China-based supply chain becoming a threat?

Filed in archive Point of view on July 10, 2008

For a global company nowadays, using China as one of the base countries for sourcing and offshoring is a must and we see these across many sectors such as electronic consumer goods, medical devices and so on. Many managers see China as a great option regarding low cost and nothing else. As a new survey by Mckinsey & Co. showed, 41 percent of the respondents believed that China is basically offering low cost...

If we accept this as a fact, then I have to say that this only advantage is disappearing: China is not a low cost country anymore and the cost of operations, labor and materials has increased a lot over there. That's not the case for consumer goods but also for many products.

The other day I was talking to director of strategic souring for one of the biggest renewable energy technology providers and as he was saying, the advantage of manufacturing and souring in China is decreasing for them and they are thinking of options such as relocation of operations to areas which might be a bit more expensive but tax friendly.

On the other hand, as China has adopted many of the techniques in advanced manufacturing, it poses a threat to the western companies. With this double threat, the question is how we can make an opportunity out of this situation?