Skiing to China

Exactly a year ago we told you how two small ski and sled companies had decided to outsource manufacturing to China.  For their low volumes it just didn’t seem to make sense.

ScottyBob’s entire annual volume of few hundred pairs of skis would take up about 15% of a typical shipping container.  Even if they consolidated their shipment with their cross-town cohort they might use up one container load.  The fastest ships take 11 days of actual shipping time to go from Shanghai to Long Beach, but add on a month or more at each end for transit to port, consolidation with 1,000 other containers, and distribution on the receiving end.

Being a lemming and focusing on chasing the cheapest labor will simply result in globetrotting from country to country.    China is already seeing a high level of factory wage inflation.  But there are also major supply chain risks… the types of risks that are real but somehow never show up on a balance sheet.  What happens if there’s a production delay?   You miss a very tight seasonal window.  What happens if a quality problem is found after the long transit time?  You miss a very tight seasonal window.  Obviously to avoid that you better increase inventories… I wonder what that does for cash flow.  What happens if the whims of the market change after all that inventory has been produced? 

If ScottyBob and Mountain Boy were going after the burgeoning Outer Mongolian ski market, then manufacturing in China might make a modicum of sense.  But trying to shave a few pennies off the labor cost of a high margin low volume knowledge-intensive product does not.  With even a small focus on removing internal waste, while analyzing their true profit and cost structure, they could achieve far greater savings while reducing the cash tied up in inventory and also reducing the sleepless nights worrying about sinking ships.

Both of those companies are still around, but the negative press about Chinese toys (justified or not) has also caught up with the ski industry.  There have been several questions recently on a ski enthusiast message boards asking about the manufacturing location for skis, and Mountain Boy Sleds has even addressed the issue of lead paint directly on their website.  Further down on that same page you’ll see some discussion on where their sleds are made, complete with a nice photo of sledmaker Brice Hoskin drinking with "our good friend Yu Guanglin and his crew."

And then there’s ExoticSkis.com, a comprehensive list of over 176 ski design companies that is attempting to list their actual factory (or outsourced factory) locations.  Pretty impressive list, and even more impressive is the variety of custom skis available… including some that are 16 feet long.  I’m not quite sure how jump turns on hard pack would work…!  Most of the smaller companies are sticking with manufacturing in their home towns… or sometimes even their homes.  But more and more are moving to China.

As one person on the forum commented,

i guess i just don’t understand why somebody would start a company in say Utah and then immediately outsource everything to China?  might as well have started the company in China.

I’m guessing someone in China has already come to that conclusion.