SARS, unpredictability give manufacturers pause
But benefits to offshore sourcing are too good for many to pass up
The Severe Acute Respiratory Syndrome (SARS) that has caused quarantines, sickness and deaths worldwide also has affected manufacturers with operations or sourcing relationships abroad.
The epidemic prompted the Centers for Disease Control to issue travel advisories for key business regions including China, Taiwan, Hong Kong, Singapore, Toronto and Vietnam.
While southeastern Wisconsin manufacturers doing business in those areas experienced delays in shipping, travel and other functions, not many reported that those inconveniences soured them on the idea of going offshore for manufactured components.
"I don’t think overall it is really going to affect things long term," said Steve Plier, manager of international sourcing for HMI, Milwaukee. The company works with manufacturers doing business overseas and travels extensively in China to operate quality control operations on behalf of manufacturers. "If they are over there, they are doing it for the cost issues, and those health issues are more peripheral."
Plier did suggest that the SARS epidemic has and may continue to impact how business is done, but will not prevent it from being done.
"It may change the way you do it," Plier said. "When we were over there, travel was restricted. You might have to stay an extra two or three nights. It was more of a pain in the butt than it was anything."
According to Plier, HMI staff traveling in China were detained and inconvenienced but did not feel themselves at risk of infection.
"It was nothing really life threatening," Plier said. "It was more a matter that our management couldn’t travel as much as we would have liked to. There was a 10-day quarantine assigned to people coming into Taiwan from Hong Kong. We also did have some stuff going on in Beijing, and they were pretty hard hit with SARS there. We wound up putting off an inspection for a week or two."
But Patrick Cronin, a partner with Global Business Strategies, Milwaukee, insists that the SARS epidemic should remind business owners that sending projects overseas is not a short-term solution – but rather is an investment that starts to pay off after months or years.
Cronin said some work for his international business consultancy’s clients was pushed back, but critical shipments managed to make it through in time.
"SARS played a role particularly as several of the more advanced manufacturing operations ended up slowing down in their production," Cronin said. "Typically they have very stable, well-trained workforces. But they found they had to put people in smaller work cells to avoid any cross infection. Their productivity suffered because of this. Some could not get the workers to come in or get the raw materials they wanted as expediently as they were used to. We were able to get our shipments through."
According to Cronin, it’s possible the epidemic will raise important issues not only for companies looking at sourcing abroad, but also for the Chinese government.
"I am hoping that what it does is show people that there are risks to be addressed, understood and managed," Cronin said. "Companies that say, ‘I have to get to China’ and go as a knee-jerk reaction will get burned. And hopefully, this will convince provincial governments in China that you cannot cover up this kind of thing. They need to be less like the old-guard communist regimes and be more honest. Be open."
July 11, 2003 Small Business Times, Milwaukee
