My Shanghai-based colleague Richard Brubaker, who pens the well-known China business and supply chain blog All Roads Lead to China, has been quite busy of late offering up his prognostications on everything from the future of China quality to inland logistics in his adopted country. But he recently took a few minutes away from the blogging world to author a short piece in Industry Week about how the Internet has changed global sourcing, supplier identification, and relationship management.
In the column, Richard does a good job describing the slow death of the trading business as more and more companies have gone the direct relationship route using the Internet: "As recently as five years ago, the process of finding a supplier usually involved engaging a Chicago, New York, or Los Angeles-based trading firm to act as liaison to a Hong Kong or Taiwanese trading firm, who in turn may have contacts with a mainland distributor who may actually know a factory -- with each tier pocketing a fee ... Now with tools like Alibaba, Made in China, and Global Sources, buyers across the globe can identify potential suppliers and view sample products online from ... Without a doubt, the most visible benefit to these tools has been the ability to leap over layers of middlemen by enabling foreign buyers to either work with the manufacturer directly, or with a China-based trading company who can manage multiple suppliers on their behalf."
But have we really eliminated the trading companies? If you talk to any experienced global sourcing hand who uses Albiba or any of the other sources Richard sites, they'll tell you that trading companies are still present on these sites -- but now they often hide behind layers of virtual factory walkthroughs, bogus quality certifications and other online artifices designed to make Western companies feel more comfortable about doing business with them. In fact, one of the biggest challenges of these directories is that they serve as little more than virtual storefronts, but without any type of trusted Better Business or Zagat-like rating system to tell you if the capabilities that someone is claiming are actually real. Because of this, I agree with Richard that "the move away from using personal introductions to find suppliers has greatly reduced front-end costs, while creating a need for greater attention at the back end ... The recent spate of recalls of Chinese products over safety concerns illustrate that diligent buyer-oversight is indispensable to ensure the product you think you're ordering gets delivered to your warehouse."
I'm guessing that we'll eventually see social-network based types of rating systems -- or online communities of interest -- become the norm in sourcing environments, enabling companies and individuals to share information on supplier performance, quality and risk. As Pierre Mitchell would call it, we need eHarmony or Match.com for global sourcing (tossed in with a bit of Facebook and LinkedIn for good measure). But until then, if you want to sleep better at night knowing that those containers on the water contain exactly what you want, are packed correctly, and will arrive on time, there will be no substitute for having an on the ground presence in the countries you're doing business in to keep your global supply chain honest.