The era of cheap s--t is over

Our kids' piano teacher lets our kids choose a little prize after their lessons, if they've tried hard and been attentive. The other day, my wife said, after tripping over one of these dollar toys for the millionth time, "I may have to tell her to start bringing candy, instead of these little toys. I can't keep up with all the crap."

Help is on the way. Last Thursday, on NPR's All Things Considered, reporter Louisa Lim tells us that many Chinese factories who supplied the world with cheap trinkets are going out of business, victims of rising commodity prices and slack demand from the West. Chinese government action may also be a cause, according to the ATC story:

Harley Seyedin, the president of the American Chamber of Commerce in South China, says this slowdown was the result of deliberate action by the government.

"The majority of this happened because of changes in regulations last year deliberately decided by the Chinese government in order to slow down the economy and to move away from reprocessing [and those] labor intensive, environmentally unfriendly and energy-intensive kind of companies," Seyedin says. "And certainly some companies have suffered as a result of that. Those types of companies needed to go anyway."

Hallelujah. One of the byproducts of the economic slowdown will be a ratcheting down in our acquisitiveness, and a reduction in the easy credit that's allowed us to buy more crap, cheap or otherwise. To me, there's good news in that.

Tags:
economics, manufacturing, recession, credit crisis

More problems with Chinese partners

There's another depressing story in today's New York Times on a life-threatening quality problem with Chinese products. Now, it's a tire manufacturer who decided to forgo installing a gum strip inside the tire, an omission that makes the tire more likely to fail on the road, the tires' US distributor, Foreign Tire Sales, announced yesterday. The US National Highway Traffic Safety Administration is demanding a recall. Writes the Times:

...In September 2006, the Chinese manufacturer, Hangzhou Zhongce Rubber, a former state-owned company based in eastern China, acknowledged that a gum strip that prevents the tread from separating was left out of the manufacturing process.

It brings to my mind a question of alliances. If my business depended on an alliance with a Chinese manufacturer, I would be very nervous. Because there is growing anecdotal evidence that faraway partners are willing to cut corners without regard for the impact of those cuts on the end-user.

Which means those partners can't be trusted. While alliances are full of mistrust (am I getting paid what I'm owed? Is my partner selling my product as hard as he should? etc.) at their core is a profound trust--that the product works to its specifications and is of acceptable quality in the market in which it is to be sold.

Because when you sell someone else's product, you do so because you don't have (or don't choose to have) the capability, experience or resources to do it yourself.

(Think of what would happen if I sent this blog to be translated into the Czech language by a company in the Czech Republic. I don't know Czech, and would be reliant on them to do a proper translation.)

And without trust, these relationships are doomed. We can't inspect every tire, can we, to make sure the gum strip is installed? But if Hangzhou Zhongce Rubber, or the company that added an antifreeze ingredient to the toothpaste, or the companies that made the tainted pet-food ingredient, feel free to implement that little change that makes the product at least substandard, or even a danger to its users, you simply can't do business with them.

Foreign Tire Sales will likely go bankrupt as a result of the tire recall. Let's hope their replacement selects better partners.

manufacturing private label China New York Times alliances

Cheap, we're learning, also has a cost

A couple of years ago I met a guy who owned a manufacturing company. He told me he had two plants, in Indianapolis and China, that made his product. The price for making his doodads in Indianapolis? $4.50. The price in China? 40 cents.

This radical cost gap has caused the manufacture of many products to move from their home markets to China. The new book "Dragons At Your Door: How Chinese Cost Innovation Is Disrupting Global Competition" by Peter J. Williamson and Ming Zeng paints the picture clearly. Chinese manufacturers have a great cost advantage, and are applying it powerfully across industries.

And who could argue with my friend's logic? Would you pay $4.50 for something you could have for 40 cents?

Well, the downside is becoming clear. Along with the thousands of reputable firms in China that manufacture quality products, for their own sales or as private-label brands, there are many who are sloppy, shoddy or malignant--and their products are putting people at risk.

Exhibit A: animal food with a poisonous ingredient, traced back to a supplier in China.

Exhibit B: tainted drugs that killed people in Haiti and Panama, with Chinese suppliers on two different occasions using poisonous diethylene glycol--an antifreeze ingredient--instead of "its more expensive chemical cousin glycerin."

Exhibit C: the news, reported Friday, that certain Thomas the Tank Engine trains, made in a Chinese factory, were painted with lead-based paint.

"Don't ask, don't tell"ing on sourcing ingredients, shrugging at poor working conditions and tolerating disdain for intellectual property are all part of the same syndrome: cheaper is better. But when your standards fall, at some point there is a price to be paid.

The Government of China has the biggest responsibility to address this crisis. But so do the American and European companies who source products from China. It's time for them to get serious, demand high standards and concern for customers, uniformly, from all Chinese companies, even if it costs more. [And invest in quality control. Laissez-faire isn't getting it done.]

Otherwise maybe the future of that plant in Indianapolis isn't so dark.

manufacturing private label China New York Times