Panjiva Blog: Blogging Global Trade

Today, I was asked, “Given the state of the economy, who’s looking for new factories?” Based on what we’re seeing at Panjiva, here’s the answer (factories, take note):

Growing companies

Yes, there are companies that are growing despite the problems in the economy. These companies are looking for factories to supplement the production capacity that’s been available to them, and they are looking for factories that can help them introduce new products. These customers, though hard to find, will be the most sought-after by factories.

Entrepreneurs

There are always entrepreneurs looking to get new businesses going. Some may be wary of starting a business in the current economic environment. On the other hand, these days being an entrepreneur isn’t much riskier than being, say, a banker… So expect to see a fair number of people taking the entrepreneurial plunge. Traditionally, factories have avoided working with entrepreneurs, because entrepreneurs place smaller orders and their growth is anything but certain. However, in this environment, order-starved factories will be more willing to work with entrepreneurs.

Companies under margin pressure

As I’ve noted in previous posts, lots of companies are facing significant margin pressures, thanks to declining consumer willingness to pay and increases in the prices of their inputs — particularly when their goods are manufactured in southern China. Some companies are trying to protect their margins by moving production to new, lower cost geographies. Plenty of factories will be interested in attracting business of this kind, but they shouldn’t be surprised when these companies move again, when yet another geography offers lower prices.

So, yes, there are companies that are looking for new factories. However, there’s no doubt that factories around the world are having to cope with smaller orders and fewer inquiries from potential customers. A painful situation, to be sure. More on this in future posts.

This entry was posted on Thursday, November 20th, 2008 at 5:16 pm and is filed under Labor Costs, Financial Crisis. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.