I caught this rather funny article in this week’s Economist called Flying the Flag about the latest purchasing certification process to make its debut. According to the Economist, the owners of high end American-made ski equipment, High Society Freeride intend to, to create a certification process to help customers identify products in which most of the materials and labor were sourced in America. The firm’s website will list the goods that it certifies, their manufacturers and the retailers that stock them.
What a bunch of hooey.
Let’s look at a consumer product with a metals supply chain shall we? I’ll revert to an example most of us can relate to, the bed you sleep on. Inside your bed (unless you have a foam mattress or some other Tempur-Pedic alternative) is a mattress innerspring. These mattress innersprings are produced in the US by companies such as Leggett & Platt. They are also produced in China. The Chinese and the US produce comparable quality products (I have seen first hand both products). The US producer typically charges at least 15-20% more than his Chinese equivalent. When the mattress manufacturer goes to purchase innersprings, he looks to keep his costs down so that he can deliver a high quality product at a cost effective price to the US customer (the mattress manufacturer is likely still operating in the US).
In this case, the mattress manufacturer buying Chinese innersprings would likely receive a rating of three stars instead of five for having non-American sourced raw materials. It reminds me of this cereal, I think it is called Annie’s Bunnies (available at Whole Foods) that says it contains 75% organic content (and lord only knows what the other 25% of the content is). I find this a highly deceptive marketing practice. But that’s an entirely different story.
Now here is the real question, would you pay more for a mattress that contains innersprings from the US? I never would simply because there is no extra value in them. Would you pay more for a Motorola phone vs. a Nokia one (Motorola phones are still at least partially assembled stateside)? I don’t even have to answer that question, just look at the market share numbers and Motorola’s stock price.
Don’t get me started on these clubby certifications. Like I said, hooey.