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Nike has always been in the forefront of international manufacturing. So much so that I can remember a time (before China became THE factory to the world) when many companies would base their decision on where to do their manufacturing on where Nike did its manufacturing. Nike started its international manufacturing (pretty much from day one) in Japan, but by the 1980s, it had moved almost all of its manufacturing to South Korea and Taiwan. Nike opened its first factory in Mainland China in 1981.
Back in the mid-1990s, Jardine Fleming Securities (now part of JP Morgan Chase) came up with the Swoosh Index, which was its theory that once Nike selects a country for its newest factory site, economic growth, rising stock markets, and other foreign companies follow. A Business Week article, entitled, “The Swoosh Index for Emerging Markets” explained it:
Yesterday, I met with a couple people who operate a high-tech product inspection and sourcing company and we — as so often happens these days — quickly found ourselves talking about what we are saying by way of companies moving their manufacturing out of China. I talked about a company that was looking at Poland for manufacturing its baby strollers. They mentioned having looked into Poland for making shoes. I then talked about having worked with company that had its shoes made in Portugal and then eventually had some of its shoes made at a Portuguese-owned factory in Angola. We talked about being surprised at how many companies still make clothes and shoes in China that probably should have moved that manufacturing out years ago. We discussed how Vietnam is bursting at the seam these days. I should have quoted Yogi Berra (but I didn’t) on how Vietnam has become so crowded for manufacturing that nobody goes there anymore. They talked about how India is a great place for jewelry. I talked about how we had clients that loved Pakistan for making baseball hats.
We then talked about how China made manufacturing easy for SMEs (small and medium-sized enterprises) and no country even comes close to China on that count. We agreed that China had great “soft infrastructure” for manufacturing and every other country was pretty terrible at this and how this was a major factor in how slowly companies are moving their manufacturing out of China. I gave example after example of companies that had come to one of the international manufacturing lawyers at my firm for legal help with their China manufacturing only to end up manufacturing in another country at lower cost and no tariffs. These country changes happened at our urgings and these discussions nearly always go like this:
Lawyer: Why China for X product? Did you consider Thailand (or whatever other country seems to make better sense)?
Client: I actually wanted to have my X product made in Thailand but I could never figure out how to accomplish that.
Lawyer: We have people who can help you with that.
We then talked about the pros and cons of manufacturing in various countries and the countries we like for manufacturing and the “sleeper countries” — those countries we believe more companies should be considering for their manufacturing. I threw out Spain, Portugal, Poland, Thailand, the Philippines, Mexico, and Guatemala.
But what about Nike? What countries does Nike like? The answer to this question is easy because Nike has a website that tells us exactly where it manufactures its products. Nike has its products made in 41 countries, using 525 factories and a little over one million workers:
What about this list surprises you? I’m surprised to see an expensive country like Germany on here and not the Philippines.
But what if you make toaster ovens? What can you learn from above? You can learn that there are plenty of countries other than China that manufacture quality items at a price that makes sense for a highly sophisticated international company like Nike and that alone ought to open your eyes to the manufacturing world outside China.
But, what is good for Nike may not be good for you and, quite frankly, there are countries listed above that I would immediately write off as too dangerous, too corrupt, too risky, too lawless, or just too difficult for the average company.
Where are you looking for your manufacturing these days? What countries do you see as manufacturing sleepers and why?
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Dan Harris
www.chinalawblog.com
Back in the mid-1990s, Jardine Fleming Securities (now part of JP Morgan Chase) came up with the Swoosh Index, which was its theory that once Nike selects a country for its newest factory site, economic growth, rising stock markets, and other foreign companies follow. A Business Week article, entitled, “The Swoosh Index for Emerging Markets” explained it:
Many companies watch Nike and then follow Nike into whichever country Nike locates. I bring all this up because hardly a day goes by without my discussing with someone “where to manufacture” something. It feels like the old days when manufacturing in China was not a given and companies needed to make international manufacturing decisions without Nike-sized budgets. With China no longer the automatic choice for manufacturing, things have gotten more complicated and more interesting. I like it. It feels like a return to the past, back to when I would call myself an international lawyer, not a China lawyer.
Yesterday, I met with a couple people who operate a high-tech product inspection and sourcing company and we — as so often happens these days — quickly found ourselves talking about what we are saying by way of companies moving their manufacturing out of China. I talked about a company that was looking at Poland for manufacturing its baby strollers. They mentioned having looked into Poland for making shoes. I then talked about having worked with company that had its shoes made in Portugal and then eventually had some of its shoes made at a Portuguese-owned factory in Angola. We talked about being surprised at how many companies still make clothes and shoes in China that probably should have moved that manufacturing out years ago. We discussed how Vietnam is bursting at the seam these days. I should have quoted Yogi Berra (but I didn’t) on how Vietnam has become so crowded for manufacturing that nobody goes there anymore. They talked about how India is a great place for jewelry. I talked about how we had clients that loved Pakistan for making baseball hats.
