As one of the world’s largest manufacturers, China has become a leading supplier of products and materials to companies worldwide. However, recent events have illustrated that sourcing from China can be risky. There have been numerous disruptions to the supply chain including the trade war with the US and the COVID-19 pandemic, causing delays and price hikes. China may be evolving as a risky global supplier particularly in the absence of having alternatives. Smart sourcing support technology can assist in mitigating this product sourcing risk.
The Rise of China as a Global Supplier
China has been a major global trade participant for decades. Low labour costs, a massive workforce, and immense infrastructure have made it an attractive destination for companies looking to cut costs and increase profits. China’s rise to become the world’s factory has been further elevated by government policies encouraging foreign investment and exports.
However, the trade war between the US and China caused disruptions to the supply chain, leading to delays and increased costs. The COVID-19 pandemic highlighted the risks of relying on a single supply source and when China shut down factories to contain the virus, businesses around the world faced shortages of critical supplies.
The Risks of Sourcing from China
Quality control is another risk associated with sourcing from China. While China has made significant strides in improving the quality of its products, there are still many counterfeit and substandard products.
In addition, China has been accused of stealing trade secrets and intellectual property from foreign companies, particularly in the technology sector.
The Need for Technology Solutions
Given the risks associated with continued primary sourcing from China, risk mitigation has become a critical part of the supply chain. This can be achieved by applying technology to assist in product sourcing enabling:
- Supplier Verification: To verify the authenticity of suppliers and ensure that they meet certain standards. This can include verifying their business registration, quality certifications, and product testing.
- Product Inspection: Inspection of products before they are shipped to ensure that they meet quality standards which can include using cameras, sensors, and other equipment to detect defects.
- Supply Chain Visibility: Real-time visibility and control of the supply chain. Businesses can track products from the factory to their warehouse, identifying potential disruptions and taking action to mitigate them.
- Alternate Sources: Identification and ability to source from alternate locations and suppliers reducing reliance on China.
Conclusion
The risks associated with sourcing solely from China including quality control, intellectual property theft, and supply chain disruptions, can be best mitigated with technology used to develop alternative suppliers. By using technology to verify suppliers, inspect products, and provide supply chain visibility and control, businesses can minimize the risks associated with sourcing from China and ensure the quality of their products.