During the last years COVID-19 pandemic there was much talk about the need to develop alternative suppliers to China in e.g. South East Asian countries such as Indonesia, Vietnam and India.
For some low tech industries, with a high labor component, this transfer was done already several years ago but with a high dependence on supplies of machinery and material from China. After the virus become a global pandemic, the situation looked a bit different. China weathered the crisis comparatively better than other countries and got its industry up and running. Yes, there was disruptions and sporadic lockdowns but overall teh industry has been producing. The complete chain of the supply chain resources in China makes it hard to beat when it comes to long term reliability.
From a global supply chain perspective, while the occurrences of viruses often starts in the populous nations, China has proven they are able to handle it effectively. 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 of engineering products. There is no reason for multinational corporations to pull out of China, as there are no good alternatives, and there are plenty of development opportunities for SME’s in China. But one lesson learn is that wherever a crisis occur global supply chains will be affected and it can affect both individul suppliers as well as regions.
The recent crisis have exposed some 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 dual/multi-sourcing strategy or establish 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 a systematic processes. The result will be a handful of “best fit” supplier candidates. As usual in the engineering industry you can get 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 to fit into you supply chain 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.
Contact us today for more information.