Now anyone can be a manufacturer

Universal model of supply chain

Manufacturing is now a commodity service in many industries.  So many industries have sent their manufacturing into low labour cost countries such as China and throughout South East Asia that these countries have grown their own manufacturing expertise.  These factories are geared to produce goods and can and will produce them for anyone.

So the brand originator does not even have to do their own manufacturing.  They can contract this out to someone else who is great at making things but not so good at innovating new products or selling them into overseas markets (otherwise they would be a brand).  

Of course some of these manufacturers can and do develop their own branded products.  We are currently witnessing the rise of global Chinese brands in the same we we have seen the rise of Japanese brands through the sixties and seventies and Korean brands in the and nineties and noughties.

It works both ways and if the brand originator is also a manufacturer then they can also choose to manufacturer generic versions of their product so they don't lose out entirely when the generic competition comes along.  They can sell the generic versions themselves at a lower price point under a different brand or to someone else who puts their label on the product.

All of these sources of manufactured goods has exploded the range of generic products with someone's brand on them.  My new Agora smartphone from Kogan was made in a factory in China or Korea or somewhere.  All Kogan did was agree on a price and send the manufacturer some artwork.  Now anyone can do this, you can do this if you want to!, just go to alibaba.com.

In the supply chain model we see the flows of generic products from both contract manufacturers and brand originators to wholesalers and retailers who source their own branded products to sell into their existing markets.  This is seen everyday in the supermarket chains all over the world who have their own branded peanut butter alongside the premium brand.  You can only do this if you have a brand you can leverage or are prepared to do the very hard work of building your own brand like Mr Kogan.

Although this can be a very powerful strategy it is also a strategy that is now open to everyone.  This was brought home to me recently when I spotted the same LED head torch that I bought from Anaconda for $45 on display at Kathmandu for $120.  I am glad it happened this way around!  This is however a great example of the power and value of a brand.  Kathmandu is a premium brand and can charge a premium for their products because of the trust and loyalty it has built up with its customers.  Anaconda is a discount store.

Contract and generic manufacturing has had a huge impact on the supply chain and has helped to make goods cheaper and more readily available.  It has also suffered the same fate as any other easily accessible business strategy, it has diminished in value.  This reinforces the power of the consumer who has wide choice and availability, but it also reinforces the power of the branded product originator who stands out with the unique and desired product.

Next we will look at the product flows in more detail and see how the internet is shaking things up with new customer channels and what this might mean in future.

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