3 Things Your China Supply Chain Needs to Focus on

During my frequent conversations with China importers, the subject of revamping their China supply chain, reduce operating costs and increase efficiency often comes up.  Many of these importers have developed good sourcing systems that are sufficient for their immediate needs, but most acknowledge that they would welcome something better.

So I would like to share with you the 3 things that most importers’ China supply chain should focus on, based on the trends that I have observed.

Ethics and Visibility

We are living in the information age, meaning that everything can become known in a very short time.  Add to that the fact that most companies have very active competition.  Such competition is often looking for an edge and that edge, more and more often, is reputation: something hard to build and seemingly easy to destroy.

In the past, importers could use the “plausible deniability” defense if their competition publicized they were dealing with irresponsible or unethical factories.  They could basically say: “We are ethical, not our fault if the factory is not: we did not know.” – and get away with it.  No more.  Even if your clients don't care, it is likely that your clients’ customers do.   The onus of ethical responsibility has shifted to the importer, and you need to make it your business to verify that your suppliers are ethical, ecologically friendly and responsible.   Otherwise, you could be just one Tweet away from pulling your hair out!  Be careful with whom you do business when it comes to your China supply chain.  Importers who are conscious of Corporate Social Responsibility are likely to do better than those who don’t care.

More options, means more flexibility and control

Don’t get me wrong; too many choices can lead to difficult decisions. Most importers do not work with multiple factories for the same products, however.  Good importers have one main factory with one, maybe two, backups.  That often creates what we call a “captive buyer” situation, where the supplier controls the buyer.

To avoid this, your China sourcing team should maintain an active program of systematic benchmarking for all your main products. Having options provides you with the flexibility you need in your China supply chain not just because this gives you alternative suppliers, but also because existing suppliers behave better when they know you have choices.

An efficient on-site China sourcing team makes a big difference

In the blog series: Are you leaving money on the table? Part 4 I mentioned that a China Sourcing Office should be an extension of your home office and should be focused on advancing your company’s objectives and protecting your interests. Such a team, well managed, provides the highest level of sourcing support since they work for you, only for you and use their brains, presence, savvy, and cultural affinity to get things done. So make sure your China supply chain is supported by a good on-site sourcing team.   Pay attention to the management of the existing team: are they “rowing in the same direction” as your home office?  And if you don’t have a sourcing team, look into getting one: it may not be as hard as you think.

What are your views on these 3 focal points? What are some areas of focus that makes a major difference in your China supply chain? Share your comments below.

 

- by Guerschom Francois

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