Customer: “Hey Ram, thanks for getting on the call today! I love what you guys are doing over there at SKUteam.”
Ram: “Hey thanks bud! We are so glad to be in a position to help our customers during the pandemic.”
Customer: “You see, that is exactly why I called you. I just got off a meeting where we discussed our post-COVID takeaways. I am sending you a couple of spec sheets. These are for products we initially developed in China and have been manufacturing there ever since! Now, I’d like you guys to help us with finding new suppliers in other Asian markets, outside of China!
...and thus began the hunt for General Tso inside Vindaloo nation!
COVID or not, China as a nation has dominated global supply chains for nearly 4 decades now. However, with the recent “double-whammy” of tariffs, further accentuated by the impact of COVID, brands are now feeling the pain of single-source manufacturing. The brands that will emerge from this crisis strongest, will be those that truly understand what it takes to diversify their sourcing strategy: Product Localization. One cannot expect to get General Tso’s inside Vindaloo nation and expect it to taste authentic.
Diversifying risk is one of the core tenets of any business and especially ones with global supply chains. A brand may have multiple sales channels, multiple warehouses or even multiple freight forwarders, but when it comes to suppliers, they’ve placed most, if not all their eggs in one basket. Why, you ask? Simple! It is to benefit from consolidating their economies of scale. The art of getting a factory overseas to make your product just the way you want it, when you want it and for the price you want it deserves a Nobel Prize. Why would anyone want to do this multiple times if doing it once is hard enough already?
From iPhones to your phones and leggings to jeggings, regardless of whether Apple in America or Samsung in Korea designed the product, when it comes to mass manufacturing, all roads lead to China! China’s strength is not cheap labor. It never was and never will be! When manufacturing moved from Japan to China in the early 80’s, China benefited tremendously, but they also had the forethought to realize that history could repeat itself. As a defense mechanism against this, China invested in two key areas:
- Vertical Integration: The ability to develop raw materials locally (giving them independence from having to rely on another nation)
- Infrastructure to scale: The ability to manufacture at scale (the R&D that the west continued to focus on would be meaningless, if the product couldn’t be manufactured at scale)
It is these two critical capabilities that continue to set China apart, as the world’s dominant manufacturing center.
The Key to Success
The thing about making Chinese products in say India is that, one does not go to P.F. Chang’s looking for Lamb Vindaloo. Likewise, one does not go to New India Cafe, looking for General Tso’s chicken. Anyone worthy enough to call themselves a chef is capable of making both dishes. However, General Tso’s chicken that smells like cumin or Lamb Vindaloo that tastes like sweet chilli sauce, doesn’t exactly sound appetizing. The availability of key ingredients defines a culture’s cuisine. Likewise, availability of key components and raw materials defines any country’s strengths in manufacturing.
Localizing expectations is going to be key in defining the next wave of supply chain migration. Any brand trying to mitigate Chinese influence over their supply chain, will need to delve into localizing their product specs to be manufactured in a different country. When it comes to fashion, be it Bangalore or Bangladesh, Colombo or Cambodia, pursuing fabric equivalents that are available in abundance, in that specific country will become critical. Localizing product specs can have far greater consequences than just lower costs. It also leads to faster turnarounds, higher quality workmanship given their familiarity with the fabric and a truly differentiated product. Ultimately, this would enable brands to give their consumers a differentiated product, manufactured in a different country, using fabrics that are different from what they’ve been accustomed to -- hitting the trifecta during these trying times!
So, who’s looking for some Lamb Vindaloo? Give us a shout at email@example.com and we’d be delighted to help!