China Supplier Transformation and Effects on sourcing from China


China low cost, low tech manufacturing powerhouse over

days Chinese suppliers dominating the low-technology, high volume, and minimal skills industries are gone. The same strategy of targeting the lower echelon of production capacity, one that jolted the Chinese suppliers in the world renowned industrial power, has also judged many of the suppliers that once thrived in this environment. With tighter environmental regulations, higher wage standard, more stringent job protection systems, better living standards and rising strength of Chinese Yuan, China, unfortunately, is no longer among the elite low cost countries as a source of employment when sought.

China is losing the battle to lower the cost Asia-Pacific neighbors such as the Philippines, Thailand and Vietnam. This development could spell disaster for the Chinese economy, one has to rely on exports, which generates billions of dollars of surplus each year. To combat this movement, China is going through a “mini-industrial revolution” which is similar to the United States in the 18th century, where significant improvements in social, economic, and technology are realized.

China supplier transformation and those who are left behind

to breaking free from the previous mode, low-tech operation, some Chinese suppliers transforming its facilities to serve the policies controlled, been driven and quality focused high tech industries such as medical, automotive, and industrial. Gone are ISO 9001 and GMP, which has become an unspoken requirement for doing business in China. The new buzz words are ISO 13485 and ISO 14971 for medical devices, ISO 16949 for automotive, and ISO 14001 for environmental management.

For those who have adapted well to the new environment, they are primed to enjoy the next season in the still-thriving economy. Those other comers, unfortunately, are scrambling to play catch up. Some have been involved in not-so-moral-way “buy” themselves into orbit regulatory compliance. For a nominal fee, one could buy a plaque and certification, finished with an official stamp of approval from the author’s institution, and will be “allowed” producer break-neck speed. Unfortunate for sourcing experts, on the well-published issues such as the language barrier, cultural and organizational risks, will also factor in business ethnics when sourcing from China.

Get to know your supplier, evaluate them

to fight things out, general wisdom and usually strategy companies need to send elaborate group Quality , engineering, and supply chain experts, to physically assess suppliers. Obviously, this is not cost effective methods, especially for companies without financial support to hire a dedicated team in the targeted country. Another method is to hire an independent vendor evaluation consultant who is familiar with the local shopping industry, and preferably on or close to suppliers interested. In the assessment, management will not only be able to make an informed decision, but also reduce the risk factor in the future.

In the era of strategic sourcing, including supplier relationship management, product life management, spend analysis and vendor rationalization has become the front runner in sourcing profession, should one pay particular attention when finding suppliers in China. While conversion supplier has brought many exciting source of opportunity for the technology sector unnoticed in recent years, it has also spread generation inferior suppliers pretend to be top shelf, which should be weeded out in the early phase of the sourcing process.


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