For some reason … this song came to mind and I think it will now officially be my and Ken’s theme song! I like this message Mr. Petty…. ; )  Enjoy and happy Friday!!

Yeah Ken! On a roll!! I can’t really add anything to this as I have not yet been to China…I do know that this is definitely a topic of conversation as of lately and I definitely understand the importance. It just reminds me how important it is to always look at the big picture and the multiple paths that can lead to a goal. Do you take the easiest way  and cross your fingers in hopes that it will work out? Do you take the take the middle road,  play it safe and never grow to reach your full potential? Or…do you suck it up, do it the right way, the hardest way and put in the effort to guarentee your success? Oddly enough, the third choice may initially require the greatest sacrifice and the strongest will to survive, but has the most potential for success and longevity. I personally choose #3! If it were me, I would rather not manufacture in China…at least not for my whole collection which I know a lot of you out there do. -Julia

Now What?

Recently, a colleague on mine sent me an article in the New York Times regarding the upcoming issues facing US companies who manufacture in China.   One paragraph really caught my attention: 

                                    “Markups of 20 to 50 percent on products like leather shoes and polo shirts have sent Western buyers scrambling for alternate suppliers. But from Vietnam to India, few low-wage developing countries can match China’s manufacturing might — and no country offers refuge from high global commodity prices”

I honestly feel as though this is somewhat prophetic as it was inevitable.   I remember quite clearly, a conversation I had over dinner several years ago in Guongdong with a Chinese citizen, who was working with several large shoe companies.   He explained to me that the Chinese government set about a master plan several decades ago.   In China, there are more people than jobs.   The Communist Government had to come up with a strategy to provide jobs for it’s citizens.   China spent billions on infrastructure, factories and training.   Their master plan was to subsidize the cost of manufacturing which, with low labor costs, would make China a far more attractive place to manufacture.   By extolling the virtues of low cost, the increased cost in transportation would be more than offset.   US companies could count on higher margins and therefore make more money.   This plan was shrewd, well thought out, and had a high chance of success.   Ultimately, China wanted to decimate manufacturing around the world so eventually, most everything would be made over there.   The plan worked masterfully.   As other countries started to assert themselves with manufacturing prowess, the Chinese simply manipulated their currency to continue to keep costs low.  Also, they had the large investment in infrastructure which India, Vietnam, etc had not made.   These two countries are at least 10 years behind China in infrastructure alone.   

As Americans clamored for more and more, and consumption became a national past time, the Chinese were making truck loads of cash.   I remember going by a showroom for Ferraris on one of my last trips to Guangdong.   Quite a stark contrast to the average Chinese factory worker who is making a little over $2/day.

So now what?   94% of all shoes sold in this country come from Asia.   Most of our domestic manufacturing facilities have closed.   FN has been filled recently with stories about CEO’s worried about sourcing.   Now that we have no manufacturing options left, guess what China is doing to the prices?

US companies have benefited from the cost structure in China.   Exactly what the Chinese had planned.   We have become addicted to cheap labor and just as a drunk needs their fix, we as a society need ours too.   I always marveled at the teams of inspectors sent by US shoe companies to make sure our standards are being upheld.   Please!   It’s like leaving a room full of 1st graders without a teacher.   The moment the teacher steps into the room, everyone is on their best behavior.     Funny how I do not hear much anymore about companies inspecting factories for human rights violations.   It impacts the bottom line too much.

The picture above was taken from my hotel room in Shanghai at 1 in the afternoon.   The haze if a byproduct of all of these factories.   When is Al Gore going to do something about this?   He can’t as it would affect the cost of our cheap stuff.

Check mate China!

Ken Proctor

Front Man
Twig Footwear, LLC
Ken@twigfootwear.com
www.twigfootwear.com

832-748-1865