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December 31, 2008

New Products. New Companies. And...Finding Humor in All Situations. 3 Great Reasons to Look Forward to What 2009 Has in Store

I'm pretty excited about 2009. There is so much happening out there. New products. New companies. And well...funny stuff. Here are 3 great reasons to be excited for what 2009 has in store for us:

1) Sustainable, alternative energy technologies are making their way into consumer products. Check out HYmini:

HYmini is a handheld, universal charger/adapter device that harnesses renewable wind power / solar power and conventional wall plug power to recharge almost all your 5V digital gadgets. $49.99 for the wind. $24.99 for the solar.

Check out Husqvarna's solar powered Automower (hat tip: Roshan Thomas' blog) It's like a Roomba, but solar powered and for your lawn. From the Husqvarna website: "Automower Solar Hybrid uses only the same amount of energy as a standard light bulb and is constructed from 90% recyclable material. It’s also been calculated that using Automower Solar Hybrid to cut the lawn in an average garden can save 40 hours of labour every year – the equivalent of an extra week’s holiday". Price is $3000-$3500. Pricey -- but cool.

Solargorilla's laptop charger (hat tip: Roshan Thomas' blog) is freeing us from outlets. With folks working on city and regionwide WiFi, and products like Solargorilla's out there, how long until we can truly take our work almost anywhere? If we find ourselves working in "nature" more often, will that give us cause to think about nature more?

Solar Gorilla is compatible with most notebooks, iPod, iPhone, PDAs, MP3/MP4, handheld games consoles, Sat Navs, Nokia, Mini Nokia, Motorola, Samsung, LG & Sony Ericsson and many standard cellphones.
Portable, fold-up design protects your solar panels when stored
20V power socket out and standard 5v USB socket
Neoprone zip case (with additional compartment for tips)

Price range: $250-$280

Generally, products like these are still at the early adopter stage. Many are still too expensive for mass market. However, as these devices continually improve in functionality, ease-of-use, and price point, they will likely reach an ever-growing number of consumers. Consumers' gadgets will be increasingly powered through sustainable forms of energy in 2009.

2) New start-ups, and more importantly, empassioned, capable people, are tackling major, global challenges by providing products and services that will help to ensure that the remarkable developments of this century can support us far into the future. A few pieces of evidence?

Virgance: Led by Steve Newcomb, a seasoned silicon valley entrepreneur, and Brent Schulkin, a young, enthusiastic, and creative entrepreneurial prodigy, Virgance is a for-profit company that takes new activism ideas and uses the power of online social networks to scale each idea into a large-scale, citizen-powered global campaign to improve the world. Founded in May 2008, Virgance is releasing a series of products that focus on using online social networks to create positive social change.

Virgance's latest products/services:

1Bog: 1Bog is a nationwide, community-based program that organizes residents locally (via the internet) and negotiates group discounts with solar installers, to help residents purchase and install solar panel systems on their homes. In their first campaign, 1BOG was responsible for 20% of all San Francisco properties that converted to solar in the fourth quarter of 2008. We project a 300% increase within the first quarter of 2009.
Carrotmob: Carrotmob is a method of activism that leverages consumer power to make the most socially-responsible business practices also the most profitable choices. Businesses compete with one another to see who can do the most good, and then a big mob of consumers buys products in order to reward whichever business made the strongest commitment to improve the world. View the video of their latest campaign.

Designers' Accord: Made up of over 100,000 members and representing 100 countries, the Designers Accord is a global coalition of designers, educators, researchers, engineers, and corporate leaders, working together to create positive environmental and social impact. Their vision? To integrate the principles of sustainable design into all practice and production. By teaching designers how to practically incorporate principles of sustainable design into products at their inception, we will begin to see a gradual reduction in the problems we need to clean up after 2009.

It's a recession. Many will hunker down, reduce risk-taking activities, and do what they have to do to survive. Nothing wrong with that. However, many will also see this as a great time to change course, take on a new challenge, and take a risk to solve problems. In many ways, the opportunity cost of starting a company has decreased. People that would otherwise be out making a good salary and have good job prospects right now, are finding that this isn't something they will be missing out on if they take a chance. Also, scarcity often breeds creativity. Jack Ma described the success of his $1.5 billion dollar IPO of Alibaba.com, as coming from circumstances like these:

There were three reasons why we survived. We had no money, we had no technology, and we had no plan. Every dollar, we used very carefully.

