Monday, August 20, 2007


Back when Lulu was growing up, there were two main players for chocolates in Malaysia. One was Cadbury, and the other, well, lets call him “the other one”.
Lulu, being a forgetful Lulu, forgot exactly when this happened, but suspects that it was in the late 90s - “the other one” had yanked the distribution rights of whoever the local distributor is who was doing it. And they had taken their own sweet time to find the replacement distributor.
In the meantime, the shelves of supermarkets all over Malaysia were left with only one big name. There was a vacuum in the market.

Vochelle, being a new name, then a mere babe in Malaysia, recognised the markets that were open to them now that “the other one” had disappeared from the supermarket shelves, and took advantage of the situation.
Their marketing team upped their activities, did press ads, tv ads, they got the shelf space, providing an alternative to Cadbury, and today, they are a known brand name in Malaysia.

Lulu says, in today's very competitive market, it is very important to recognise opportunities, and seize them at once.

China, as a manufacturer, is on everyone’s “beware, be cautious list”.

Today’s the Sun has a report on their latest export scare – “Poison in clothes from China”
Some key dates in China export scares
Hasbro recalls EasyBake toys. Burn injuries reported.
Chemical melamine found in pet food. Cats and dogs died
4,000,000 toy bracelets. Fear of lead paint
Toothpaste banned. Contaminated with industrial solvent diethylene glycol (DEG)
450,000 tyres – safety key feature missing
Mattel recalls 1,500,000 Fisher Price infant toys because of possible lead paint hazard
Seafood halted after traces of banned drugs and pesticides found
Black & Decker tools causes 58 injuries
Gilchrist & Soames recalls toothpaste from hotels in 17 countries
Mattel recalls more than 18,000,000 toys worldwide

Companies who have sub-contracted their products to be manufactured in China have good reasons to be concerned. The level of trust in China manufacturing, Lulu guesses, would be very low.

For example, in this Lulu does math moment,
In the last case of Mattel recalling 18,000,000 toys, as most parents know, is not cheap.
For illustration purpose, lets assume that the toy retails at USD10.
Assume that between the retailer and Mattel, the toys were sold at a 60% [wild guess] from the manufacturing cost.
Add another 10% for the recall exercise logistics.
And they need to replace the recalled toy.
The recall of the 18mil toys could cost them close to USD20 million. The greed of China could cause a smaller company to go under.

If Lulu were a company, Lulu would be nervous too about giving any manufacturing rights to a factory in China.

SO, what’s Lulu getting at?
First she talks about chocolates,
Then the export scare in China?

If you think about it, there will be a “manufacturing vacuum” due to China’s greed in taking shortcuts.

If you are a local manufacturer reading Lulu’s blog, would you explore the contract manufacturing for these OEMs? Lulu thinks, the multinationals are out there looking for manufacturing site options. Would you quickly-quickly put something together and find out how to make contact with them?
Lulu says, the opportunity is there, but you need to be quick to grab it.

If you are a cybertrooper, or a part of the government, would you whisper this to your masters? For the good of the nation, Lulu will not bongkar that the idea did not originate from you.
Will you ask them [the government-lah] to be quick enough to recognise the opportunity open to them?
Will you get them to quickly put up a package to entice people like Mattel to move some of their manufacturing here?
The last one is a bit tough, but would you follow the written rules, and not phantom government department policies, in processing the applications of foreign companies to set up plants in Malaysia.

This is a great opportunity for our country to gain back manufacturing jobs which were lost at the turn of the millennium when the China markets opened.




carboncopy said...

Good point, but I think Malaysia have our own problems which drove away manufacturing contracts in the first place.

Corruption and red-tape to name two.

Still, take advantage of the moment indeed.

kittykat46 said...

Hi Lulu,
There is definitely an opportunity there. Unfortunately, Negaraku has been steadily losing it relative competitiveness for many years, now more than ever.
It takes far too long to get a foreign manufacturing facility approved compared to our neighbours. The big Napoleons and little Napoleons are often hostile towards the needs of the business community. The quality of the school-leavers and graduates joining the workforce has been stagnating, if not declining.

Bear in mind the issue concerns China's integrity and transparency as a reliable manufacturing partner. Negaraku isn't exactly a model of integrity these days.

moo_t said...

Good thought. But Lulu forget something, it is the cheap-cheap-cheap labor attract multinational manufacturer in the first place. And Vietnam are cheaper.

mob1900 said...

China can be the main protaganist in manufacturing err but their gov are taking new measures to address it.

For Tanah Air Ku(which some hardcore AMNO will disgree) we have crap records in manufacturing lately, thanks to kangkung-fondler Bedol Napoleon.

Look on the bright-side, one industry down, another srpings up! It's called making Corridors, like Northern Corridor, Southern Corridor, etc. All it takes are throw in promises and huge numbers like "RM199 Billion!!" then smile for the cameras.

ghostline said...

Mob's right. Malaysia's booming new industry is happening right in the heart of Putrajaya:

PKFZ, IDR/SJER, NCER, UMNO General Assembly Economic Region (UGA-ER, pronounced "OOOGAAA! ERRrrRrR!"), MaChAi Economic Region (MCAiER, pronounced MaChAi? ee-yeRR...), Semi Value Economic Region (SVER - pronounced 'Samy Valued, Indians Marginalised' Economic Region) and all the other assorted gravy train 'ER's.

RM199 bil? small change aje.

Anonymous said...

no time for this, lulu. we have the corridors, south, east, north to think of. trying to figure out another corridor which is facing west and towards the straits of malacca.
then, we have other priority issues like the namewee video, cyberwar with socio-politial bloggers who have been monkeying around by revealing to all and sundry the scandals such as PKA,in depth planning for the PM's coming holidays,...
thanks lulu for the tips. some othe time then. may be vietnam or thaland can pick up your tips and do charge them for this brillaint idea.

Anonymous said...

taking advantage of china err... ?

wouldn't be surprised if some of these manufacturing plants belong to m'sians & u think they want to shift the operation back?

btw, want to know why these m'sians are forced to set up factories there in the first place...? well your guess is as good as everyone else.

Sunflower said...

Don't forget the kids' clothes from China with formaldehyde levels 900 times above the safety limit. Now I understand why my mom always insisted that new clothes go through the wash first before we were allowed to wear 'em.

manhon said...

Lulu, check your numbers. Recall 18m unit of toys giving rise to an opportunity cost of only US20m?

Nice thought, but I cant see the opportunity becoming real for Malaysian entrepreneurs. Struggling US manufacturers gets a boost in their arm.

There is however an opportunity to provide "policing"/"audit" or accreditation service on Chinese manufacturers to US buyers. That is the only way to bring up standards of compliance in H&S issues.