We then talked about how China made manufacturing easy for SMEs (small and medium-sized enterprises) and no country even comes close to China on that count. We agreed that China had great “soft infrastructure” for manufacturing and every other country was pretty terrible at this and how this was a major factor in how slowly companies are moving their manufacturing out of China. I gave example after example of companies that had come to one of the international manufacturing lawyers at my firm for legal help with their China manufacturing only to end up manufacturing in another country at lower cost and no tariffs. These country changes happened at our urgings and these discussions nearly always go like this:
Lawyer: Why China for X product? Did you consider Thailand (or whatever other country seems to make better sense)?
Client: I actually wanted to have my X product made in Thailand but I could never figure out how to accomplish that.
Lawyer: We have people who can help you with that.
We then talked about the pros and cons of manufacturing in various countries and the countries we like for manufacturing and the “sleeper countries” — those countries we believe more companies should be considering for their manufacturing. I threw out Spain, Portugal, Poland, Thailand, the Philippines, Mexico, and Guatemala.
But what about Nike? What countries does Nike like? The answer to this question is easy because Nike has a website that tells us exactly where it manufactures its products. Nike has its products made in 41 countries, using 525 factories and a little over one million workers:
- Argentina — 13 factories (6 apparel, 3 equipment, 4 footwear)
- Bangladesh — 1 factory (apparel)
- Bosnia — 1 factory (footwear)
- Brazil — 24 factories (9 apparel, 15 footwear)
- Bulgaria — 1 factory (equipment)
- Cambodia — 10 factories (apparel)
- Canada — 3 factories (apparel)
- China — 109 factories (46 apparel, 33 equipment, 30 footwear)
- Croatia — 1 factory (equipment)
- Ecuador — 1 factory (apparel)
- Egypt — 5 factories (apparel)
- El Salvador — 3 factories (apparel)
- Georgia — 2 factories (apparel)
- Germany — 1 factory (apparel)
- Greece — 1 factory (apparel)
- Guatemala — 4 factories (apparel)
- Honduras — 5 factories (apparel)
- India — 8 factories (2 apparel, 1 equipment, 5 footwear)
- Indonesia 38 factories (15 apparel, 5 equipment, 18 footwear)
- Israel — 1 factory (equipment)
- Italy — 18 factories (10 apparel, 2 equipment, 5 footwear)
- Japan — 12 factories (3 apparel, 8 equipment, 1 footwear)
- Jordan — 3 factories (apparel)
- Malaysia — 7 factories (apparel)
- Mexico — 16 factories (14 apparel, 2 footwear)
- Moldova — 4 factories (apparel)
- Netherlands — 2 factories (apparel)
- Nicaragua — 2 factories (apparel)
- Pakistan — 6 factories (4 apparel, 2 equipment)
- Poland — 1 factory (apparel)
- Romania — 1 factory (apparel)
- South Africa — 1 factory (apparel)
- South Korea — 8 factories (1 equipment, 7 footwear)
- Spain — 2 factories (apparel)
- Sri Lanka — 17 factories (15 apparel, 1 equipment, 1 footwear)
- Taiwan — 13 factories (5 apparel, 5 equipment, 3 footwear)
- Thailand — 29 factories (24 apparel, 5 equipment)
- Turkey — 4 factories (3 apparel, 1 equipment)
- United Kingdom — 1 factory (apparel)
- United States — 42 factories (37 apparel, 5 equipment)
- Vietnam — 105 factories (68 apparel, 11 equipment, 26 footwear and 463,531 workers)
What about this list surprises you? I’m surprised to see an expensive country like Germany on here and not the Philippines.
But what if you make toaster ovens? What can you learn from above? You can learn that there are plenty of countries other than China that manufacture quality items at a price that makes sense for a highly sophisticated international company like Nike and that alone ought to open your eyes to the manufacturing world outside China.
But, what is good for Nike may not be good for you and, quite frankly, there are countries listed above that I would immediately write off as too dangerous, too corrupt, too risky, too lawless, or just too difficult for the average company.
Where are you looking for your manufacturing these days? What countries do you see as manufacturing sleepers and why?
Print:
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Dan Harris
China Law Blog Archive
www.chinalawblog.com
