Is manufacturing really coming back to the US ?

I love reading the Wall St. Journal. In addition to great book reviews and the always interesting human interest stories at the bottom of page 1, there is a lot of China news, usually in the Marketplace section. This past week there was an article entitled “It’s No Fun Making Toys or Toasters in the USA.” As the headline suggests the article was about the challenge that small business in the US face when they try to manufacture here in the US. In fact if you are a toy company and want to get, say, a plastic toy made in the US, it is almost impossible to do so. The main reason is that US manufacturers are just not set up nowadays to handle large orders, most of those orders having gone to China over the past 20-30 years. So China now has the infrastructure and the US does not. This is nothing new, really, and I have written about this before here. Making dolls in the US But I like to see these stories now and then in the major news outlets because I think they offer a good dose of reality and offset the almost fantasy like stories about manufacturing returning to the US. Because you know, with very few exceptions you just can’t make low cost consumer goods in the US anymore and have a viable business. A case in point: I received an email from a vendor in China the other day and this vendor was offering a 3 pc breakfast set , a table and two chairs, made out of particle board and powder coated steel. The price $ 28.00. And I am sure if I went back to him and told him I wanted to place an order for 1000 pcs I could get it for under $20.00. And there are probably 1000 more vendors like him in China. Do you think there is any place in the US where you can buy a breakfast table and two chairs for $ 28.00 ? I seriously doubt it.



Drop Shipping from China

I have gotten a couple of inquiries lately about drop shipping from China. Drop shipping, where the distributor or factory ships directly to a retail customer, is a of course a way to cut lead time and reduce costs substantially and at least here in the US it works. Drop shipping is a common feature of e-commerce nowadays with sites like EBAY and Amazon and even with many brick and mortar retail stores. But drop shipping out of China ? Hmmmm..I don’t think we are there yet.

One company that called me is an industry leader in a minor category of apparel and they wanted to ask me about finding a supplier in China who could drop ship to their customers in the US. They said they have a new CAD program which will allow customers to design a garment online and the factory in China will make the product from the online specifications as entered by the customer. I asked them what happens if what the customer orders is not what they get and they replied to me that would not happen because all the specs are there for the customer and vendor to see. The guy I talked with was insistent that there was no margin for error. This is a real company and theirs was a serious inquiry so I listened to them, politely. But all the while I am thinking to myself “these people do not understand China.” There are a few problems with this idea as follows:

  1. In overseas manufacturing something can always go wrong, no matter how simple the product seems. And, far from being simple, garment manufacturing is no walk in the park. I know because I used to work in Home Textiles.  Drop shipping garments made in China to individual customers in the US seems like it would be fraught with problems.  I can see massive returns based on incorrect sizing, color or quality. I mean, just because you show the vendor where the stitch goes does not mean they will put it there. As a vendor once said to me when I told him he should be able to find a solution for a simple problem we were facing “sometimes the easy things are the most difficult.”
  2. Few Chinese companies that I know of are going to be interested in doing orders like this. One reason is that it takes a lot of time to set up a production line and factories do not want to do it unless the order QTYs are large.  Although the US Company said their solution would be to bundle the orders so that factories were given an order for, say, 1000 units a month, it just would not be a big enough order to get many Chinese companies interested.    I should say here that a lot of small companies that come to me have ideas for products and they get very excited.  They think that all they have to do is to find a factory in China to make their product and they have got it made. They expect the factories they approach in China to share their enthusiasm and they don’t understand when the factory does not.  But factories want big orders.  They don’t care what the product is. They just want volume, because that is where they make their money, and if you can’t offer that to them, they just are not interested.
  3. The cost to send one garment from China to the US via an international carrier such as FEDEX or EMS, is from $30.00-50.00.  Needless to say that adds a lot of money to the product and I don’t think there are many customers who are going to be willing to absorb that kind of shipping cost on a $25.00 product.  And then when there are returns the cost goes up even more. No one is going to want to absorb that cost, neither the customer nor the manufacturer.

As I said, these are serious companies and one company even offered to fly me out to Denver to discuss the project with them. But I knew I would just be going there to tell them that they did not have the right idea about China, and that an idea to drop ship from China to the US was just not a smart idea, and not one I wanted part of,  so I politely declined.


Memories of Chinese New Year (CNY)

Chinese New Year is coming up. This year Chinese New Year, or CNY, as it is known to people who do business in China is on Feb 19th. The Chinese refer to Chinese New Year as 春节(pronounced “chun jie”) which translated into English is Spring Festival, another term you hear often in China. And Spring Festival is just that, a festival. It takes place over 4-5 days in which time all Government offices and businesses are closed and pretty much everyone in China is on holiday. I lived in China in the 1990s and the five or six Spring Festivals I spent there are among my most special memories of China. Here are some memories that stand out.

