China Sourcing Alternatives
It wasn’t long ago that if your company was sourcing its supply of raw materials or finished goods overseas, it was likely being sourced from China. For decades, China has been the dominant force in global sourcing. So much so that they earned the title of “Factory of the World”.
China has enjoyed this dominant position in large part due to its cheap labor, strong business ecosystem, lack of regulatory compliance, low taxes and duties, and competitive currency practices.
Although many of these advantages still exist today, they are not as persuasive as they once were. The cost of goods sourced from China has been trending higher for many years and continues to trend upward.
It’s not only rising costs that have entered into the equation when considering sourcing goods from China but also other factors such as economic turmoil, political tension, and intellectual property concerns as well as what the Covid crisis has done to complicate things.
If you have been buying products from China for years or if you are new to global sourcing, it is the right time to take a step back and look over your goods overseas options.
Over the last few years, many companies have been trying to improve their supply chain by taking a series of parallel paths to assess the impact of the disruptions caused by current events including trade wars and global pandemics.
- Step 1- Assess your current supply chain with an eye for risks and opportunities. For example, try and determine the financial stability of your current key suppliers and consider second sourcing or take advantage of the highly competitive marketplace brought on by weakening economies and improve your cost of goods and/or commercial terms with a fresh round of negotiations. There are many opportunities for those who spend the time to seek them out.
- Step 2 – Consider alternative Asian countries that are emerging as top competitors to China. There is a growing list of top global companies moving their manufacturing bases to alternative countries including Apple, Samsung, Nike, Adidas, HP, and many more. Countries such as India, Vietnam, Cambodia, Indonesia, Thailand, and the Philippians are capturing larger and larger pieces of the “manufacturing pie” every year. It is wise to understand the powerful forces at work in the global supply chain so that you can harness them to your advantage.
- Step 3- Don’t go it alone. Seek out the right expert who can help guide and support you while you fine tune your supply chain strategy.
