The Chinese government is on a mission to produce 70% of the world’s electronic components. When you think about it, that’s an ambitious goal.
However, electronics aren’t the only thing manufactured within its borders. In fact, China manufactures a considerable share of the world’s goods.
If you’re considering outsourcing products or services to China, however, how would you manage risk? Well, with some insider insight, you can safely reap the benefits of product assembly in China.
Keep reading to learn more about how to secure supply chain risk for product assembly services in China.
Understanding Supply Chain Risk
Global supply chain risk is one of the biggest concerns of the world’s shippers. You never know when your supply chain could become exposed to an unanticipated vulnerability.
These occurrences can lead to increased costs. Even worse, you could end up with unhappy customers. It’s critical for you to mitigate these and other supply chain issues.
More supply chain stakeholders are turning to supply chain risk management for this reason. The term refers to the processes, strategies, and tools used to reduce supply chain risk. They can help you to identify dangers that could affect your supply chain.
The Benefits of Managing Risk
Your company could enjoy considerable benefits from a supply chain risk assessment. For instance, a risk assessment can help you reduce profit loss. It can also help you to ensure peak efficiency in production, fulfillment, and delivery.
This kind of evaluation will also improve the speed and effectiveness of your company. It will help you to respond to emerging situations that could affect your supply chain.
A risk assessment will also help you keep up with regulatory issues and maintain compliance. Moreover, it will help you create a reliable process for managing unexpected interruptions in your supply chain.
Even More Benefits of Effective Supply Chain Management
China’s assembly companies have unmatched expertise in putting together complex goods like electronics. Still, regular risk assessments can help you protect the reputation of your brand.
They’ll help you increase your competitive advantage. Also, risk assessments will help you improve customer satisfaction.
Most customers take for granted that you’ll deliver products whenever they need them. In reality, however, supply chains are quite fragile. For every activity and every level of your supply chain, there’s a risk of disruption.
The Importance of the Risk Mitigation Process
Your supply chain might only have one supplier. Alternatively, it could have thousands.
Imagine a pharmaceutical company that needs a third party to supply pill bottles. It may also need another supplier for the external packaging. Meanwhile, this company might also need an additional supplier to handle labeling and other aspects of product packaging.
You may have your own employees who manage various tasks, like taking orders. Yet, you more than likely use a third-party credit processing company. In turn, that company might contract with another firm to perform credit checks.
Any point in this supply chain is subject to vulnerability. The reliable, timely delivery of your goods would depend on all these suppliers. If any of them fails to perform as expected, you might not have the ability to deliver your goods on time and at the right price.
Effective Risk Management Matters
With a risk management process, you’d start with identifying the parties in your supply chain. You must emphasize the most critical suppliers.
Next, you’d assess them for regulatory compliance. You can then go on to assess your suppliers’ suppliers.
You must review every supplier for insights into past performance. You must also assess their potential risks to your supply chain.
If you discover issues, you must address them immediately. It’s important to resolve your findings as quickly as possible.
In the end, you should set up a monitoring system with real-time dashboards and up-to-date reports. This kind of system allows for continuous monitoring of your suppliers and notification of any critical changes.
Key Risk Management Points to Consider
There are four primary steps in this process. They include:
You must identify the risks that can impact your supply chain. You must also identify where you can find these risks in your supply chain.
Next, you must estimate the potential financial, operational, and reputational impact of these risks. Then, you can develop strategies to offset the negative impact of various forms of supply chain disruption.
Finally, you must figure out how quickly you can respond to a disruption. You must also assess how long it would take your company to recover from this kind of event.
Product Assembly Services in China
Suppose you were to hire a product assembly company in China. In that case, you must perform robust due diligence and risk mitigation. You must uphold the integrity of your imported goods.
In the United States, for example, there’s growing interest in countering controversial business practices. With this in mind, the US government has issued an advisory about potential exposure to these kinds of activities in certain regions. United States lawmakers expect companies to perform robust due diligence to combat allegedly unwelcome business practices in these territories
Protecting Your Interests in China
Furthermore, this advisory is an interagency effort. Involved organizations include the following:
• Department of Labor
• Departments of State
• Homeland Security
• Treasury Commerce
• United States Trade Representative (USTR)
These agencies are working together to draw attention to supply chain risk to US businesses related to areas of special interest.
