The tail of the Chinese dragon
The rising Chinese dragon has meant increased labour costs
Many people are being forced to face up to the fact that sourcing in Asia is becoming an increasingly difficult game, says Stevie Knight.
David Peach of Henri Lloyd and Nick Gill of Gill explain that both labour inflation and raw material costs have spiralled with big increases in both cotton and in man-made fibre prices, all of which have affected everyone, including the big high street brands...
Peter Sjolander of Helly adds that while Helly sources its supplies from all over the world, you can’t underestimate China’s importance.
“China has been seen as this infinite source of labour and production: but things are getting more complex," he says. "One part of this is the fact that the last downturn meant a lot of the traditional Pearl River factory bases closed – and it wasn’t so easy to simply ramp up again into increased production with the new wave of demand.”
The other part is down to China’s successes. Despite the large economic wobbles, the country is doing extremely well, and its people are looking for more advanced jobs.
“As in the UK some 20 or 30 years ago, workers are showing a preference for things like retail or office based jobs and no longer want to work in the labour intensive factories,” says Mr Gill. Further, the state has enshrined the idea that workers are entitled to retire at 50 and the one child policy has had its effect.
All of which means that the demographic is under pressure. Mr Sjolander explains that today, 100 workers support 16 retired people, and in 10 years, that 100 will be supporting 30. Further, by 2020 or so this looks like becoming 60...
Mr Peach says that HL’s sources are a mixture of Far Eastern countries and European, adding that Henri Lloyd Poland is playing an important part in the process. “We manufacture some of the high tech products there and we keep very tight control over what’s going on,” he says.
He adds that because HL has a very established supply base, covering both its own TP fabric as well as the well known Gore brand, it’s allowing the company to ride some of the choppier supply waters. However, Mr Peach says, “We are hoping that the raw material inflation will be short lived.”
But he says that most of the brands are facing changing circumstances. “In this game people are looking much further ahead than you’d think. There’s a definite move to relocate supply back to Europe.”
However, Mr Gill points out that it is again about relationships. “If a factory is producing goods at the right price and right quality, we are loyal: you need to be committed to the company for a long period to get the best out of it, and with one Asian company Gill has a very useful 20 year association.”
And to put the nail into the nascent idea that the UK might be able to benefit from the backwash from Asian ascendency, Mr Gill says, he simply doesn’t see manufacturing itself coming back to the UK in any big way, although Gill, like a lot of companies, has kept the development, patterns, samples and engineering of its products firmly close to home.
Despite the fact that some industry sources say there may be some very interesting opportunities in Eastern Europe, Mr Gill at least concludes that the UK itself isn’t geared up for any return. “There simply isn’t the labour market or for that matter, industry infrastructure to back up manufacturing in the UK anymore such as fabric, component suppliers and machinery...”
So, sadly, the UK won't be catching much of what falls from the tree.
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