When I mention China and it’s push to clean up the environment, it usually results in snickers and other bad jokes from folks living overseas. The reality is, China is the world’s biggest investor in renewable energy. That’s no joke and on the subject of fuel efficiency, you might be quite surprised how China’s cars compare to those of the traditional American automakers. Of course on the subjects of waste education, collection infrastructure, air pollution, etc., there is still a lot to improve.
So in those areas of eco-deficiency, over the last couple months numerous suppliers that I actively work with in China have informed me about serious problems in production lead-times. You see, the government began a massive campaign to rid the country of the bad polluters and this campaign has especially impacted manufacturing in China. I have heard stories of upwards of 200 factories being shut-down in a single city in Jiangsu province, coating/finishing such as PTFE, anodizing, etc. in Zhejiang province being greatly impacted, or wood product suppliers out of Shandong province getting their doors shut. Wherever it is, the story is the same. I need to expect serious changes in my order lead-times because manufacturers of finished goods are having to find new suppliers for their components.
Now don’t get me wrong, pollution is bad and I do consider myself a cheerleader for the environment. I think it is great that the country is finally making a drive to clean up the ugly. But as a sourcing professional, I see two issues coming out of this that directly impact you. These are lead-times and production unit costs. Costs, like they do on a regular basis in China, are indeed going to increase more as there are less supply options on the market for manufacturers to source their components and services from. For those who do survive, their operating costs will ultimately increase because they must comply with stricter regulations. As for lead-times, well in the words of quite a number of my regular suppliers, they can’t guarantee lead-times during this period.
But before you blame China for the pollution, please consider this. We as buyers of goods manufactured in China are equally to blame for the current state of the environment. It is because of our demand for low cost production and our constant bargaining that has led manufacturers to do what they can to produce your products and still have a viable business model at the end of the day. Had manufacturers in China all focused on the environmental standards that we are accustom to in Western markets, we would not have been able to produce and sell and buy as consumers what we have been able to today. The manufacturing costs that we have grown accustom to would in no way be as cheap as they are compared to producing the goods back in our home markets. It would have been totally impossible. This is the reality.
Should you choose to run away to lower cost supply markets like Bangladesh, Cambodia, etc., please remember that you are then also most likely fueling the environmental degradation of those countries too by a sole focus on price. Instead I hope that as buyers, it becomes more important for you to place a greater emphasis on environmental standards and labour standards of the manufacturers you are working with. We must accept that products made in an environmentally responsible manner will cost more to produce. We must begin including environmental audits and compliance expectations in our purchasing strategies. As the last time I checked, there was no other planet that we could move to nor do we possess the technology to move billions of people to a new home.
September 18, 2017