The advisory warns that US businesses must have an awareness of their legal exposure. They must know whether partner entities in the area are linked to companies that maintain disputable business practices.
If so, decision-makers in these firms could face liability for criminal statutes and sanctions. Meanwhile, their companies could face export controls and import prohibitions.
Areas of Special Concern
Again, many companies are deemed responsible for these allegedly disputatious practices have headquarters in specific areas. In these areas, it’s implied that many cases of aforementioned business practices occur. These companies participate in various industries, including:
• Cell phones
• Electronics assembly
What Can You Do?
If you believe you’ve become exposed to liability, you must increase auditing and other supply chain due diligence practices. In the above reference, for instance, you’d monitor for warning signs of a potentially disreputable business partner’s savory business practices.
This would become especially important if you were to continue doing business with a possibly distasteful company. In this case, you’d closely watch a company that hides the origin of its goods or ownership.
You’d also practice extreme caution with a company that has high revenue but a low reported number of employees. You could evaluate this circumstance by reviewing the company’s contributions to China’s social insurance program.
You could also monitor for a company’s use of terms that seem to indicate that a company is spinning its unfair practices. This elevated level of due diligence is essential when dealing with suppliers to ensure the integrity of your company’s brand and reputation.
As a business operator, it’s also important to stay informed about developing sanctions and Withhold Release Orders (WROs). You must also monitor goods highlighted by the Department of Labor. The agency maintains a list called List of Goods Produced by Child Labor or Forced Labor.
The list includes the names of products and companies subject to WROs. You should also monitor for names on Department of Treasury lists. These documents include Specially Designated Nationals (SDN) and Blocked Persons lists.
Conduct Independent Audits
There are anti-sanction laws in China. As a result, you could find it’s difficult to secure reliable and independent information from native entities. You could even have trouble eliciting accurate information from your legal aid in China.
Accordingly, when working with a service provider in China, you should also conduct independent, on-site audits when possible. This practice promotes increased supply chain transparency.
Your Responsibilities as an Importer
You can’t defend yourself from liability by claiming a lack of knowledge. For example, you could find out the first or second level of your supply chain in China has disappeared.
It’s counterproductive to use lack of knowledge as a defense. This kind of defense will set you back if the Chinese government engages your company.
This position will make it much harder for you to gather an origin to destination paper trail. You’ll need this information to satisfy any inquiry or detention notice from the Chinese government.
Doing Your Due Diligence
You must remain prepared for a government inquiry, especially if you suspect foul play on the part of a supplier. In this instance, you may need to gather supporting purchase records.
You might also need to gather production documents. You could also need to collect labor documentation.
Overall, you might gather the same information you would need during an unfair trade investigation. These types of investigations might include antidumping or countervailing duty verification.
The Big Picture
When you partner with a reputable OEM manufacturing service provider in China, your biggest benefit is cost savings. The assembly service will create your products in bulk. As a result, you’ll save money on production costs.
Furthermore, you’ll find that the products are of superior quality. Still, it’s vital to maintain strict testing standards. If you’ve hired competent OEM manufacturers in China, they can withstand your testing.
Leveraging a China Assembly Service
There’s a good reason why OEM manufacturers in China provide the most outsourced production in the world. China has advanced production capabilities.
These capabilities make it easy for companies to meet massive production numbers. More importantly, the companies can do so at an affordable price.
It’s true that China is one of the first regions hit by the pandemic. Yet, the government has been able to contain it largely within the region.
It’s for these reasons that large brands like Apple and Nike outsource their contract manufacturing to China. In light of the pandemic, the nation’s positioned as one of the first countries that can dive back into full steam manufacturing.
Partnering for the Win
Some companies couldn’t exist without China’s assembly services. China service providers have specialized technology that allows them to create components that many companies couldn’t produce on their own.
When outsourcing product assembly services, you allow another company to produce your product. Yet, you’ll keep all intellectual property and trademarks.
Still, another company manages production. In China, this process often takes place through a network of multinational suppliers.
It’s vital to locate and secure an agreement with a China assembly company that you can trust. An experienced consulting company can help you to do just that.
Let Us Help You Safely Navigate Your Importing Risks
Now, you have a better understanding of risk when working with product assembly services in China. If you need to find a reputable China service provider, Shield Works Precision Mfg. can help.
Please feel free to contact us today to learn more about reputable assembly services in China.