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Onshoring: The Role of Transparency

Savvy consumers demand to know something: Where exactly does your product originate?

In the heyday of offshoring, few of us thought of China as anything but the land of opportunity. Then reality set in. Revelations of sweatshop labor, environmental destruction, knock-off products, and quality issues raised questions about the “Made in China” stamp and put pressure on companies to take responsibility for their entire supply chain.

To further complicate matters, the hidden costs and pure complexity of dealing with suppliers in multiple countries took some by surprise. When all factors were finally taken into account, what had started out as a money-saving endeavor became a headache. In order to improve transparency, there appeared a simple solution: Pack up the operations and move home.

The experience of Sleek Audio, a Florida manufacturer of in-ear headphones, is no anomaly. After four years of manufacturing in China, the company faced a crippling set of issues. There were communications problems with the Chinese partners, shipping delays, tedious travel, rising costs, and repeated deliveries of products that did not meet the company's quality standards. When a shipment of 10,000 units was ruined, the foreign venture came to an end, and Sleek Audio moved its manufacturing back to the United States.

Other infamous cases — labor abuses in Nike factories, suicides at one of Apple's Chinese suppliers, and the discovery of lead in toys manufactured in China — showcased the risks American companies were taking by moving production to foreign markets.

Though they may have been able to claim ignorance of such “missteps” in the past, distance is no longer an excuse for inadequate supplier oversight. Even so, distance does make oversight that much harder. In fact, building a transparent supply chain is crucial to gaining the trust and confidence of increasingly savvy consumers.

“The big names at the end of the chain have come to realize that lowest price can mean highest risk — and highest risk can mean high total costs,” MIT’s Charles Fine wrote in a 2013 analysis. “In that sense, the rapid switching of suppliers in search of ever lower costs has become a higher risk approach to supply chain management.”

A leaner supply chain rooted in the United States comes with increased velocity, improved quality control, and reduced management support costs, because the US business culture tends to be more service-oriented than other cultures. It enables quick and timely response to changes in demand. It also eliminates the risk of disruptions to the supply chain as a result of foreign labor disputes, natural disasters, and political upheaval, and it cuts out costs associated with shipping and tariffs.

Most of all, since consumers and watchdog groups now pay close attention to the origin of products, telling people exactly where your products come from should be easy.

Do you think it is possible to maintain transparency with the supply chain stretching across multiple borders?

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9 comments on “Onshoring: The Role of Transparency

  1. harpat949
    April 29, 2014

    I am of the opinion that offshoring is not in the long term interest of USA for many reasons.

    Having said that, most of the problems of offshoring are due to gross incompetence of American company management. Any manufacturing activity requires you have day to quality control. You do not want to find out quality or safety problems after shipping a million units. I have read about cases of prestigious toy companies like Mattel and companies like McDonald recalling hundreds of thousands of products for lead paints or other issues. One wonders if these companies have any quality control people on their staff and any procedures to prevent this type of occurences. Every shipment should be tested for problems like these and if it is stipulated in the contract that such violations will result in return of all goods without payment, this nonsense will stop quickly. A better scheme would be to have a quality control guy right at the place of manufacturing to check the product out before shipment. Rather than sending the useful quality guys, American management seem to be more inclined to send worthless top echelons splurging on travel expenses.

    The issue of slave labor is a matter of perspective. Slave labor is part of their culture and will not go away, rather it will become worse, if there is no offshoring. Obviously if we require the Chinese to pay the same minimum wages as in US there will be no offshoring in the first place. True , we are practicing double standards, one for US and one for the third world. 

    I don't think the majority of people really care where things are made so long as they are getting good value for their money and most people don't even care that America may be destroyed in the long run.

  2. Houngbo_Hospice
    April 29, 2014

    @harpat949:

    “I don't think the majority of people really care where things are made so long as they are getting good value for their money “


    That is true, even more so with globalization. But sometimes business can become a matter of patriotism and manufacturers may choose to bring job back home in order to support the country's economy.

  3. Ashu001
    April 30, 2014

    Rich,

    You raise valuable points here.

    What I have seen however is that the Onshoring Scene is getting better for America now.

    Primarily because of Lower Energy Costs (but also because American Labor has become competitive with Chinese Rates) we are seeing lot of Manufacturing come back home to America.

    It has less to what Lobbyists/Arm-chair Pundits scream and Shout and more to do with Plain Economics.

     

  4. Anand
    April 30, 2014

    Does it really matter where you get your goods? Most consumers no longer place emphasize on the originality of an item now days, with globalization it is important to learn to embrace and appreciate diversity as long as you get value for your money.  Does it really matter if a gadget is from a third world country or even china?  The issue of double standards is sure to emerge if consumers were to know the origin of goods because the matter of the fact is that not all stuff from the US are quality and neither are all products from China fake.

  5. ahdand
    April 30, 2014

    Rich- yes with the market is huge and the spending category is high and suitable people would love to take it

  6. ahdand
    April 30, 2014

    I know this may sound silly but with the most products being manufactured in China

  7. Ashu001
    May 4, 2014

    Rich,

    Even on Labor;if you take into consideration that Unemployment(amongst the 24-54 Age Group) is Higher in America than in China it clearly shows you people are more desperate to work here than there(where they have been constantly demanding and getting away with Double Digit Wage Hikes).

    In contrast,Wages in America are depressed big-time.

    When you also consider the fact that China is ageing much-much faster than America and it makes sense (for Labor-Intensive Operations atleast) to move back to America today.

    As far the Suppressed Value of the Chinese Currency is-I am not so sure.

    A lot of Chinese Capital is flowing out of China(to places like Canada,the US,Australia,The UK,etc) today simply because most of the Powers the Be in China are really worried about the Real Estate Bubble which looks set to Burst in China with Devastating Consequences and trying to push their ill-gotten Cash out of China before the People get really.really mad.

    Once that Burst actually happens ;I actually see the Chinese Currency Sinking in Value very,very sharply.

    What will that do to Exports coming out of China ?

    Will that make them more competitive?

    I guess,we should cross that bridge once we come to it.

  8. Ashu001
    May 4, 2014

    Rich,

    Have to agree wholeheartedly with what you are saying here.

    Unless there is Genuine Effort made to either Improve the UK's Competitiveness and Cost-Structure or make Chinese Exports Expensive (via tariffs,etc) ;this 100 million will just go Down the Drain.

     

  9. nathandavidson
    September 25, 2018

    I really wouldn't be surprised if there are components of all of your things that come from China. It also isn't hard to believe that some company that isn't in China, actually is buying Chinese parts and passing them off as their own. We cannot deny that they have an amazing upper hand over cost and production efficiency that is unrivalled by so many other places.

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