I have been very busy recently setting up China Direct Partners UK. This venture arose out of a chance meeting with Gary Dickinson whom I met when I was last in China.
The company is based around the direct global procurement business model. This involves leveraging the power of the internet and modern telecommunications, the increasing competitiveness of containerised sea freight, and the huge competitive advantage of China in large-scale manufacturing. The target sector is the building industry, the structure of which, in the UK, has remained apparantly unchanged in the face of the globalisation.
I have had great fun speaking to managers in main contractors. In many cases they say that they source entirely from the UK, which seems highly unlikely, although maybe they choose not too look too closely at where their distributors get their supplies from. I am still learning about how the industry works. I still don't know exactly what determines the decision of a main contractor to go 'management only', with all labour and materials outsourced. I would have thought that that would automatically shift too much power to the supplier in terms of preserving margins. Certainly distrubutors do make large gross margins - around 33% as far as I can tell from studying the published accounts of firms like Wolseley, although most of that saving is swallowed up through the costs which arise from managing the sourcing from a high-labour-cost economy like the UK.
I apologise for the lack of general blog entries recently. I have just been too busy.
If I know you, and you have any background in the construction sector, I would be very interested indeed in buying you a meal or a drink in exchange for picking your brains about how the sector operates.
