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S. Asian Factory Fire’s impact on Sourcing

The following highlights are from an interview with two key subjects:

  1. The impact of the recent factory fires in S. Asia on sourcing.
  2. General sourcing trends as we head into 2013.

Here are some excerpts:

Q:  Are new emerging production hubs such as Bangladesh that are pegged as alternatives to China really prepared to meet the high standards / demands of the sourcing industry?

Mike:   Different industries and different buyers have different standards. Is Bangladesh and other S. Asia/ S. E. Asia sources ready to be the next China in terms of production standards, overall cost, product availability and quality? Absolutely not.  Is Bangladesh a serious option for lower quality, simple BOM (bill of material) cut and sew products (socks and underwear for example)?  Absolutely yes.  Here is a look at the reasons China will remain the premier sourcing destination for the majority of products for the next 5 to 10 years:

China Sourcing Trends: The Big Picture 2010-2013

http://chinasourcinginfo.org/2012/10/23/china-sourcing-trends-the-big-picture-2010-2013/

Heavy hitters weigh in on future of China Sourcing

http://chinasourcinginfo.org/2011/08/02/heavy-hitters-weight-in-on-future-of-china-sourcing/

Q: Are more of your customers (or other buyers you come across) nowadays considering to switch part of their sourcing from China to Bangladesh?

Mike: Not really, unless they deal in lower end, cut n sew products.  At the sourcing agency I own, we help our clients source globally, so we are not against sourcing outside of China,  we go where the orders are, but we have yet to see more than a trickle, let alone a mass exodus from China sourcing to other markets for the reasons explained in the two links above.  Furthermore, the few cut and sew projects we have going in Vietnam use raw materials sourced in China!  So the only reason for even thinking about putting production in a place like Bangladesh or Vietnam, is strictly the human labor component of the all-in-price. If your product is not labor intensive (think electronics rather than socks) then moving production from China is a step in the wrong direction.

Q: Do you think the Bangladesh factory fire will make big retailers rethink their sourcing practices / strategies there?

Mike:  Perhaps. But more importantly it will remind those who purchase in Asia that due diligence and monitoring is a key part of the sourcing process.  The good news is that China-based service providers of inspections and auditing also have set up offices in these new markets.  www.AsiaQualityFocus.com is the inspection firm I use on a global basis. Visit their website and blog to learn their first-hand experience on the ground in these emerging sourcing destination.  The amount of orders in these new markets is a fraction of what is done in China, but because the conditions are so bad in these new markets, inspections and audits are essential if the buyer wants to sleep at night knowing the supply chain has no red flags.

Check out the full article:

Safety concerns aside, low-cost Bangladesh will continue to pull buyers

http://www.globalsources.com/NEWS/Bangladesh-fire-112912.html

About the blogger

Written by Mike Bellamy – author of, “The Essential Reference Guide to China Sourcing” (chinasourcinginfo.org/book) and founder of PassageMaker Sourcing Solutions (www.PSSchina.com). Read about him in the Financial Times: “A Foot in Both Cultures”



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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