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Exclusive look at data from one of the largest Chinese supplier surveys ever conducted

Dr Neale O’Connor with the School of Business at the University of Hong Kong is interviewing 1000 suppliers in China to understand market trends and challenges. As buyers, it is always good to know what our suppliers are thinking. Dr O’Connor has spent the last 18 months and over $HK300,000 on research, including a team of 14 interviewers, yet it could be months before the full 1000 interviews are complete.  Luckily, in an exclusive arrangement with CSIC, our favorite professor is willing to give our readers a sneak peak.
Below are some of the figures from the first 644 interviews with Chinese suppliers.
The pie chart breaks down how China based suppliers answered the question “what is your number one challenge?”
“Cost Control” is the biggest challenge in the eyes of the suppliers.  Further questions were asked about how the suppliers plan to implement cost control and below are the results from the first 212 respondents broken down under “no solution” (black), “strategic” (yellow), “managerial” (green) and “human resources” (blue).
After reviewing the data with Dr O’Connor, here is some initial analysis:
Suppliers are responding in different ways to the cost challenges but very few of them are looking to long term solutions like brand building, technology innovation or even moving inland to less expense locations.
Many are seeking short and medium terms solutions.
Short term:
1.  collecting more quotations (in other words, trying to twist the arms of their sub suppliers)
2.   achieve economies of scales
Medium Term:
1. Automation
2. Improve efficiencies
Interesting that “cost control” challenge is a huge slice but “currency appreciation” challenge is tiny.  Perhaps being a bit optimistic, I would take this to mean that suppliers realize that gains in
efficiency can far outweigh losses in currency.  This means they are in control of their destiny and I take it as very good news for the future of China sourcing.
The sooner factories realize they can no long depend on the “throw another body at it”
production mentality the better. I am happy to see that according to the research above, more and more suppliers are finally realizing they actually need to learn proper management and efficiency techniques to stay in business. There are some professional factories in China a lot of un-professional factories. I am hoping the increased costs of labor, rents, power, taxes, and currency appreciation will cause a great shake out where only the efficient and well managed
factories survive. As buyers, this will make our lives so much easier, plus there will still be plenty of factories left after the shake out for healthy competition driving down costs.
References:
Here are some blog posts that explain why I feel China has another 5-10 years as the premier sourcing destination:
http://chinasourcinginfo.org/2011/08/02/heavy-hitters-weight-in-on-future-of-china-sourcing/
See below for more information about Neale O’Connor and the “Supplier 1000” research.
Neale O’Connor PhD, GDip(Acc), FCPA(Aust)
Associate Professor

School of Business, The University of Hong Kong

Mob +852 93045964
Home page: www.nealeoconnor.com | He can be found on Twitter as @acno1
Director of the China Supplier-1000 Projectwww.Chinasupplier1000.com The largest face to face
interview study of Chinese suppliers.



Mike Bellamy

Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). Author of “The Essential Reference Guide to China Sourcing” and founder of PassageMaker Sourcing Solutions. Mike is co-founder of CSA, the China Sourcing Academy.


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