While the COVID-19 virus was only ravaging in China there was much talk about the need to develop alternative suppliers in e.g. South East Asian countries such as Indonesia and Vietnam and India.

Now, when the virus has become a global pandemic the situation looks a bit different.  China has weathered the crisis comparatively better than other countries. While it has been a 2 month disruption things are now back to normal, while the rest of the world are still right middle of it, with varying degrees of success in the response. Vietnam seems to have handled it very well. In Indonesia it took a suspiciously long time before they started to report any cases and the situation in India looks frightening.

 

From a global supply chain perspective, while the occurrences of viruses often start in the populous nation, China has proven they are able to handle it. With a quarter of the world’s production and a big future growth potential it will still be the go-to market for global sourcing for engineering products. There is no reason for multinationals pulling out of China, as there are no good alternatives, and there are plenty of development opportunities for SME’s.

But, the crisis will have exposed supplier weaknesses with different readiness level for a crisis and ability to get back to work and deliver.

It might be time to analyze current supplier’s performance and look at alternative solutions in China.  One risk mitigation strategy could be to develop a back-up supplier, or suppliers in different parts of China.

Scandic Sourcing has conducted supplier searches and evaluations in China since 2006. The process is started with an analysis of the customers’ requirements and development of ideal search profile. Then via our large network and comprehensive research capabilities we scan the market for potential suppliers with possibility to meet the requirements. These are further evaluated and the less suitable ones are eliminated in several rounds of evaluations and audits according to systematic processes. The result will be a handful of “best fit” supplier candidates. As usual in the engineering industry you can get a 70-90 % fit with your requirements. Then it is a choice which supplier gaps are easiest to fill. This step has to be done in close cooperation with client engineers via joint visits and discussions. Finally one or two suppliers are normally selected to produce a sample.  During this step work instructions, quality control methods, supplier ability and result are finally evaluated.

To develop a new supplier takes time and a budget, but the cost has to be compared with the benefit of having an alternative in time of crisis or changes in the market as well as an opportunity to upgrade to something better.

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