Thursday :: Aug 16, 2007

Relentless Pressure on Prices Led to China Toy Recall

by Mary

McClatchy reports that the toy recall manufactured in China are also due to the relentless pressure of getting more for less. US manufacturers and importers have been requiring lower cost goods from China in the face of higher wage and material costs to the Chinese plants.

“Everybody is pushing, pushing, pushing for lower and lower prices. The vendors are squeezed to the point where they aren’t making a profit anymore. So they are looking to cut corners,” said Peter Dean, a former U.S. toy company executive who now teaches at Hong Kong Polytechnic University.

The squeeze on China’s manufacturers, led by big retail names like Wal-Mart and Target, means low prices and low inflation for U.S. consumers. But perversely, it may now be giving an incentive for Chinese manufacturers to cut corners or outright cheat.

Certainly WalMart has taken it's tactics of bullying its suppliers from the US to China. In November 2004, Frontline reported that WalMart was applying the same pressure on Chinese manufacturers that they had used in the US. The choice companies face in either case is deliver the goods for the price WalMart demands - and lose money doing it - or lose the work to someone else that will do it for less.

The WalMartization of the world has created a rapid race to the bottom. So who really benefits? Or do we eventually get to a point where everyone loses?

Another view: It is only a question of Quality Control.

Mary :: 8:11 AM :: Comments (5) :: Digg It!