I am in the process of writing a 2021 revision of my sourcing and importing book, but I thought I should post this extract now because it is so important.
With the onset of what became known as the Trade War between China and the USA, followed by the pandemic there has been a growing interest in sourcing from countries other than China. Many view it as essential in order to minimize their risks if their chosen products join the list of those on which much higher tariffs are imposed. Others are looking elsewhere in an effort to speed up delivery of their imports, but there is another major change that should be noted.
In China, increasing production costs due to such factors as removal of incentives, new employment protection laws, heavy enforcement of anti-pollution regulations, rising wages, a growing shortage of cheap labor, and rising foreign exchange rates, have led to what is known as The China Plus One Strategy.
As a result of this new strategy, the sourcing scene has changed dramatically. Many Chinese and Taiwanese companies have set up manufacturing facilities in other low labor cost countries where they are not affected by the growing consumer doubts about the quality of products bearing a Made In China label. This move is primarily about reducing their cost, but it also enables them to avoid the high tariffs being imposed on goods made in China.
Taiwan is also suffering similar cost increases. I recently found a major Taiwan manufacturing company that has set up manufacturing facilities in several other Asian countries. Their motivation is probably primarily to reduce costs, but it will also help diversify their supply logistics.
If you take note of what Chinese manufacturers are doing you will surely realize that you should be doing something similar. You might not want to set up your own manufacturing facilities in other low cost countries, but if that is being done by others, why not take advantage of that and begin sourcing from those places?
Walter
With the onset of what became known as the Trade War between China and the USA, followed by the pandemic there has been a growing interest in sourcing from countries other than China. Many view it as essential in order to minimize their risks if their chosen products join the list of those on which much higher tariffs are imposed. Others are looking elsewhere in an effort to speed up delivery of their imports, but there is another major change that should be noted.
In China, increasing production costs due to such factors as removal of incentives, new employment protection laws, heavy enforcement of anti-pollution regulations, rising wages, a growing shortage of cheap labor, and rising foreign exchange rates, have led to what is known as The China Plus One Strategy.
As a result of this new strategy, the sourcing scene has changed dramatically. Many Chinese and Taiwanese companies have set up manufacturing facilities in other low labor cost countries where they are not affected by the growing consumer doubts about the quality of products bearing a Made In China label. This move is primarily about reducing their cost, but it also enables them to avoid the high tariffs being imposed on goods made in China.
Taiwan is also suffering similar cost increases. I recently found a major Taiwan manufacturing company that has set up manufacturing facilities in several other Asian countries. Their motivation is probably primarily to reduce costs, but it will also help diversify their supply logistics.
If you take note of what Chinese manufacturers are doing you will surely realize that you should be doing something similar. You might not want to set up your own manufacturing facilities in other low cost countries, but if that is being done by others, why not take advantage of that and begin sourcing from those places?
Walter
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