unfashionable when one of the conference coordinators asked me if I thought it would be a good idea to invite a PR firm in to speak on, I gathered, Covering Your Butt When Products You’ve Ordered From China Prove Unsafe.
I adamantly responded the Conference should most definitely NOT take a CYA stance on tainted products sourced from China. Instead, the Conference should provide information to managers on WHY and HOW to keep tainted products from entering their product stream in the first place. I went on to explain to the coordinator that anyone who has spent ANY amount of time here knows several things about sourcing in China:
-Most Chinese suppliers will skimp on quality when given the opportunity;
-Most Chinese suppliers do not know anything BUT how to skimp on quality;
-Responsible buyers of Chinese goods have implemented quality systems in their Chinese supplier companies exactly because they know Chinese suppliers either consciously or out of ignorance get stingy on quality
-Most Chinese suppliers have had their margins squeezed for the past two years because of American buyers’ need to buy cheap: electronic appliances, toys, sneakers, you name it. Americans are addicted to consumerism, and Americans are addicted to CHEAP. Of course Rising costs of raw materials and labor, as well as changes in Chinese tax codes have eaten deeply into Chinese margins. Of course Chinese suppliers are going to cut corners where they can to maintain their razor-thin margins, especially when all they hear from American buyers is: “Keep the price down or we’ll go elsewhere!”
A Financial Times editorial dated 3 September 2007 by Stefan Stern entitled, “West must take some blame for tainted Chinese goods” echoed essentially the same sentiment.
To my way of thinking, it is the awfully clever corporate buyers of the tainted Chinese goods who should be held to account: it is THEIR quality systems – if they had any at all in place in China - that failed. In other words, the products should never have left Chinese shores for Western store shelves; indeed, they should never have been allowed to leave the Chinese factories, what with all the impressive technologies and management processes Westerners have to bring to bear.
But it is much less expensive to hire the PR guys and call “one of the largest recalls in history” than to pay the lawyers for the inumerable lawsuits the companies would have to pay for in the courts of America, the Land of Litigation.
Cheaper still would have been to put the American quality guys and gals on the ground in China from the beginning.
But what makes the corporate play so brilliant is that these same companies that have been for years sourcing out of the Dragon’s Mouth now become Patriots – “not Nationalists” – by branding thick-headed Chinese suppliers as criminals with the intent to murder.
And in these times when America needs a new enemy, given that America is getting its butt beat bad in Afghanistan and Iraq – China fits just the bill.
Stern writes near the end of his op-ed piece:
“But to adapt the familiar slogan: it’s the management, stupid. Our management, which urgently needs to get a better grip on the supply chain. A more sophisticated understanding of the realities of doing business in the global age has to be developed too. This means forming effective partnerships with low-cost countries, and not seeing every new entrant as a primitive, blood-curdling threat.
“Robert Reich, the former US labour secretary, described what sort of mindset the new era would demand back in 1992, before he left academia to serve in the Clinton White House. In an article for the New York Times in February that year, headlined “Is Japan Out To Get Us?”, he wrote this: ‘The central question for America in the post-Soviet world – a diverse America, whose economy and culture are rapidly fusing with the economies and cultures of the rest of the globe – is whether it is possible to rediscover our identity…without creating a new enemy.’”
I don’t think that’s possible now in Bunker America.
Bill Dodson
SUZHOU, China
4 Responses to “Sourcing from China: How to Cover Your Patriotic Bum”
By sophie on Sep 14, 2007 | Reply
It is the multinationals who make the most profit out of cheap Chinese goods. Yet when there are any problem with the quality of their products, they always blame their Chinese providers, who are small companies competing for razor thing margins.
By Steven Capozzola on Sep 17, 2007 | Reply
The bottom line is JOBS. The U.S. lost 46,000 manufacturing jobs in August 2007. More significantly, the ongoing losses are taking a cumulative toll on communities throughout the country. We need to adequately enforce our trade laws, and hold countries like China accountable for illegal trading practices such as currency manipulation. Otherwise, we’ll continue to shed manufacturing jobs.
www.manufacturethis.org
By Bill on Sep 21, 2007 | Reply
Steven;
Firstly, the article to which you are commenting here is about the lack of responsibility American multinationals are taking to address an issue that is actually illegal in the States; that is, lead in paint for products, especially toys. In other words, these corporations should be held legally responsible, and yet are not. Now, belatedly, these same companies are hiring armies of QA auditors and engineers they should have twenty years ago but didn’t, because they couldn’t resist the margins they were getting through penny-pinching.
It is these same American multinationals that very few people in the States are holding to task for disengaging themselves from the very communities from which they draw their most valuable asset; namely, their people. American citizens since 1970 have allowed multinationals to slough off their responsibilities to the very neighborhoods that make them such a success; first, through destroying the mom and pop operations that were the basis of so many towns throughout America before the advent of the Walmarts with their Made in America branding in the early 80’s changed the fabric of Middle America (remember that? before Walmart started contributing 10% of the Chinese GDP through its China sourcing operations). Then, through the outrageous tax advantages that suburban communities gave American corporations with headquarters in the Carribean, in order to get low paying jobs (which, suburbanites figured, were better than no jobs at all). No wonder wages for middle class workers have been stagnant for 30 years! Can’t blame that on the Chinese, much as you might want to…
No where in the American discourse are conversations about how the Corporation as a pillar of American society dislodged itself from the foundation of the country through outright mercenary tactics.
Meanwhile, it is far more PC for Americans - hidden behind their bunker walls - to blame another country for its losses, when it refuses to examine where it might be able to improve the lot of its own people. First, we blamed Japan for our non-competitive woes, only to forget that red herring when the American economy began booming again in the late 90’s.
Instead of plowing billions of dollars wreaking death and destruction in the Middle East and being the world’s largest legitimate arms dealer (legitimate in OECD terms), American should be plowing those hundreds of billions of hard-earned tax dollars into educating its citizenry and re-tooling experienced workers who are as bright and energetic as their forebears who built the country in the first place (and not in the most legitimate of ways all the time, I might add).
Globalization is a very old phenomenon indeed, as old as the Silk Road itself, when people spoke several languages and traveled to where the work was and developed whatever trades were in demand as the times changed. America’s cross-roads in history is not the first time a country has had to adapt to new-world torrents; and it most certainly will not be the last.
Kind regards,
Bill (a former IT professional downsized by the Indians who began studying Chinese at mid-life to begin his own successful consultancy in a country less blinkered about how the world works - as opposed to how it should work - than his place of origin.)
By Ryan Jang on Sep 25, 2007 | Reply
I foresee China is going to be a scapegoat for every goods that goes wrong in the US. You rightly point out that it’s the onus of the US MNCs to do its due diligence to ensure their products are safe. Mattel, the biggest toy maker, is pulling back 17 million defective Made in China toys voluntarily. Now, that’s corporate responsibility.