Thinking about exiting your supply chain in China? Read this first
The trade wars, conflicts with other countries, governmental regulation issues, and on an emerging front - COVID-19 have plagued supply chains stemming from China as of late. Given the recent spat of problems a lot of companies have begun to seriously consider exiting their supply chain from China.
In the U.S., President Donald Trump, has been adding barriers to trade such as tariffs and quotas on imports. Retaliation from trading partners has slowed down trade and investment, affecting the global economy. The U.S. and China both suffered from the trade war that started in 2018, so it is understandable for people to want to, at the very least, reduce their supply chain reliance on China.
More recently, COVID-2019 is causing investors to pull out of the Asian stock markets to Europe and North America. How the global economy will react to the virus remains unclear, but in every case of outbreaks and pandemics, the economy always recovers (even healthier than before).
Companies who depend on China are quite vulnerable and their stocks go down accordingly. Wuhan is a major industrial hub and limiting the factories’ production sends people into panic, making them weary to work with Chinese vendors in the future.
Historically, the SARS outbreak and its effect on the Chinese economy shows that businesses and the markets will be hampered. Despite all of that, the economy is expected to come back in time much like the SARS economy dip.
So, while people may be skittish about having manufacturers and money tied to China, they should recognize the monumental growth the country is experiencing that has no signs of slowing down. That being said, while people may be optimistic about China’s growth, they should recognize if having manufacturers and money tied to China is slowing down their own company.
When done right, working with China can take your business to new heights.
Traditionally, working with China means higher production capabilities at lower manufacturing costs. Mix that with cheaper labour, and the opportunities to scale your business dramatically increase.
We can help you assess if staying in China is right for you. Is it cost-effective in the long run? Are there cheaper options outside of China? We can help you weigh the pros and cons of manufacturing in China. The future’s uncertainty might not be best for your manufacturing needs. Are you limiting your potential? Diversifying your suppliers and vendors might be beneficial, depending on your specific requirements.
It starts with finding the right resources. Figuring out how to choose the right vendors and supply chains can be daunting to those unfamiliar to this new landscape. That’s where we come in.
Envest has experience finding, vetting, and starting up new suppliers. We put great effort into the Supplier Approval Process (SAP). In-person audits are critical to this process because a company can look great on paper (or online) even though they might not even have a completed factory. One company’s videos showed expansive clean rooms and quality control equipment that did not exist yet. Audits and supplier reviews are not enough to go off of - when our own team performed an audit on a large supplier, the factory to be utilized did not even have a foundation finished. While they said they could manufacture for us without any issues, we did not take that chance (we will be sharing more details of this in an upcoming blog post).
We prefer to predict the actual costs of manufacturing so we can have a better idea of what potential quotes might look like in advance of actually receiving them. Our estimates usually put us within 5-10% of a favourable quoted value. That way, when something looks too good to be true, we have a more practical number to compare it to. With Envest, you're never going in blind and can have more realistic expectations.
In the long run, we reduce overall costs and significantly reduce the risk of outsourcing your supply chain activities. Our services ensure that you're confident with chosen suppliers and that you can reap the rewards of manufacturing no matter which location you choose. Coupled with this, we have design engineers on staff that can improve and adjust your designs to further reduce costs.
We like hearing your headaches so that we can find out how we can be of help. Reach out today for more information.