I just finished reading Poorly made in China by Paul Midler, a short 241 page book that takes a look at manufacturing in China since 2000. It is very much an anecdotal look at the country, but it also reveals certain aspect of the behavior of the Chinese people.
My favorite bit is halfway through the book, where the American buyer has changed the information at the back of the bottles of shampoo to indicate that the shampoo was not testes on animals. I can see many people who would find this an admirable situation for a company to commit not to test its products on animals. The problem is that the product was not tested at all (excluding consumers)! In a nutshell, the manufacture was continually changing the formula without consultation with the American buyer (or for that matter telling anyone) without anyone testing the product to see if it was dangerous when exposed to users.
The more serious aspect of desintermediation is here further illustrated; in the financial sector (in the US) those who wrote the mortgages, those who packaged the mortgages into security products and those who financed the mortgage backed securities were three entirely different groups, that had conflicting objectives, the result was the MBS and Alt-A fiasco that has and continues to destroy financial institutions the world over.
In the manufacturing side, it became more convenient (and cheaper) for American soap sellers to get the stuff manufactured in China, where there are no standards or regulations, dramatically reducing the marketing wrath of Greenpeace faced by the American companies' laboratories in Connecticut -- in essence the law of unintended consequences! Whereas when Greenpeace and other animal rights movement were picketing or firebombing laboratories that conducted quality control test on US manufactures products, they never conceived that the end result would be for more and more of the chemical products we use everyday to be manufactured in place were there are no quality controls checks -- the consumer is at the mercy of the lowest bidder.
The problem left unspoken here is that over time, its not only the cheap stuff that is manufactured in China but also the expensive stuff, because the cost advantage for marginal supplier is even more tantalizing for larger players, in fact large players are active in China using an army of quality control inspectors, yet Mattel found itself caught out -- and that's one that was well publicized. The risk is that debased goods will flood the market.
My favorite bit is halfway through the book, where the American buyer has changed the information at the back of the bottles of shampoo to indicate that the shampoo was not testes on animals. I can see many people who would find this an admirable situation for a company to commit not to test its products on animals. The problem is that the product was not tested at all (excluding consumers)! In a nutshell, the manufacture was continually changing the formula without consultation with the American buyer (or for that matter telling anyone) without anyone testing the product to see if it was dangerous when exposed to users.
The more serious aspect of desintermediation is here further illustrated; in the financial sector (in the US) those who wrote the mortgages, those who packaged the mortgages into security products and those who financed the mortgage backed securities were three entirely different groups, that had conflicting objectives, the result was the MBS and Alt-A fiasco that has and continues to destroy financial institutions the world over.
In the manufacturing side, it became more convenient (and cheaper) for American soap sellers to get the stuff manufactured in China, where there are no standards or regulations, dramatically reducing the marketing wrath of Greenpeace faced by the American companies' laboratories in Connecticut -- in essence the law of unintended consequences! Whereas when Greenpeace and other animal rights movement were picketing or firebombing laboratories that conducted quality control test on US manufactures products, they never conceived that the end result would be for more and more of the chemical products we use everyday to be manufactured in place were there are no quality controls checks -- the consumer is at the mercy of the lowest bidder.
The problem left unspoken here is that over time, its not only the cheap stuff that is manufactured in China but also the expensive stuff, because the cost advantage for marginal supplier is even more tantalizing for larger players, in fact large players are active in China using an army of quality control inspectors, yet Mattel found itself caught out -- and that's one that was well publicized. The risk is that debased goods will flood the market.
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