China's supply chain value
I recently attended the ISM China conference, which was attended by about 200 supply chain professionals from companies like IBM, Cooper Industries, Delphi, Alcoa, Home Depot, BP, Emerson, Cardinal Health and Eaton.
The major theme of the conference was about China’s supply chain value. The general consensus at the conference was that sourcing from China was necessary and still an advantage.
Data presented from a survey 240 senior procurement professionals said 25% thought China was still the best low-cost country for sourcing, followed by the Czech Republic at 21%, Hungary at 10% and Poland /India at 9%. Other data showed that labor rates have increased in China. However, China, India and other Southeast Asian countries still have lower labor rates than Europe and other Asia regions.
An economist from a major global company explained that the future of business in China will depend a lot on the Chinese government policy relating to taxes, export/import procedures and banking controls.
Oil continues to be a problem. Developing countries including China and India will consume 3.4 barrels of oil per $1,000 U.S. value of GDP and developed economies 1.1 barrels for the same amount of GDP. Oil and energy will be a major future constraint on growth in this area.
In the past, China’s economic growth resulted from labor costs and favorable government policies. However, its future will depends upon the energy constraints, rising labor costs, and competition from other counties in the area like Vietnam and Indonesia.
Vincenzo commented:
Thanks for sharing notes from the ISM conf.
One has to be careful before joining the China bandwagon. For most low mix - high volume type products, China has established itself as a global leaders. On the other hand, the Indian manufacturing is still in it's infancy and relies on it's rich Engineering capabilities to carve up a niche in the high mix - low volume arena.
Before sourcing from both low cost countries, it is imperative that we understand the Total Landed Cost. By that we don't mean a simple calculation in a spreadsheet. It's understanding the capabilities of the low cost suppliers to link into your companies processes & systems, engineering, testing, design, international logistics etc.
Long and short is a thorough theoretical and tactical study is required before sourcing from the Low Cost Country belt.
jim craig commented:
we purchase about $3M from China and agree, continue to see an advantage, looking at costs very closely over the next year or two.