Thankfully, some of my favorite business bloggers will continue helping us all to share valuable insights and resources with each other (Guy Kawasaki, Seth Godin, Dan Harris of ChinaLawBlog, Tim Ferriss, and DesignSojourn).

3) And finally, sense of humor doesn't go out of style, even in a recession. I saw this short video before and loved it. It's classic and worth checking out on this blog.

Happy 2009.

Posted by GSS on December 31, 2008 at 12:58 PM in Current Affairs | Permalink | Comments (0) | TrackBack (0)

December 17, 2008

Global Sourcing Outlook: Staying on Top in the Short Term

Did you hear? The world economy is facing tough times. No--not another blog post or news story about the economy throwing up all over...everything. Obviously, businesses across the globe are facing challenges on both the demand and supply sides. Below, I've put together four suggestions for actions you can take now, to make sure your business does not get burned on the supply side, particularly if you have manufacturing sources offshore.

Good practices for the short-term in a recessionary world economy:

Do a cost audit of your current supplier(s) and consider new suppliers. Prices negotiated 6 months ago may be uncompetitive now. Manufacturers are hungrier. Some, if not many, of their costs of production have dropped. Many of these cost reductions are driven by falling world demand (which we hope, and I believe, is a short-term phenomenon). Cost saving opportunities and their causes will vary from supplier to supplier, so reviewing price at your existing factories as well as looking at new sources, may yield an opportunity for short-term cost savings that could help your bottom line now. When demand picks up, it will be on your supplier(s) to raise the issue of rising costs with you. But, there is always a lag time between increasing costs and rising prices, so don't fail to capitlize on current conditions.

Monitor the financial health of your sources. Factories, both domestic and offshore, are facing very tough times and many are closing shop. Generally, when this is happening, their isn't much incentive for factory owners/managers to let their customers know, "hey, we may not be around in a few months". While "credit checks" in low-cost country sources (LCCS) are generally not typical of what we might consider a credit check in the U.S. (i.e. running a credit check through Dunn & Bradstreet), informational audits that can be performed through 3rd party information gathering, and can aid your assessment of your supplier(s) financial health and risk. There are companies that perform these services in popular LCCS' like China, India, Mexico, etc., and you can generally get an idea of a factory's current credit situation and perhaps some current financial information. This could give you the heads up you need to start securing second and third sources of supply, in case your primary source suddenly stops responding to your emails and phone calls, and their website disappears. Performing these kinds of audits are not too expensive, $US500 to a few thousand dollars, and may save you your business in the long run.

Continue monitoring your quality control, and if you haven't been doing so very well thus far, START NOW! Don't become a quality disaster/recall headline or a product liability defendant. When times get tough, suppliers look for ways to lower costs and maintain margins. Many may feel inclined to let the quality of materials or workmanship slip to save a few cents on your next order. If there is ever a time to continue your quality control program or implement a quality control program, it is when companies supporting you are potentially hurting.

Don't treat your suppliers as the enemy. An honest conversation may open up new opportunities for mutual gain. When times get tough, people often begin looking for easy scapegoats and targets. It may be tempting to push unreasonable demands and threaten even your best suppliers. None of the recommendations above are intended as a suggestion to get absurdly tough on the vendors supporting you. Be diligent, negotiate well, and expect results. Approach the need for businesses to survive during these challenging times from the perspective of "how can we work together to mutually survive and eventually flourish?" Gaining transparency in the supply chain ("transparency"-- basically sharing information) is a best practice in good and bad economic conditions. Being forthright and reasonable with your suppliers will not only earn you their respect and appreciation, but may open opportunities for new ways to reduce costs, improve efficiency and/or quality, and present new business opportunities. This is such an easy, but often overlooked method of dealing with supply chain challenges, and it might begin with a simple and honest conversation.

Posted by GSS on December 17, 2008 at 09:10 AM in Product Sourcing and Strategy | Permalink | Comments (1) | TrackBack (0)

December 10, 2008

How Long Does it Take to Close 36,738 Apparel Factories?

About 1 year...

But are they closed? Serving other markets? In hibernation?

A report released by Panjiva, a company founded in 2006 that mines U.S. Customs and Border Protection data to create useful reports on suppliers, claimed that the number of apparel suppliers shipping goods to the U.S. dropped 85 percent over the year (ending October 31, 2008). Circa October 2007, approximately 43,653 factories were supplying apparel to the U.S. One year later, the data revealed that only 6,262 remained. While some of these factories may be surviving by diverting attention to other markets, there's no doubt that a great many of these suppliers have probably shut down completely.

