Last week, I had the chance to catch up with a friend and industry colleague, Mitch Free, founder and CEO of MFG.com. While we tried to avoid talking directly about work most of the time, I could not resist asking him if we could conduct a short blog interview about the future of sourcing, marketplaces and related topics. Mitch was more than happy to oblige. Somehow, the conversation even turned to Courtney Love and Manny Ramirez (don't ask me how). In any event, below you'll find the first part of my interview with Mitch. I'll publish the second installment later this week.
Jason: What are the more interesting trends that you're seeing in the MFG.com marketplace today?
Mitch: There's a lot going on. For one, UK companies are sourcing more from the US. This is to be expected given the dollar. But I'm not sure where the work was before -- perhaps domestically sourced within the UK. Without question, there's a real surge in UK companies awarding to companies in the US. In addition Mexico is becoming really hot again. This is work that was going to China, but is now coming back to Mexico. It's not just due to the currency, either. The cost fuel is making the total cost from China and other Asian regions prohibitively expensive for US companies. It has added a lot to the landed cost. What else is happening? We're seeing Canadian companies sourcing more aggressively from the US thanks to the currency issue. Columbia and Brazil are also very interesting today. For a long time they lacked sophistication relative to Mexico and China, but the manufacturing capabilities are really coming along. Brazil is further along in A&D, but Columbia is generating a very cool job shop base.
Jason: We've talked quite a bit in the past about how the MFG.com Chinese operation is growing. What is the current fuel for the fire if it's not the US?
Mitch: When the China sourcing boom began, it was all about suppliers wanting to access buyers in the West. Now it's actually internal demand. The majority of what is happening in China in the MFG.com marketplace is China to China. Not just China companies to Chinese companies, but western IPOs using it within China for their regional sourcing efforts now that they're more aggressively selling into the market. What else do I attribute to the growth of China for MFG.com despite slowing exports to the US? Clearly, turmoil in any market is good for a marketplace. The fact that a number of larger suppliers and job shops are losing customers makes them scramble for domestic jobs and the MFG.com marketplace is a place to find them. As more suppliers come online, we have an eager Chinese buyer community looking to find qualified suppliers that have been vetted by the marketplace.
Jason: You're headed to the Olympics in a few weeks. But what do you see post-Olympics in your China crystal ball?
Mitch: I see them moving to the next tier starting in 2009. What I term "value-add" is the next stage for China -- when they go beyond producing lower-value items and materials. There will always be a lot of manufacturing capacity in China, but they will keep moving upstream to higher value added. The nuts / bolts / trinkets era is almost over. China is now outsourcing low value work to places like Vietnam. But China won't stop there. The next stage for China will be brand ownership/brand stewardship. Ultimately, they'll move to becoming brand owners. The Olympics will help solidify China on the world stage. There are a lot of Chinese companies creating their own IP and own brands at the moment -- they're on the cusp. We'll start to see made in China under Chinese brands.
Spend Matters would like to thank Mitch for his insight. Stay tuned for the second part of this interview later in the week.
- Jason Busch