More Western business executives are deciding to start sourcing items from China in order to take advantage of the country’s low production costs. However, we observe most of these China sourcing projects that lack a robust Change Management component: They frequently underestimate the amount of time and effort required to move to supplies from China.
The transformation is dramatic: departments such as purchasing, quality, research, logistics, and design arranged their operations around relationships with “established” suppliers. The change from “local sourcing” with specifically this old supply base to “distant sourcing” with new suppliers in China will have a significant impact on how they work:
To begin, the Design Department should incorporate new technological and financial limitations into the designing of the next generation of goods. The three major principles are as follows:
-1 When sourcing in China, parts with higher added value as well as sub-assemblies provide the greatest cost savings.
-2 Different production methods exist in China: A variety of manual procedures replace the automatic production. It minimizes capital investment and costs while increasing production flexibility; nevertheless, tolerances are not quite as excellent as in an automatic system. Product sourcing from china is an easy thing if you plan it correctly.
Furthermore, the Engineering Department formerly relied on its conventional suppliers’ better engineering capabilities, knowledge, and innovation capability. Switching to a provider whose knowledge is inferior means:
1- Additional work: New technical validations, as well as assistance to new Chinese suppliers
2- Diligence: Thorough examination of all safety standards
3 – Parts containing vital intellectual property must be kept outside of China.
Third, personnel in the Logistics Department would need to begin setting up modern flows arriving from China as well as adapt to a newer set of standards. Long container transit times may be a new restriction. Every day, factory logistics staff deal with dozens of problems, and additional limitations are never welcome. Daily shipments in returnable packages, for instance, are not a possibility when the manufacturing factory is 10,000 kilometers distant. The distribution cycle is simply too long, as well as the investment within boxes would’ve been prohibitively expensive. However, if this is the chosen mode of delivery, the Logistics Department would need to modify its routines as well as adapt to new goals.
In addition, the Quality Department should reconsider its approach to supplier quality:
The vendors used to be actually subcontracted for the quality of the acquired parts: Quality targets are incorporated in buying contracts, and defective components are returned to the source. The customers have little to do with their Chinese wholesale suppliers‘ quality management. This method doesn’t actually work with remote sourcing. It would be extremely dangerous and costly to actually wait for the components to be delivered before inspecting their quality. It will take time as well as resources, but purchasers will have no option but to reclaim control of quality management.
Lastly, buyers should adjust their bargaining technique and attitude immediately on the battleground, in the purchasing Purchasing Department.
It is impossible to be aggressive in price reduction objectives to Chinese suppliers without offering anything in exchange. It is not just only due to Chinese corporate culture. If the agreement does not result in a win-win situation, the Chinese supplier may begin looking for methods to reduce his production costs and reclaim his lead: Switch the raw materials for less expensive ones, or subcontract to yet another business. A transaction that is unprofitable for particularly the supplier generally degrades the quality of the products.
While confrontation seldom works, being supportive of specifically a Chinese supplier usually pays off. Give realistic advice, conduct short trainings, and offer assistance where it’s required: Suppliers will maintain a good attitude, which will benefit both parties.
This is the fundamental idea of Supplier Development: A particular Supplier Development t often begins when the proprietor of a Chinese firm accepts the active assistance of his potential customer over time and involves his company throughout the project implementation of all the best practices that have been presented to him and his crew In exchange, the customer establishes a custom-made manufacturing facility for its parts, as well as a loyal supplier. After six months of weekly inspections and workshops with the various departments, the Chinese plant has significantly improved, and production has begun. This is a significant time as well as effort investment, but it actually pays off in the form of a long-term cost benefit.
All of these adjustments would only be successful if they occur concurrently and as the China sourcing initiative progresses. A company-wide Change Management initiative is required to handle such an issue.
In conclusion, moving to obtaining supplies from China is a difficult process and Supplybase Solutions offer to support this by providing the supplier sourcing process and managing the complete order process without the need for you to visit China.
