China'S "Labor Shortage" Is Affecting American Importers With The Butterfly Effect

In today's economic globalization, China“ Labor shortage ”Is profoundly influencing the Imported Merchants.

In the southeast corner of downtown Los Angeles, the United States, there are many Chinese businessmen engaged in the import and wholesale of clothing and textiles. Most of their sources are in southern China. Therefore, they are quite impressed by the impact of the "labor shortage" problem on their business. Mr. Pan, who is nearly 50 years old, is a typical one.

Helpless Mr Pan

Mr. Pan immigrated from Hong Kong to the United States 20 years ago. He has been engaged in clothing import and wholesale business in Los Angeles for more than ten years. He mainly imports clothing from Foshan, Guangdong, China, Xiamen, Fujian and other places, and then wholesales it to wholesalers and retailers in the southwestern states of the United States. In 2005, when the U.S. economy was booming, Mr. Pan also tried to supply jeans to Wal Mart and other large chain supermarkets. However, considering the factors such as the poor cash flow caused by the long return period of payment for goods, he focused on some small chain supermarkets and small wholesalers, and accumulated a fairly stable customer base.

When talking about the butterfly effect of "labor shortage" in southern China, Mr. Pan's chatterbox is difficult to close once he opens it. He told the reporter of the World Expo, "After doing clothing import business in the United States for several years, I felt that the Chinese New Year was not very good. Later, he summarized some experience, for example, every autumn, I would order one more quarter than usual, because the sales would increase a lot near the Thanksgiving Day and Christmas peak season at the end of the year. Another reason is that during the Lunar New Year, Chinese manufacturers basically shut down, stopped accepting new orders, or increased the supply price, and the delivery speed will become very slow, because most workers have returned home for the New Year. "

In the past, Mr. Pan would place orders for spring clothing to Chinese manufacturers around the Lantern Festival. At this time, the supply price and delivery speed have basically returned to normal, but this year's situation is different. Mr. Pan received a response that the supply price has increased by nearly 20%, and the delivery speed will be extended for at least three weeks. The most unacceptable thing is that the types of styles sent by the manufacturer through email this year are much less than those in previous years, and even some so-called new models, which can be seen from the slight modification of last year's styles.

Mr. Pan said, "I have been under a lot of pressure recently. I am afraid that some customers will place orders with my competitors, which will directly lead to a decline in the order volume and further increase in the purchase cost. This will soon enter a vicious cycle." As an import wholesaler, what I fear most is this situation. Mr. Pan's biggest supplier is a clothing factory in Foshan, Guangdong. After many negotiations, the manufacturer said that it was very sorry, but there was no way to reduce the price of clothing in spring, nor to add more styles, because this year's "labor shortage" was too serious.

According to the manufacturer, before and after the Lantern Festival last year, most of the workers who went to their hometown for the Spring Festival returned to the factory and began to resume normal production operations, and the styles were generally designed in place. However, two weeks after the Lantern Festival this year, the rate of workers returning to the factory was less than 60%, and the manufacturer had to raise wages to recruit everywhere. From the salary increase of 10% last year to nearly 50%, there are still not enough skilled sewing workers recruited. The result is insufficient production, fewer new models, lower production efficiency and increased supply costs.

　 "Made in Vietnam"

In desperation, the manufacturer promised Mr. Pan that they could provide customers with the clothing styles of this summer as early as possible, and strive to keep the wholesale price of clothing this summer at the same level as last year. Although Mr. Pan expressed his gratitude verbally, he still felt insecure.

He said, "The current situation of employing workers at high costs cannot be solved in a short time. Once wages rise, it will be difficult to reduce them. This has increased nearly half of the firm labor costs, which can only be digested in terms of supply prices.".

"It has become increasingly difficult to do business in the past two years. American consumers' wallets are not bulging. The appreciation of the RMB has continued. There has also been a rise in cotton prices since last year. In addition to the soaring labor costs this year, the cost of imported clothing has become higher and higher, while the quality of some products has become worse and worse." Mr. Pan sighed, "But fortunately, my customer base has not lost in a large scale, perhaps because my competitors have encountered the same problem, and everyone is careful to deal with manufacturers and wholesalers."

Speaking of the current countermeasures, Mr. Pan said that he was going to Jiangxi, Hunan and other places in China to investigate some clothing manufacturers with good export qualifications, and spread the orders for winter and spring clothing there. "I heard that many of the manufacturers in Foshan, Guangdong Province have workers from these two provinces, and presumably there will be more local skilled sewing workers there." As for whether to go to Vietnam and other Southeast Asian countries to find alternative suppliers, Mr. Pan made it clear that he is familiar with the business environment and cultural atmosphere in mainland China, and business communication and transportation are relatively convenient, I haven't thought of finding a trustworthy partner in a completely strange place recently.

