Posted by DR on July 23, 2005 at 01:37 [67.83.76.91]
In Reply to: Manufacturing Economics posted by Frank on July 22, 2005 at 22:06
First, you shouldn't compare diaper manufacturers to Wal-Mart. Wal-Mart manufactures nothing, but is a retailer able to procure deep discounts through incredible economies of scale and further slashes prices through technologies like electronic data interchange, vendor-managed inventory and logistics management. That has *nothing* to do with outsourcing overseas manufacturers.
In fact, the vast majority of the diapers sold in the US -- and at Wal-Mart -- are produced domestically. Diapers are far more cost effective when manufactured domestically because shipping is very costly and thus dampens any benefit (e.g. labor) of overseas production. Not only are diapers a heavy freight item, but they are also bulky, and thus assume a larger volume of cargo space (and import taxes) than their proportional worth as compared with other products. This is true not only of adult diapers but baby diapers also. This is one important reason why Procter and Gamble manufactures Pampers on every continent except Antarctica, and has distribution centers located in almost every modern nation around the world.
This strategy makes sense from a primary consumer point of view. Hospitals and nursing homes are a significant proportion of adult diaper primary customers, but choose their preferred brands largely on price and bulk purchase discounts. Diapers shipped from overseas would be too expensive for their tight budgets.
Retailers aren't likely to market overseas diapers either -- not only because they are more costly, but also because individual consumers are generally loyal to their preferred brands. And while consumers base their preferences on price (since adult disposables are expensive), they also like brand name diapers for reliability, availability and recognizability. Frankly, Kimberly-Clark spends more time, energy and manpower on quality control than the independent companies do, which explains why end-users can depend on Depend. Also, retailers who sell brand names, like Depend, seldom go out of stock, but if they do consumers know they can find that brand through some other nearby retailer.
And local taste is a final reason why diapers are generally produced and sold domestically. Unlike diabetes pills, which are a global product and can thus be manufactured anywhere but sold internationally, diapers are subject to local consumer preferences including: comfort, size, aesthetic, and privacy needs. European diapers are the perfect example -- I find they run smaller than US diapers. This may be explained because, on average, we Americans are fatter than Europeans are, and thus require a bigger product.
Based on all of the above, I don't see the domestic diaper industry being supplanted by overseas companies.