Tips to alleviate disruption when shifting sourcing location

Reshoring, offshoring, and nearshoring: these were some of the most used terms in 2020 in numerous industries, including furniture. China continues to reign as the world’s manufacturing superpower and primary supplier of all varieties of goods, but companies have begun diversifying their supply chains in recent years and pursuing alternative manufacturing hubs. COVID-19 disruptions and the US–China trade war have acted as an accelerator in many cases, urging brands to look for manufacturing sources outside China.

China is the world’s manufacturing superpower

 Source: Statista ‘Top 10 Countries by share of global manufacturing output 2018’

The global furniture industry has been seeking sourcing alternatives to China for several years already, with some manufacturing countries outside China reinforcing their position and becoming a bigger part of manufacturing production volume for some brands. Some of the countries preferred by brands and retailers include Vietnam, Cambodia, Malaysia, India, and Indonesia in Asia, Poland in Central Europe, and Mexico in Latin America. New countries mean new opportunities, but they also come with new risks. When relocating parts of production out of China, the risks include:
  • Inadequate production planning and status: When working with new suppliers, some factories may not operate at their full capacity or might have inadequate planning, making it difficult to meet production targets. It is important to check your factory records to see how many actual people are in the production line, as well as daily output and quality control reports.
  • Rushing production: With relation to the above and to ensure correct timing, some suppliers may rush to make up for lost time, tempting them to cut corners and speed up processes. This can lead to mistakes and skipping quality control measures that put the entire production at risk.
  • Raw materials shortage: New manufacturing countries do not always benefit from the same access to raw materials as China. This may result in a shortage of some materials such as specific types of wood, stone, or components, or longer delivery times.
  • Lack of quality control to ensure safety and quality: A lack of local teams onsite or experienced factory employees may decrease the level of quality control, putting product safety and production quality at risk.

How can these risks be mitigated?

The concept of shifting production to areas outside China was already on the table before the US–China trade war and COVID-19-related pressures. However, these recent issues have broadened and escalated the topic’s relevance, with many companies now considering moving ‘out of China.’ Diversifying production areas and pursuing alternative locations can help secure additional inventory and capacity. However, launching production in a new area can be challenging without the right experience or teams in that specific area. A third-party company can support brands and retailers with adapted solutions that facilitate a smooth transition that protects production quality. The crises and disruptions experienced by supply chains in recent months may be the catalyst for revisiting a more global supply chain strategy and accelerating the adoption of new models and capabilities. However, in the meantime, short-term actions are needed to respond to these challenges.

3 tips to alleviate disruption when shifting sourcing locations

Tips from a manufacturing perspective include:
  1. Increasing workforce visibility and labor planning: Having stronger visibility over actual factories and suppliers is vital to ensure production is completed on time and with the expected quality of goods.
  2. Understanding the key suppliers: Whether the orders only represent a small portion of one factory’s production lines or are flooding the lines with goods makes a significant difference in how to best interact with that factory.
  3. Increasing supply chain transparency and carefully selecting the right suppliers: It is essential that you work only with the most suitable suppliers for your production needs.

Supporting our customers with our manufacturing expertise

At API, we are putting our manufacturing experience and product expertise at the disposal of our clients to help them adjust during this challenging time. Thanks to the agility and flexibility of our teams and our local infrastructure, we speedily implement onsite solutions that respond to each clients’ particular needs. Our dedicated technician program will act as an extension of your teams onsite to ensure your products meet your safety and quality requirements. We provide support through all stages of the supply chain, from initial development and supplier selection, through the manufacturing phases, and across production safety and quality control. For example: Interested in learning more about how we can support you in new sourcing locations?