The Battle Rages: Low Cost Supply Chains vs Branded Product Distribution

More and more top branded product manufacturers are finding the penduluim is swinging back in their favor. Most fortunate are those branded product makers that resisted the short-term lure of volume buyers and overseas sourcing. Our mothers always said "if it's too good to be true..."

Low cost overseas "procurement" is no sustitute for the worldclass quality and reassurance that end customers seek from their brands. The editors at the Wall Street Journal are among many sounding the alarm that everyone in the "low prices" systems will be held accountable:

Too many American companies have assumed they can't be held liable because they only import Chinese goods manufactured by someone else. But all bets are off as soon as injured children or sick adults start appearing before juries.

And they go on to highlight the profund strategic implications for U.S. players:

...American companies have not always realized how expensive Chinese-manufactured goods can turn out to be once the cost of low quality is included. Naivete is as much to blame as greed. Western companies sometimes fail to understand how Chinese manufacturers do business -- especially the way many factories outsource some work that has been outsourced to them . . . Importers are also becoming vulnerable on store shelves. Consultants who work with U.S. companies sourcing in China predict a flight to quality as safety fears mount. Brand protection will become more important than ever.

'Chinese Fake Out', WSJ, July 14, 2007; Page A6

It might be time to reign in those world-traveling buyers racking up frequent flyer miles. What might have looked liked brilliant sourcing is beginning to smell a bit in the strategy room.