Should you Improve Your China Supply Chain?
March 24, 2017
Should you revamp your China supply chain? Maybe you should, maybe you shouldn’t. How would you know if your supply chain is in need of improvement? One thing we know for sure is that things are always changing, and your China supply chain should change and adapt as well. Many companies work to reduce their operating cost and increase their supply chain efficiency.
Let’s examine this further. What should you consider in order to evaluate if change is necessary? The main things we recommend are:
– Do a quick SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of your China supply chain: Do you have good relations with proven, strong and competitive suppliers? Are you getting evidence that competitive products are coming from different areas, at lower prices? Is your competition starting to take over some of your market share?
– Existing set up: Are you getting the best value (i.e. Price/quality ratio) from your current factories? How do you know? Have you compared? Have you tested your assumptions?
– Benchmarking: Have your systematically compared other factories in the area? Other factories in other eastern seaboard areas?
– Geographic locations within China: If your current location is not competitive, is moving inland a solution? Will this reduce labor costs? Will this increase shipping costs? Are these workers as experienced as the ones located on the eastern seaboard? Will the quality be as good? These are issues we need to consider very carefully before we move our factories.
– Logistics: Is it beneficial to consolidate your shipments instead of shipping LCL? Are the factories located in the same vicinity to make this practical? Will this slow shipping time or improve it? Will this allow you to place smaller orders instead of having to fill a full container?
– Alternative Sources: Many companies have considered moving their sourcing from China to places like Vietnam, Bangladesh, India and other countries. Sure, labor there is cheaper, but productivity levels are much lower due to inefficiencies. China often provides a proven network of inter-connected supply chain solutions that other countries find difficult to beat. China has also developed a strong CSR (Corporate social responsibility) profile. Ignoring CSR can be risky. You must consider – how strong is the infrastructure? Do local business practices conform to your profile and to your client’s requirements? How about labor management? These are very important issues you need to take into account.
– Relocating to the USA: Have you looked into that? With rising China labor costs this becomes a real alternative. Especially when you factor freight, speed to market and the benefits of making things in the USA.
These are just a few ways to think “outside of the box” to maintain and improve our China supply chain. Maybe these are new issues that you have not considered – and perhaps you should.
How do you evaluate and improve your supply chain? Share your thoughts with us in the comments below!
By Susan Timpe