However, he also said that he has felt the competitive pressure from some local Vietnamese clothing importers. "Vietnamese people also celebrate the Lunar New Year, but I have never heard of the problem that parents of manufacturers are short of work. So they have been able to purchase goods from Vietnam smoothly, and the price is not expensive, but the style and quality are not as good as those we import from southern China. I am still confident to retain my main customers."

　　 Industrial chain Advantages still exist

Later, I interviewed Mr. Lin, who runs sock import wholesale business in New York and other places by telephone. He is several years younger than Mr. Pan, but he has more years of experience as an importer in the United States, so he also has many original ideas and insights.

Mr. Lin, who grew up in Rui'an, Zhejiang Province, told reporters that he had experienced supply bottlenecks before and after the Spring Festival long ago. Therefore, he was considerate in selecting manufacturers. Now the main supplier is in his familiar hometown Rui'an.

80% of Ruian's workers come from the local rural areas, and a rule or habit has been formed for a long time. Every Golden Week, there are enough workers willing to work on duty, of course, they will get reasonable overtime pay, while only office workers are on vacation, so production and shipment are basically not affected.

"Our manufacturers have made great efforts in workers' management, and added some human feelings in addition to improving welfare, so we can ensure smooth supply during the holidays, and it is acceptable to increase labor costs appropriately," Mr. Lin said, "There are still many cost factors that lead to the increase of supply prices, such as the rise of raw materials and accessories, packaging costs and freight costs, but we adhere to our own brand in the U.S. market, and our operating profits are guaranteed. If it is for the suppliers of large chain supermarkets to do OEM, the profit space will be very limited. If the manufacturer fails to start production in batches due to insufficient work, it will be difficult to do this business. "

Mr. Lin, who is determined not to do OEM, added, "Most American Korean importers also purchase from mainland China, and their brand management philosophy is worth learning from our Chinese counterparts. The method of low price competition can not digest those price increases that are difficult to control. In fact, over the past decade, American consumers have increasingly recognized Chinese made products. As long as our products maintain good quality and high cost performance, the market can grow larger and larger. " {page_break}
 

As for whether he will go to the labor rich inland provinces to find new suppliers and manufacturers like Mr. Pan, Mr. Lin said that he would not do so for the time being, because it is difficult to move out of a mature supply chain that can fully ensure product quality in a short time. He said, "You can transplant several trees, but it is not easy to move a forest. In terms of socks and leather shoes manufacturing industry, there is a complete supply chain in southern Zhejiang, ranging from sewing accessories to packaging cartons, as well as efficient logistics systems, as well as a unique small commodity distribution base like Yiwu, where can it be completely copied?"

When the reporter mentioned that some American importers had turned their eyes to Vietnam and India, Mr. Lin thought it was unnecessary to make a fuss. He said, "At least as far as I know the sock processing industry, the competitiveness of Chinese manufacturers is very strong. I can give a brief example. In 2005, a sock factory in Zhuji, Zhejiang Province moved to Vietnam, mainly to avoid the textile import quota of the United States, and also to save about 20% of labor costs. But it had to be withdrawn after three years, because the supporting supply chain could not be formed. Even if the sewing needle was broken, we had to ask a master to repair it at home. The maintenance of machinery and equipment would be more time-consuming and laborious. "

Mr. Lin also expressed his belief that with the passage of time, some textile processing industries in Southeast Asian countries such as Vietnam and Thailand will become more mature, but after all, the production scale is limited, and it is difficult to catch up with the mature supply chain built by China after 30 years. According to him, because Chinese manufacturers have a great demand for sock production equipment, Italian equipment manufacturers only do business with Chinese people, and have no time to take orders from manufacturers in other countries.

Mr. Lin also said, "Although I have never been to South Asia, I know that there are peers and customers who place orders there. It is said that some sock manufacturers in India only have two specifications of packaging cartons, because there is a lack of matching carton manufacturers; while Pakistan can only make black and white gray socks, because there is no corresponding color printing and dyeing factory. I think there are also some business culture factors implied in this. We Chinese are good at learning from each other's strengths and avoiding weaknesses, which is very important for cultivating and improving the supply chain of the processing industry. We should be able to overcome the adverse effects of rising raw material costs and labor costs. "