Now that the 2008 Summer Olympics in Beijing have ended, it’s time to settle down and spend more time thinking about work.
The air quality in China was a major concern before the games. To try to improve it, the Chinese shut down a lot of factories two weeks before the August competition started and left them shuttered for the duration of the Olympics. I’m sure that some of those factories supply textile products to the United States. Earlier this year, my major suppliers began giving me indications of supply issues and potential price increases due to the high cost of oil and various cotton crop failures in the Far East.
Textiles are now a global product, with little being produced in the good ol’ USA. We’re more dependent on foreign production of textiles than we are on foreign sources of oil.
The equipment from closed textiles mills has been sold to foreign countries eager to put their labor forces to work. In a global economy, we must come to understand that formal agreements aren’t always treated the same elsewhere as they are here in the USA.
Several suppliers have complained that the overseas mills from which they’ve been purchasing goods won’t honor their current contracts. Rapidly rising prices and shortages of raw materials have put these mills in the middle of a price squeeze and they’re looking for a way out. Refusing to make products at extremely low margins appears to be one of the strategies that they’re employing.
Manufacturers will also tend to shift raw goods and materials into products with the highest market value. Traditional healthcare products don’t fare well in this type of environment. The first companies to be affected are those that tend to buy on the spot market or on short-term contracts. Rapidly increasing prices and reduced availability of healthcare products will create product shortages in the United States. The month-long shutdown in China will also cause a supply problem for a number of products, including textiles.
This product shortage is likely to get worse before it gets better. It’s during difficult times, like these, that a strong working relationship with one of the major healthcare textile companies proves it value.
Many of these companies have long-standing relationships with overseas mills in a number of different countries. Often, they have part ownership in the mills that they use. These relationships, combined with diversity in global manufacturing capability, allow these companies to take care of their regular customers. They will often restrict sales of textile products to new customers in deference to their longtime business partners.
Facilities that have shopped strictly on price, with little or no loyalty to a particular vendor, may face severe product shortages in the near future.
Periodic product shortages have occurred at times during my 35-year career in the laundry industry. The pain they’ve caused my fellow managers and me has prompted my current method of purchasing. When the products are in ample supply and easy to come by, it’s difficult to understand why developing a strong working relationship with just a few vendors is a good idea. But just like the grasshopper in the children’s tale, The Ant and the Grasshopper, the cold winter — or the next product shortage — is lurking around the corner.
We’re not gifted with foresight to know when it’s going to come or how bad it’s going to be, but history tells us it will continue to happen. In this global marketplace, it’s more difficult for us as managers to track all the events that may impact our business.
The best buffer against an uncertain future is to regularly seek out advice from the most knowledgeable people you can find and to develop strong, mutually beneficial working relationships with major suppliers.
Have a question or comment? E-mail our editor Matt Poe at [email protected].