A ‘new China’ for low-cost sourcing

Did you know that Brazil is ‘the new China’ for low-cost sourcing? That’s what
Anusha Bradley is raising in SupplyManagement.com – London UK – 13 April 2006

The future of low-cost country sourcing lies in India and Brazil as China will lose its competitive edge, according to leading businessman Sir Anthony Jolliffe. “I see China as a 10-year wonder because wages are going up: 7 per cent of people have an income of more than $100,000. What will happen when that goes up to 15-20 per cent? How will China address the imbalance of wealth?” he asked.

“If I were looking for somewhere to source now, I would be in Brazil, India and even Japan, which is making a comeback. India is giving China a good run for its money. Brazil has a large population and is more aligned with the West and could be the engine of South America,”. Speaking at a CIPS event in London on Monday night, Jolliffe declared his distaste for Sir Alan Sugar’s “bullying” business tactics displayed on his hit TV show The Apprentice.

“That’s all for entertainment. Business is not really done that way. Business is all about good relationships.” Jolliffe said he takes a personal interest in his companies’ supplier relationships. Purchasers working in his companies sit down face to face with suppliers to negotiate the right price together, he said. “If they trust you and you trust them then you will get the right price. This is important as you might need them on your side if you get a big order.” He agreed that the approach commonly used by large supermarkets to continually drive down supplier prices was unsustainable and short-sighted.

“Unless you are prepared to close them down and look for new suppliers, they must make a profit. Quality control depends on your suppliers. It’s not all about price,” he added.

Jolliffe, a former Lord Mayor of London, grew his accountancy firm into a multinational operation in 44 countries with 200 partners. He currently holds a number of directorships in publicly listed firms in the UK, US and Japan. As director of Turbochef Technologies, which supplies high-tech ovens to Little Chef, Jolliffe described how he outsourced the production of ovens to China to reduce costs, but brought production back to the US when Chinese labour costs went up and automation of production in the US made production more efficient and cost-effective.

“The only thing China offers is low-cost labour. When you take that out of the equation they can’t really offer anything else.” Jolliffe replaced Sir John Harvey-Jones who was unable to attend due to ill health.

Article published on www.supplymanagement.com