Thursday, April 26, 2007

The Point of Globalization?

Christopher Sciacca of the "Who says Supply Chains are boring?" Blog, says:

I would prefer to be called "an emerging market" or "a cool, hip country with really smart people that want to work". Because if you are outsourcing simply for the lower wages you are missing the point of globalization in the first place.
I tend to agree - I'd even include lowest sticker price to the lower wages bit. The point of globalization is lower overall costs through comparative advantage. In working with new clients, I get two sides - there's one set that have heard of all these benefits to sourcing from China and want to jump on the outsourcing bandwagon expecting savings to simply fall like mana from the sky, but then there's the other side, a more skeptical bunch who have heard the horror stories or experienced them themselves. The same is true for some foreign manufacturers who expect to open a factory in China with ridiculous expectations and ultimately get robbed blind - especially when it comes down to day to day management. One client would used to repeatedly order from the suppliers that priced cheapest despite knowing that there would be rework in the US (I suspect it had to do with poor project accounting since they weren't the ones responsible for the cost of the rework and simply for getting the best price).

Now more than a few years ago, I encounter far more of the latter who have experienced challenges first hand. It's these clients that I hope for, since they're far "stickier" and have far more grounded expectations. On the flip side of it, it's a far longer (and sometimes frustrating) sales cycle, but all things considered, I wouldn't have it any other way - especially given the impatience it would seem of many Chinese suppliers who think they want to begin supplying overseas.

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