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Wednesday, June 10, 2009
Moral Compass and Purchasing from China
Where does your compass reside on this controversy?
Does you organization have a policy concerning domestic versus foreign procurement? Where do you go for major raw material purchases?
How do you decide when the numbers tell you one thing and your compass says something different?
I had just this situation a few years back. Plywood out of the Northwest kept getting higher and higher. Another supplier, a US supplier at that, offered us a program supplying product from China. Our initial investigation showed the product to be inferior to US//Canadian product even at huge cost differential.
Further investigation developed a suitable source in China with a much higher level of quality control – these guys were good. Then came the formaldehyde scare; this caused some significant delay. After we were satisfied that the formaldehyde emissions were under control, all seemed to be on the right track.
Our main concern was that the Chinese were trying to buy the business and the subsequent price would jump to levels comparable to the US//Canadian pricing. This was a major concern.
After all, how could these guys buy logs from the Pacific Northwest, ship them to China – stripping the veneers in route, apply veneers to plywood core in China plant, ship finished containerized product back to west coast, transship containers to Texas, warehouse containers and still have a better price than the US//Canadian suppliers? On top of this, the quality of the end product was higher than that supplied by domestic suppliers; a quandary that defies logic.
So, you make the call. How would you decide? Take the deal or pass it up?