Many companies have employed a China Plus One strategy in Sourcing to mitigate risk across global supply chains. According to McKinsey, in 2023, FDI decreased in China by 17%, while in the rest of Southeast Asia increased by 20%. Additional tariffs, trade barriers, and intellectual property concerns could be even more significant and drive more manufacturing out of China into other parts, like Southeast Asian countries and India. Countries like Vietnam and Indonesia are rising rapidly and are expected to continue to increase.
Nearshoring vs. Global Sourcing
For a Procurement strategy, the best combination will always be a mix of nearshore production with strong global sourcing & supply chain networks. This allows organizations to leverage the benefits of both price & availability worldwide.
Choosing which products to nearshore or continue sourcing globally becomes the key question for organizations to answer. In some cases, for high-running or critical parts, it could make sense to dual source production from 2 different regions to reduce risk.
When should I dual-source vs re-source?
How to find new suppliers?
Companies use many different channels, such as events and shows, and traditional channels, like Google search and business registries, to find new suppliers. Sourcing, validating, and qualifying potential suppliers’ capabilities requires much time.
When looking for new suppliers, qualifying suppliers across various functions is essential to ensure they align with your expectations regarding design, development, mass production, quality, and engineering changes.
MESH Audits are a 45-question sourcing audit that covers manufacturing processes, plant layout, equipment, engineering, quality, and logistics. This allows buyers to quickly and easily validate the supplier’s capabilities.
Conclusion:
In today’s complex supply chain landscape, companies adept strategies like China Plus One to reduce risks and improve resilience. With shifts in foreign investment and rising opportunities in Southeast Asia, businesses are exploring nearshoring and global sourcing to strike the right balance.
Deciding when to dual-source or re-source depends on risk mitigation, cost, and capacity needs. Meanwhile, finding reliable suppliers requires thorough vetting to ensure they meet quality and production standards. Tools like MESH Works can streamline this process, helping businesses make more innovative, confident sourcing decisions for long-term success.
Written by Sahil Shah, President & CEO of MESH Works.
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