by Mitchell Rona, Executive Vice President, #GlobalSourcerer
As anyone who has been doing business in China knows, the country’s environmental problems are well documented. China hit the world stage, and increased its international profile back in 2008 when it hosted the Olympics in Beijing. For China, this was like a debutante’s coming out ball!
Since then, China has consistently made strides to improve its environmental standing in the world. In the last two to three years, that push for improvements in environmental compliance has increased, and has translated into tremendous pressure on all manufacturing suppliers; it has hit suppliers of iron and steel castings especially hard.
In late 2017, and the first half of 2018, this pressure intensified as many suppliers suffered major production interruptions. As a result of poor weather and poor air quality conditions, controls were tightened on many manufacturing processes. However, out of this adversity came opportunity. The suppliers with the resources and determination to make the necessary changes have become better suppliers overall. Initially, while suppliers may have been forced to introduce environmental improvements, the resulting changes have improved quality and overall production efficiency.
Yes, the costs for these environmental advances and improvements are going to find their way downstream to us, and to our end customers, but the increase is not significant enough to make China non-competitive compared to the other qualified alternatives. While other countries are improving, and some manufacturing business is migrating, there is no replacement for China – except China.
The Chinese suppliers who are still in business believe they deserve to be paid a fair price for the improvements they have introduced. They are proud that they are still “alive” considering the major challenges they have faced. SIGMA is both fortunate, and gratified to partner with several key suppliers who have made it through and are committed to continuous improvement to ensure that their output meets customers’ demands. It is never easy, but there is no alternative.
There are other challenges facing those who are currently doing business in China. These challenges include: pricing (relating to currency movements); raw materials costs and sourcing, and other soft costs, which have become increasingly volatile. Additionally, the political landscape has been quite turbulent. We are carefully watching all the different elements that affect those of us operating in China. Our eyes are wide open. Given all of the above, we still encourage prospective customers to continue to feel comfortable developing new business in China. By working with the SIGMA OEM team, you can rest assured that we can help you navigate your way. Nothing in life is 100% guaranteed, but the key to success in our industry is to build trusted relationships with companies such as SIGMA and our manufacturing partners.
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