In 1991 I was invited to dinner on New Years Eve by a professor from the Shanghai Conservatory of Music. The dinner was held at the house of her mother, a Shanghai matriarch in her 90s. It was an older group of people and I enjoyed listening to everyone talk about the old and the new China, for this was just the first year of reform in Shanghai. It was a time when there was tremendous change in the air.

After a traditional New Years Eve dinner everyone sat down to watch the major New Years program on Chinese TV. 春节联欢晚会( pronounced in Chinese Chun Jie Lian Huan Wan Hui). Shortly before midnight the fireworks started and the sound was absolutely deafening. I had never heard anything like it. The only thing I could compare it to was the battle scenes from the first Gulf War which had just begun, images of which were broadcast daily on Chinese television. I was chagrinned because to this glorious pyrotechnic display all we could contribute were a few sparklers, which is all we had on hand. Everyone explained to me that there were four more days of the festival and that there would be more fireworks. Accordingly, the next day, the first day of the Festival, I went out and bought enough firecrackers, Roman Candles, Bottle Rockets, Sky Rockets, MD-80s etc to fill a duffle bag. But that night as I waited outside for the fireworks to begin, there was nothing but the sound of a few isolated firecrackers. And the following night it was also quiet. I asked some people about this and received conflicting answers. Some people told me there would be fireworks that 3rd night and some people said there would be no fireworks that night but on another night. Having just arrived in China my Chinese was not good enough to understand the complexities of Spring Festival and so on the final night of the festivities I decided, after a few sleepless nights, to go to bed early. Yet around midnight I was awakened by the sound of fireworks once again.  As fast as I could I put on some clothes, grabbed my duffle bag and ran outside to set off fireworks. It was more fun than I could have imagined.

After that first year I had learned on which days to set off fireworks, New Year’s Eve 大年夜( pronounced Da Nian Ye in Chinese) and the final night of the Festival初四 (pronounced Chu Si) and I was well prepared from then on. Every year I would go out and spend over $100.00 on fireworks which was a considerable amount in those days. Vendors sold them on the street and you could even buy them in the grocery stores. The bigger fireworks, the kind that in the US that you would need a license to set off were sold in specialty stores, nominally illegal, but allowed to operate as other stores.

My second year in China I was in Beijing for the New Years. My wife’s parents, officials in the Cultural Bureau, were stationed in Japan at the time so we got to use their apt across from the State Guest House. On New Year’s Eve, before dinner, I threw a firecracker off the balcony and then went inside. A short time later, as I stood in the kitchen with my wife, we heard a commotion outside and everyone was screaming. I asked my wife what they were saying and she said they were screaming “Fire.” We ran to the balcony and below us a fire was raging just about where I had thrown the firecracker. As a crowd of people gathered below some firemen entered the veranda put out the fire. A short time later there were loud knocks on the door and when my wife opened the door three or four members of the Public Security Bureau were standing there before us. They explained that someone had seen the sparkler thrown from our apt. Because officials lived in the building it was apparently under constant surveillance and the PSB knew immediately who threw the firework. They told us that the people whose apt the fire had started in were in Hong Kong and that they had to break down the door with axes to put out the fire. They confiscated all my fireworks and that pretty much put a damper on our New Year’s Eve, dinner and all. About the only positive thing was that when the people in whose apt the fire had started came back from Hong Kong, they were very nice about the whole thing and even laughed about it.

For another Spring Festival I was asked to be a guest on Radio Shanghai in which Shanghai’s top Radio personality interviewed me about my experience on Chinese New Year. I went down to the studio and sat there with her and she asked me about my experience in China on Spring Festival. In those days before there was much to watch on TV I imagine that ten million people must have been listening to that broadcast on that day. Of course I told the story of my first Spring Festival in China and also of the fire I started in Beijing. The interview was conducted in Chinese and although I was a little nervous I pulled it off I guess for the following year I was asked to be a color commentator for the Super Bowl which was broadcast on China’s equivalent of ESPN.

These days I can’t imagine that Spring Festival is much fun. Authorities in big cities have banned fireworks for some years now and these bans are strictly enforced. And this year, because of the Western New Year stampede in Shanghai which killed 37 people, public celebrations will be severely curtailed, not just in Shanghai but in many major Chinese cities. New Years in China is obviously going to be safer. But I don’t think I would enjoy as much as I once did.