As Chief Operating Officer of Otter Products, Kyle Pettine is no stranger to the complex world of global trade. But these are especially stressful times.
CGTN’s Hendrik Sybrandy reports.
“I was dark-haired six months ago,” Pettine said. Appearing recently on the Trade Geek Podcast, he spoke about how the U.S.-China trade war has affected his company.
“The difficulty is not that there’s a trade war,” Pettine said. “The difficulty is we don’t understand what the rules are day today. And so the risk to business is profound.”
Colorado-based Otter makes a variety of outdoor gear, like coolers, along with things like water bottles. It’s primarily known for its protective smartphone cases. A lot of these products are made in China.
“China as a trading partner, they have wonderful logistics, they’re really good at international trade,” Pettine said.
Chinese factories, he added, have mastered the machining needed to mass-produce the cases. The country also has a strong network of ports, bridges, power grids and airlift needed to bring them to market.
But that Chinese advantage is being eroded to some extent by U.S. tariffs that are making Otter’s products more expensive. And that has this company, and many others, thinking about ending long-standing relationships and moving their factories elsewhere.
“I think now they’re saying can I get it made for the same amount, the same quality, and will I be able to somehow negotiate logistics that fit in line with that,” said Pete Mento, Crowe LLP’s Global Customs and Duty Practice Managing Director. Mento helps companies minimize their import and export duties and deal with tariffs.
“It’s become the most important conversation among logistics professionals, is how do we manage this and help manage this for our clients,” Mento said.
An industry survey in May found that 40 percent of U.S. companies operating in China have or are considering relocating manufacturing facilities outside of the country.
“It’s difficult to make these snap judgments, not even just for cost but just to make sure you get the product where you need it, when you need to get it, at the right price and the right quality,” said Jack Buffington, a supply chain expert who teaches at the University of Denver Daniels College of Business.
It can take years to move a supply chain, an action that’s not easily reversed.
“This is a decision your shareholders are expecting you to and they want you to make in such a way that’s sustainable,” Mento said.
“We have made shifts in our footprint and I won’t say it’s 100 percent commitment to leave China but certainly we’re going to reverse our dependence there,” Pettine said.
The overall goal, he emphasized, as Otter builds its cost models, with tariffs included, is keeping customers happy and protecting the brand.
“When we bring new suppliers on, it creates risk to our business,” Pettine said. And a crystal ball that remains very cloudy when it comes to trade doesn’t help.
“Perfect forecasts,” Pettine said when asked if he had one wish. “Wouldn’t that be awesome?”