It's not difficult to surmise the cause.

Looking at the retail side, Q4 '08 is showing the signs of pain up and down the supply chain. Order cancellation, inventory build-up, tightening credit, and of course, weak consumer shopping are rippling throughout the retail and manufacturing environment.

The end, or even the beginning of the end, is not in sight. Problems beleaguring consumers and retailers will surely extend, and likely worsen in Q1 & Q2 of '09. Once the holiday cheer is over, the credit card statements come and many feel consumers will be on spending lock-down. Inventory surpluses will need to deplete before buyers will once again begin signing off on orders. One merchandise planner for a major department store commented to me that Q3 of next year may still be early for things to finally hit bottom on the retail side. Much will depend on the next few months.

With respect to the many factory closings, damage has been done and even more may close. But, it's unclear how many of these factories have closed permanently, or rather, gone into hibernation. Many of these apparel factories may be smaller shops, with 300 or less workers and no heavy machinery. Equipment might be liquidated or stored easily and, as mentioned in my previous post, labor forces in a given locale of a developing country, particularly China, have a way of contracting and swelling much more easily than in, say, the United States. In China, it's not uncommon to see a series of furniture shops open and close in a matter of months when a large apartment building goes up and residents moving in will need furniture. Start-up costs/barriers may be no more than: buy some furniture and rent the space.

Thus, as the consumer spending, and subsequently retail, begins to turn the corner, which we may begin to see by Q3 of '09 (hopefully), we may see factories begin to come out of "hibernation" and pick up operations again. After all, management prowess, labor skills, and industry contacts don't disappear. The availability of credit is another question.

Posted by GSS on December 10, 2008 at 12:31 PM | Permalink | Comments (1) | TrackBack (0)

December 05, 2008

China's Manufacturing in 2008: A Rollercoaster that Shows No Signs of Stopping?

Looking back over the developments of 2008 in China's manufacturing base, they are quite astounding. The signs of change began before 2008--probably the most notable being the Central Govt.'s elimination of VAT tax rebates in the summer of '07. Consider this the long, first ascent of the rollercoaster. Hope you have your seatbelt on.

We began the '08 with rapidly increasing costs across the board in most sectors: new labor laws, repealed VAT rebates in effect, increasing commodity prices, unprecedented growth in shipping, rising energy and material prices--a slew of factors raising the cost, and the perception of cost, of manufacturing products in China. It is estimated that 10,000+ factories in southern China alone shut down due to an inability to compete amidst the changing conditions. There were powerful winter storms blocking tens of millions of workers timely return home during the Chinese New Year Holiday. Many workers returned late, and many more never returned at all. Also, the mounting preparations and excitement over the Olympics also caused a lot of frenzy in manufacturing and logistics circles. This affected the Shanghai and Beijing regions far more than the southern regions.

Now, with the mounting slump in demand becoming apparent in the second half of 2008, material and commodity costs have dropped, VAT rebates have been reinstated for a number of product categories, and capacity in shipping has quickly opened up.

I recently heard the claim (haven't been able to verify yet) that Dongguan, a region in Southern China long known as a manufacturing hub of the area, has had it's population (previously ~12 million people) cut in half over the last year. Comprised largely of migrant workers from regions further west in China, approximately 6 million of these workers have returned home and not come back. If the claim is true, which I believe there is at least a lot of truth to it, it's quite remarkable! I think it's hard for Westerners to fully grasp the kind of challenges a shift like this can present to local governments, economies, etc. Imagine if half the population of Los Angeles, New York, London, or Paris, simply up and left in a matter of a year!

The challenge of retaining skilled workers in China is well known, but some are now questioning whether retaining unskilled workers in some key manufacturing areas like Guangdong, is going to heat up.

