Why the Global Supply Chain is Dysfunctional
July 7, 2008 – A friend of mine had a profound realization today regarding sourcing in China and quality control. He has a company that produces prefabricated housing, and sources construction materials. Today, he was meeting with some potential clients with whom he had been in discussions for over one year. As he was going over the various items in the production process, he realized that his potential clients had no idea what he was talking about. This surprised him because the potential order size was large, and they had been working on this for quite some time.
Reflecting upon the meeting later, he had an epiphany. The internet has enabled an enormous amount of novice buyers to connect with Chinese suppliers (particularly through sites such as Alibaba and Global Sources). Many novice buyers do not become sufficiently educated before placing orders. This has two negative effects. First, capable Chinese factories may seek to take advantage of uneducated novices by producing substandard products. Second, the large amount of novice money flying around China has encouraged the birth of numerous incompetent suppliers.
As my friend put it, “The combination of novice buyers and subpar suppliers in China has in turn led to a dysfunctional global supply chain” that has recently manifested itself with the various well-publicized recalls. In other words, Western buyers are just as much at fault for sourcing poor quality control as are Chinese factories.
