Back in February, the world was watching the Far East (predominately China) as the onset of this Pandemic took hold of economies and lockdowns were implemented. Albeit over Chinese New Year, companies’ Asian supply chains were shut down and the return of workers remained an unknown.
Now to today, over the past 5 months, this virus has spread widely infecting some 13 million people globally. Moving from Asia to Europe, the Americas are now the epicentre. The number of infections has risen by 1 million in just 5 days. This has led Tedros Adhanom Ghebreyesus, Director General, WHO to comment, “too many countries are headed in the wrong direction”.
Whereas Asia is now operating relatively normally within their own borders (China has just announced GDP growth of 3.2% for the second quarter suggesting a V shape recovery), Western markets are hampered by lockdowns and a resultant shift in consumer behaviour. In addition, with borders shut, companies now find themselves locked out of their Asian supply chains. What does this now mean for Asia Sourcing strategies or specifically companies with no buying office in Asia?
The New Asia Sourcing
We have always said that being close to your suppliers is paramount, in whatever guise, to leverage the benefits of buying from Asia. Therefore, we thought it would be useful to run through some ideas of how to manage your suppliers in this current environment:
1. Sourcing new Factories
Should you need to identify new factories, then it is important to look to a local partner who you can collaborate with to visit the sites, engage with the owners and undertake the pre-screening work that you are not able to currently do. This will provide greater visibility and allow you to still go through an objective onboarding process.
2. Quality Control
More than ever, it will be important to use third parties to conduct inspections (inline and final) to ensure that the products being produced are to the quality standard you require. If you usually take TOP samples, make use of high resolution photos as a means to saving money in this tough business environment.
3. Use Technology
Technology, and its use at a corporate level, is something that this Pandemic has certainly accelerated. Certainly, using communication tools can help you get closer to your suppliers. Likewise, digitization of supply chains has been accelerated to better manage data and metrics particularly when access has been restricted.
4. Plan B
Should something go wrong with a particular production, it would be advisable to have an option (“Plan B”) of getting people to the factory to work through and resolve any issues. Again, a local QC house, or Sourcing company may be able to help. Trying to address a matter at arm’s length may end up causing more issues than solving the problem.
5. Limit Risk Exposure
Given that budgets are currently restricted, where possible, identify the suppliers and products that carry the most risk. This may be around the value of an order, the strategic importance for your client, the type of product or even the terms (upfront terms) but it will ensure that you are allocating what resource is available as best as you can.
Virtual Buying Trips
As part of our commitment to our clients, we are already working with our clients on Virtual Buying Trips. Depending on your time zone, we have been setting up and managing meetings with clients’ factories. Also, we are taking clients to new factories via Zoom and Teams. Our staff are on-site and walk you through the production as well as play an integral part in the discussions with the factory management. No more long journeys or waiting for your train and all from the comfort of your own home!
Summary
We hope that this Pandemic will be brought under control in the shortest possible time. The new normal for Asia sourcing needs to rely on an upstream capability being put in place as well as use technology to take you to the factory gates. For all your sourcing needs, please contact us at unlockAsia@et2cint.com
