Strategic Sourcing in China

Good leadership certainly requires good thinking on sourcing. Naturally, many of us started in China by relying on cheap labor and correspondingly shocking low prices.  Some of us became used to buying  on price while keeping a close eye on quality. Today the story has changed or is changing.  Barry at the China Sourcing Blog wrote a very good blog on this change that you can read in its entirety here. It is about China’s new level of competitiveness.  I paste a small portion here:

“The structural changes in China’s competitiveness across the sourcing spectrum will require procurement managers to shift some of their commodity spending from China to other LCC’s, while increasing their orders of machinery, complex parts and high-value added consumables in China.”

Some people are saying that purchasing will go to Vietnam or some other aspirants. They have failed to realize that China learned a lot selling cheap and will be better as a supplier in the future. Some are or soon will be ready for more. 

Two things are now necessary for leaders.

1. Build long term relations and strategic partnerships with your best present suppliers.  Do not buy them unless you are very careful.  However, you should deepen your relationship when you have done the human resources due diligence on your supplier.  This was always true and still is. Long term is your best path. Do not just buy on price and switch often.

2. Develop new sources of supply that previously were not available at this level of quality.  Just as Barry has said above, you need to change your mix of what you are buying.  Find new suppliers and due diligence. China is a wonderfully relational country. In America, long term relationships are a good supplier methodology. China is better. Consider this, and also remember the down side.

In English we have the term, I got Shanghaied.
What does it mean to you? I hope the existence of this gives you cause to pause when you visit a supplier and they are very nice to you and smile warmly at dinner.

Find suppliers you can trust and know how much you can trust them, and then go deep with them with a proper guide in culture.

Any other thoughts or examples?

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Posted in: Customers, External Stakeholders, Quality, Sourcing

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