World demand for Chinese exports drop--and many of the short-term effects we've seen aren't hard to predict. See my post here. But they will no doubt have longer term effects--and there is a lot of talk, but no consensus, on what exactly they might be. Elliot Ng, of CNReviews.com, has written a good summation of the challenges China's economy now faces amidst the world financial crises. In the article, Elliot's Hong Kong Uncle summed up things rather concisely:

Uncle’s simple but powerful framework: China is supported by a three-legged stool, but two legs are now broken

China’s economic growth is supported by three primary legs:

export-led growth
real property growth
government spending

The first and second legs are now broken. Ng goes on to write:

Nouriel Roubini, the NYU economics professor that predicted many elements of this global meltdown, writes (at RGEMonitor, reprinted with commentary at JapanFocus) that there is strong evidence that China is facing a hard landing. Roubini points out that a hard landing actually still means a 5-6% growth rate. 9-10% growth is needed to absorb 24 mm new entrants into the labor market, including 12-14 mm poor rural farmers. A 5-6% growth rate means a significant risk to social stability and continued political control, so its clear that Chinese leaders are in a tough place.

China's growth model necessitated their domestic consumer market pick up the burden of the export sector--basically meaning that the hope was Chinese manufacturers would be serving their own consumers as much or more than foreigners. But for a number of reasons (maintaining an undervalued currency, very high savings rates, and maybe just not enough time), China hasn't reached this point.

Now, the government is forced to make up for the lack in spending through economic stimulus packages. Whether this will be enough, no one knows. Many bloggers and economists are speculating on the impacts of all of this on the next year or two: possible increased social unrest, a tougher stance by Beijing on social unrest, currency revaluation, export subsidies, and the list goes on.

I prefer to error on the side of "no one really has any clue what's going to happen", and to not make hasty judgments. Some are predicting China will be just fine this year. One thing is certain, if you're manufacturing in China, change is in the air. I know--that's not rocket science. The rollercoaster ride may have just begun, but this doesn't mean you can't find opportunities to thrive in this environment. If you have time to tend to more than your challenges here, pay attention to your sources, pricing, shipping, and govt. policy in China. New prices, better sources, more attention, faster shipping... All worth looking into.

Posted by GSS on December 05, 2008 at 09:09 AM in International Trade and Political Economy | Permalink | Comments (0) | TrackBack (0)

December 03, 2008

Treasury Secretary Paulson, the U.S. and China, Going Green One of the New, Few Safe Bets?

Yesterday morning, I watched U.S. Treasury Secretary Henry Paulson give a short speech and field some unforgiving questions from the audience before heading straight to the airport and on to China to continue the U.S.- China Strategic Economic Dialogue. His prepared remarks were more or less standard with Washington's public position on the current challenges and issues facing the U.S. and China today. I was particularly interested by the amount of attention Sec. Paulson devoted to environmental issues and initiatives. While Sec. Paulson does have a personal interest in the environment and conservation, and perhaps he would rather highlight the ecological environment compared to the financial environment at this time, I believe it's an interesting sign of the times, that a Secretary of the Treasury is emphasizing environmental topics. As you can see from the picture, he looks pretty happy about it.

As Sec. Paulson pointed out in his speech, with economic prosperity, comes environmental degradation--unless we do something about it. The financial crises, trade and currency, will no doubt be the main topics of attention during Sec. Paulson's visit to China, but an action plan for air quality, and discussion of launching an initiative to establish eco-city partnerships among their cities, will also be on the agenda.

At a high level, with respect to the environment, China gets it. With the new U.S. administration coming in, it seems we may be "getting it" real fast.

In both countries, on a local level, it may be beginning to trickle in:

Greensburg, KS: This midwest, U.S. town, was leveled by an F5 tornado in early 2007. As you can see from the picture, the town was destroyed. Today? The town has implemented a green rebuilding project that mandates all city buildings larger than 4,000 sq. ft. to be built to LEED-Platinum level and have an energy performance level at least 42% better than current building codes. Talk about seizing an opportunity.

Dongtan, China: Many have heard of China's work in building one of, if not the most, pioneering green city in the world, from scratch. The first of four "eco-cities" slated for construction by the Chinese govt., the city will open in 2010 and offer residents zero-greenhouse-emission transit and complete self-sufficiency in water and energy.

These are two small examples of local town/city implementions reflecting higher-level goals. But as Sec. Paulson stated, the importance of the U.S.- China economic relationship, if not already, will likely become the most consequential for the world economy very shortly, and it's implications will reach every corner of the world.

There is a lot of turmoil out there and a lot of opinions on short-term and long-term developments. But going green has gone from fringe issue, to popular lofty goal and topic for government, media and corporations, to perhaps one of the safest long term bets at this point in two of the most important countries in the world.

Posted by GSS on December 03, 2008 at 11:35 AM in International Trade and Political Economy | Permalink | Comments (0) | TrackBack (0)

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