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How your supply chain can make a graceful exit from China.
Many companies these days are understandably concerned about still doing business in China for a variety of reasons. Mainly their worries involve matters like the US-China trade war and tariffs.
As a result, while 75% of American companies are willing to stay put, 12% are packing their bags and another 12% are eyeing the door. If this dissatisfied bunch includes you, here’s how you can go about finding new suppliers outside of China.
Factoid
About one-quarter of U.S. businesses are either planning to leave China for manufacturing and sourcing or are definitely considering it.
Voice of America’s
voanews.com
Check out your current suppliers’ competition.
First of all, you need to learn what other countries make the same product(s). Nearby nations like India, Vietnam, Indonesia and Thailand are likely good alternatives, but also explore North America, Mexico and Central America.
Once you’ve identified some potential new suppliers within the countries you select, contact them and get their estimates for lead times and prices. Some companies will reply quickly with detailed estimates, while others not so much. From that alone you can start to whittle down the possibilities.
Let them dazzle you with their competence.
Send product samples to the candidates you’ve identified and ask them to send back what they would provide that’s of equal quality. If creating a mold to make the product is required, for example, that goes into the equation for determining transition costs and timelines. In any case, put the samples through rigorous testing. Find out now what could trip you up in the future.
Obviously, once you get samples from everyone, this is where things get real. You have their products, prices, delivery times, etc. all in hand. (You also have another example of how each of these candidates has acted in response to your request.) Now, of course, you need to combine all the relevant factors from all the potential suppliers and weigh them according your criteria.
It’s time to vet your shortlist.
Actually, you may choose to take this step even before contacting any potential suppliers, but you certainly need to do it before any final decision. Whereas information from a prospective supplier is weighted to shine the best light on them as possible, you need an objective third party to chime in.
This goes beyond critical certifications like FDA and to also include everything from industry reputation, historical track record and longevity to financials (stock market, earnings,
This can range from a service that a website like Alibaba provides to a company like Glovendor that can give you an entire suite of supply-chain services, including supplier vetting (see below for more detail).
As with your personal medical care, getting a second opinion makes all kinds of sense, particularly for a critical decision like hiring suppliers.
Before pulling the trigger, do a cost-benefit analysis.
This is to make sure it’s worth leaving China in the first place. This means you’ll need to take a harder look at the potential negatives that your new supplier’s country may have such as taxes and tariffs, history of supply-chain disruptions, political and economic stability and so forth.
At some point, because significant uncertainties are involved, you’ll need to consult with your gut. Very possibly, that will determine your ultimate decision of whether or not to even abandon China for greener pastures.
Make both transition and backup plans now and not later.
Rather than thinking you can figure it out when you get there, detail the steps you’ll need to go through to disengage with your current supplier and form the new relationship. Also, be prepared with a Plan B involving a different supplier from your shortlist. Contingency planning is usually time well spent.
