China Sourcing: The Future Ain’t What it Used to Be (Post 3)

This afternoon, I'd like to welcome's AJ Sweatt to Spend Matters. I've asked AJ to offer his opinion on what's going on in China from a Western supplier perspective.

"I Told You So" Is The Wrong Reaction For North American Manufacturers

Oh sure, it's great news. China reduces or eliminates the rebates for VATs for nearly 3,000 products, and you're all over it. "Tried to tell you," you say. "About time," say the downtrodden.

Now is NOT the time for suppliers of discrete or standard products to dwell on this useful but minor victory. It's time for action. Sure, the bloodletting has been fierce. If you're still standing, you have reason to gloat a little.

But only for a minute.

Once the initial buzz wears off, North American and European suppliers should DO something. While many in manufacturing's hoi polloi will debate the economic, cultural and political ramifications, there's money to be made in them there hills.

The question for North American suppliers is: can we capitalize, and can we regain some ground?

There are opportunities, certainly. And they aren't just hollow ideals from editors looking to fill space on a page. They mean business -- long-term, tangible business. Perception's reality, and when the companies that have substantial investments in China see the costs incurred by the adjusted rebates, they're going to come looking for viable alternatives. To cut costs. To insulate themselves from exposure of further adjustments. Fact is, these volatile times can play into the hands of savvy suppliers.

Here are some inspirational tips for North American manufacturers, to help us focus on righting the ship after 15 years of listing (or sinking):

  • Be Assertive. Do NOT be timid. Use your Web site to enunciate your strengths and values as a preferred partner. If you're a suppler of high-volume product, focus on the logistical strengths you bring to a partner. If you're higher tolerance, low-volume in your approach, adjust your message to convey competence in the design, project management and participative stages of the sourcing cycle. Now is the time to PROVE you're a good partner, before the buyers begin to research online.
  • What Are The Costs? A real strategic advantage that North American suppliers have in this scenario is time. But only a little. The products and materials affected by the VAT rebates are confusing at this stage, in that they sometimes name products, and sometimes name materials. Are watches hit by a 2% increase in the VAT, or are watches made from steel hit by 8%? It's going to take a while for buyers to determine the real impact of these adjustments on costs. And that means North American suppliers have time to condition buyers with their message of consistency and dependability.
  • It's About Competition. If there's a bottom line, it's this: we're not as expensive as we were 2 weeks ago. Not only that, we speak your language, we understand you vernacular, and our shipping costs are less. Everything you say and do from your integrated media (Web site, mailings, e-mails, etc.) should drive that home.
  • Marketing Judo. Use your opponents weight to your advantage. Of course, your prospect and customers aren't your opponents -- but where do you think they're going to go when they start looking for alternative sourcing solutions? According to's latest Buyer Survey, 82% of buyers say a supplier's Web site is important to them when selecting a potential supplier. As these buyers move online in the coming months to examine their sourcing options, North American suppliers need to be there to capitalize on those behaviors. This is the fundamental function of a supplier’s Web site. Distinguish where the buyers go to research online, and make your presence known. “Do the buyers of our services use Thomas?” Then you need to be there, too.
  • Why Now? Honestly, there are a lot of folks speculating about why this is going down now. It could be that the Chinese government is sincere, and it wants to reduce the impact on its environment and endangered species. It could be a result of international pressures brought on for economic reasons. Maybe China is looking to move its manufacturing base from a low-technology position to a higher technology base, a la Japan in the 1970's.

In the end, it doesn't matter. The opportunities are real, and if North America is serious about reclaiming some of its supremacy as a manufacturing powerhouse, this is the place to start. Forget the government, forget your former customers -- it's in the suppliers' hands now.

AJ Sweatt is Vice President of Knowledge and Content and He can be reached via email: AJ [@] mfg [dot] com.

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