I hate to be a Grinch, but ...
aren't the holidays getting more advance notice each year?
This is a global phenomenon—on a recent trip to Germany I found the stores bedecked with holiday fare, and this was only October!!! Even the duty free stores at the airport are getting in on the act with Holiday packaging and promotions. Yes, I admit it—I fell into the trap! Who can resist a singing reindeer—especially when the song is in German!
And now for the interesting twist to Christmas of 2004—based on the labels on all the items that filled my personal cache (including the traditional hand-painted nutcracker), it seems that Santa will need to relocate to China! No doubt the elves are considering what it would be like to set up shop in warmer climates—that is, if the whole manufacturing operation is not outsourced. It would certainly make sense for Santa to go straight to the source—toys are one of the items that have benefited from the low labor rates—amongst other things. Which brings me to my next commentary—what happened to Made in Germany'? Or whichever western nation you choose to think of.
As a global commuter, one of my pastimes, in between flight delays, is to visit the airport gift shops, looking for local souvenirs. I have one rule though—items need to be manufactured in the country that I am currently visiting. In the case of Germany, I have concentrated on specific items, one of which is Steiff stuffed animals. For the uninitiated, Steiff teddy bears are actually an adult collectible! (or were!)
Steiff toys have been lovingly made in Germany for years, each item easily identifiable by the special Knopf in Ohr'—button in the ear. And these are no ordinary bears! The little village of Giengen on the Brenz was the home of the very first jointed bear—or Teddy Bear—designed and manufactured in 1902 by Richard Steiff. Named in honor of one of America's favorite presidents, Teddy Roosevelt. Teddy has become part of the American family since an American toy buyer purchased 3,000 of these pieces in 1903. In fact, Steiff teddy bears, dressed up as hunters and fishermen adorned the tables at the wedding of President Roosevelt's daughter in 1906. As such, I have always thought of my Steiff bears as a link between the USA and Germany.
On this trip I selected a couple of stuffed animals from the new Cosy Friends' range and was surprised to find that the famous ribbon and button Knopf in Ohr' no longer carries the words Made in Germany. Making Steiff toys is a labor-intensive process with over thirty steps. Cost prohibitive in any industry. Steiff, in common with the manufacturing exodus from Europe, is taking advantage of low cost outsourcing. Cost pressures have driven German brands like Mercedes Benz and BMW to assembly points with low cost labor and other incentives. But Steiff? How could Giengen on the Brenz have allowed such an outrage? Almost apologetically, the rear of the label explains that this item has been carefully manufactured in China, under quality control of Steiff Germany. Chinese hands now craft the toys, and the role of Steiff GmbH has been reduced to final inspection and the placement of the famous label!
The mystique behind the Steiff label has resulted in a market for collectible Teddies, many of which fetch hundreds of thousands of dollars in traditional venues like Christies and Sotheby's—or over the web on Ebay! The Limited Edition items that are displayed on these websites advertise the fact that they are Handcrafted in Germany. Perhaps that alone will one day make them collectible, as the more mainstream products are crafted by hands on distant shores!
It seems that the sun is setting on the manufacturing industries in many parts of the western world. A combination of taxes, environmental legislation, high wages and other issues make finding low-cost manufacturing facilities an imperative for many of the most respected brand names. The playing field is being leveled and luxury goods are now manufactured in the same locales as their illegal knock offs.
Initially the source of low cost consumer goods, China is now creating products that bear labels previously reserved for only the most exclusive products. Which begs the following questions:
- Do companies understand
What motivates the consumer—product or price?
Where is the true value—the quality or the logo?
What is the value of the brand—snob appeal or quality assurance?
- Do firms understand the long-term impact to that brand once they outsource?
- Is the benefit of low-cost production worth the uncertainty of a longer supply chain? As market demand varies, long supply chains, especially in toys and apparel, which are sensitive to fashion', instincts are not responsive.
- What are the risks inherent in sharing manufacturing techniques and skills with potential competitors?
- Once the low cost providers move up the food chain, where will the next global factory be?
Educated consumers know the difference between a high fashion product made of Italian leather versus a similar item made in Italy. Craftsmanship and tradition combine to create products that are truly classic—elegance is worth the premium for an item that reflects the lineage of the brand.
Unfortunately, this is not true for all products—the thrill of cashmere at every day low prices is tantalizing. Will luxury and economy converge? The low cost producer wins the battle of the checkout. The rulebook is rewritten as emerging nations compete for market share. But what is the long-term impact? What will the owner of the Steiff collectable feel when their neighbor brings home their Steiff from Wal-Mart? We may not grasp what is lost till it is gone.
This article is from Parallax View, ChainLink Research's on-line magazine, read by over 150,000 supply chain and IT professionals each month. Thought-provoking and actionable articles from ChainLink's analysts, top industry executives, researchers, and fellow practitioners. To view the entire magazine, click here.
About the Author
Carla Reed heads ChainLink's Global Logistics and Distribution practice. Ms. Reed brings deep hands-on experience, having design and managed numerous global distribution networks and warehouse facilities around the world. Before joining ChainLink, Ms. Reed founded New Creed, a business process and enabling technology consulting group which focuses on the global supply chain, linking evolving technologies and concepts to global business issues in existing and emerging markets. Ms. Reed was previously Director, Logistics Solutions for Sterling Commerce, General Manager, Sales and Marketing for Premier Freight, Johannesburg, South Africa; and has held various other positions in the international freight management area.
ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.