Cheaper Is Not Always Better !

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With all that’s going on today, how can anyone even consider moving operations to China? We have monumental supply chain shortages, especially for critical parts. For instance, chip shortages have seriously hurt the automotive industry. How many container ships off the West Coast are waiting to get in and unload? It looks like China is getting ready to invade Taiwan. If that happens, shipping from both countries is likely to stop. 

No Simple Answers

There are no simple answers. J.P. Morgan used to say, “Most people have two reasons for doing something; one they will tell you and the real one.” Managers aren’t eager to share their reasoning for often desperate decisions. Let’s look at the automotive industry as an example. Let’s say our cars need a new module, either because of damage in an accident or because of a reliability failure. The module has integrated circuits, otherwise known as chips. We may wait months for that replacement module.

Understandably, because of the shortage, the manufacturers would rather ship a new car than a module. The customer, who trusted the manufacturer enough to buy their car, is already hooked. Today, there aren’t many products that don’t include some components from China. Unfortunately, these are often the most critical, hard-to-get-from-anywhere-else components. We can’t ship the product without them.

The Way Ahead

Akio Morita, founder and longtime CEO of Sony Corporation, used to say, “An American manager’s long-term planning horizon is a whole 10 minutes out.” In such a situation, we are often so desperate to avoid any semblance of failure, we’re tempted to solve for the short term and worry about the long term later. Now, even Apple is beginning to see the light. They’ve announced they’re going to move some of their manufacturing out of China. Which is not going to be that easy.

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Source: Nhbr