The Necessity of "China Plus"
Updated: Mar 11, 2019
“Don’t put all your eggs in one basket” is an idiom quite apropos for Supply Chain Management in 2019. Too many firms have been relying on China as their main or only source for suppliers. Given current geopolitical and macroeconomic trends, it is incumbent upon firms to adopt a so-called “China Plus” policy today.
Add its very simplest, a “China Plus” SCM strategy means not relying on vendors only from China in the same way one would not rely on only one supplier in general. A dual-vendor strategy should be extended and a dual-country strategy should be developed and implemented Ideally of course even more countries and vendors are a better way to go to diversify away unnecessary risk exposure.
The risks that a China Plus strategy mitigates against are vast. They include the following:
Being tied to vendors only in the People’s Republic of China.
Being exposed to appreciation of the Chinese currency against your home country currency.
Being caught up in geopolitical struggles between China and other parts of the world (e.g., the current US-China trade war).
But how do you go about implementing a China Plus strategy? Methods are myriad. However, some tactics to keep in mind include the following:
Determine if your existing suppliers have production facilities outside of China or have plans to set up said. This applies not only to existing suppliers but those that you have in your Rolodex (ask them for updates).
Search online for new possible vendors in English and local languages. In some cases, hire local support to conduct local-language searches.
Tap governmental economic development entities tied to particular countries or geographies for support. It is their job to help you.
The tactics listed above just scratch the surface. Feel free to share more tactics and thoughts in the comments below. To close, purchasers should immediately design and implement a "China Plus" SCM strategy.