Daily Archives: November 4, 2009

Are Economics Going to Push Us Back to China?

Despite the disadvantages, which include

  • limited ability to respond to demand changes,
  • high logistics costs in boom economies, and
  • the potential for large currency-exchange losses
  • it looks like economics are going to push many multi-nationals back to China.

Consider the following advantages that the global recession has created, as pointed out in a recent article on Sourcing Successfully in the New China by Accenture’s Jonathan Wright:

  • Dips in the global economy have left China with lots of excess manufacturing capacity, which exceeds 50% in some industries.
  • Dramatic overcapacity exists in ocean freight, with hundreds of vessels floating fallow in Hong Kong’s harbours.
  • China’s domestic growth is as promising as any economy in the world.
  • Labor rates are still significantly lower than Western countries.
  • Most suppliers have dramatically improved their product/service quality by implementing control mechanisms and systems, renewing manufacturing lines, and increasing their available talent pool. They are also much more open to continuous improvement methodologies.

When you put all this together, those companies with good demand planning systems and dual sourcing strategies (to allow for unexpected demand increases to be handled near-shore) could lock in great deals now on both production and transportation and have a significant advantage during the forthcoming recovery while being in a great position to serve the emerging domestic market in China. While I normally don’t push the outsourcing bandwagon, it looks like those companies that climb aboard early could benefit greatly while those companies who wait until it becomes the “in-thing” will have totally missed the boat (as prices will rise as capacity diminishes).

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Teaching our Children (Not) Well

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

(Title with apologies to CSN&Y.)

I saved an article from the October 4, 2009 edition of my local newspaper because I knew that it would make a great blog topic: Some Russian business leaders have created an MBA program that teaches bribery and bureaucracy. Having such extensive experience themselves these business leaders want to pass along their knowledge of these topics to up-and-coming executives.

(It makes me wonder if it’s okay — if not a necessary requirement — to cheat to get a good grade in this class. Hmmmmm … I also wonder what it takes to get a scholarship?)

It’s bad enough that the percentage of surveyed teens who believe unethical behaviour is needed to get ahead in business jumped from 22% in 2005 to 41% in 2007 in a Deloitte / Junior Achievement poll. Now we’ve got business leaders providing an education on how it’s done.

(I think those were likely American teens surveyed. It’d sure be interesting to see the same survey’s results from Russian teens.)

In comparing his school’s curriculum, the dean is quoted as saying that Harvard “[is] a business school of the past, I have to say. But a business school of the future has to be different.”

Around the time of this article several Broward County (FL) commissioners, school board members, lobbyists and fund raisers have been removed from office and/or arrested by the FBI on a long laundry list of fraud, corruption, and ethics violation charges, and more people are due to get snared in the legal net being cast. I have to think that maybe the Russian school dean has a valid point in his comment. Ethics — or so it would seem — are passe and the foundation of the future would seem to be fraud.

No, no, no! I don’t want to believe this! But it’s tough to turn a blind eye to the endless acts of shenanigans when they seem to be escalating in frequency all over the place. Corruption seems to be the new norm (no pun to my name intended). Is fraud our apocalyptic future?

How weak has the fortitude of people’s integrity become to be so swayed by corruption and for sometimes such small dollar amounts? Do an Internet search on the latest Broward County corruptions and you’ll learn that these folks sold out for nothing greater than five-figure amounts, and that these were on the low end of the scale at that.

Instead of teaching future business leaders how to cheat and work around the system we should be educating them on how to fix the system. Instead of teaching kids how to con one another, capitulate to corruption and gravitate to greed, we should be educating them on how to stand up for oneself even in the face of adversity, instilling values and a belief that doing what’s right is what’s right and that there can be plenty of profit in doing so.

Where will we find these educators? I hope that they are among the vast majority of people who live their lives on a straighter path. They are the politicians and business leaders of today who have turned away from greed and corruption and stick to the right behaviour. They are the retirees who “remember when” and talk of the days when a handshake was able to seal a deal and a person’s word meant more than a signed contract. These are the folks who need to guest lecture at schools and universities and let the future employees, employers, and leaders know that ethical behaviour and success are complimentary, not adversarial, concepts. These are the people who — through their interactions — are able to promote good behaviour and explain why bad behaviour is not acceptable in a civilized — at least for the present — society.

Let us teach our children well.

Norman Katz, Katzscan

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