In the year 2018, the global supply chains suffered enough distressing moments, especially while importing goods from China. All the procurement organizations were left perplexed and dazed. The year 2019 was even worse. The decision of the US administration to levying a tariff on US imported products and services had a greater impact on the companies that were maintaining charming sourcing relations with Chinese producers till now. Among all the other nations that have been devastated by the decision of the US administrator, Asia sourcing is a judicious economical destination.
Question yourself before sourcing from Asia:
If the firms have not yet decided on maximizing sourcing prospects from Asian markets, few questions are to be explored for answers. Based on these answers, one can decide whether outsource requirements to Asia or not. Here are the questions that you need to ask yourself.
2. Are you aware of the selected supplier base?
Procurement leaders should have a deeper knowledge of the supplier market in Asia sourcing. Adequate understanding of the supplier market network, and insight of services and market trends in the Asian market, and familiarity of balance between supply and demand. Prediction of disruption that may pave the way to an imbalance between supply and demand helps the procurement leaders to handle the disruptions at an ease. Implementation of informed decisions and proactive steps can be done by employing intelligent-enabled tools.
Few other crucial aspects to be considered by the procurement teams while sourcing from Asia are as follows:
- Supply chain leaders must review the entire supply chain system. The increase of tariffs on imported goods has influenced a plethora of products and their prices. These products must be thoroughly reviewed along with the supply chain operations to moderate risks. The complete product line can be e-sourced or additional products can be sourced through different platforms to avoid this problem.
- You need to consider multiple low-cost destinations while sourcing from Asia as a crucial task. Determination of geographic regions that have competitive vendors such as India, Vietnam, and Indonesia serves as a better prospect for those expecting a region that is conducive and highly economical.
- Another significant aspect to consider while choosing to source from Asia is the calculation of costs including newly imposed tariffs and trade duties. Evaluating all the incurred costs that embrace transportation costs and brokerage fees will assist the procurement leaders to assess the market cost structure of Asia thoroughly.
2. Is your choice of supplier base appropriate?
Most of the organizations have to handle the suppliers who cannot withstand themselves when they have to comply with the standards or quality of an alternative market. For instance, the addition of tariffs on the goods imported from the US has impacted the quality standards and requirements of the goods. Now the organizations find it easy to accommodate themselves to the present quality criteria. However, suppliers may have concerns while handling changed quality standards and requirements.
Another crucial and tedious thing to be done is to determine whether the existing supplier base can deal with the change. Conducting a financial and risk assessment for the new supplier base can help you accomplish this. The assessment should be crucial through a series of evaluations that include evaluating capacity schedules, checking the product quality, and examining other particular business strategies that vary across companies and categories. For instance, manufacturers may have to check the CE and ISO and AS 1900 certifications for thermocouple probes supplier base and engineer suppliers. Due to highly varied requirements, it is more difficult to select the supplier base that originates from countries of varied cultures.
The tier 2 and tier 3 supplier bases are known to play an immense role in growth with the increase in the marginal pressure on the industrial sector. This in turn enhances the extent of challenges faced while accessing for quality. However, if the challenges are appropriately navigated, the business benefits will overpower the concerns.
3. What is the negotiation strategy?
Procurement leaders must formulate a robust negotiation strategy. Brilliance such as supply-demand balance, competitor pricing, the volume of supply in the market, standard market pricing can function as effective negotiation approaches. For instance, a particular quote can be set by the buyers. The suppliers can proceed with such buyers by adhering to the set quote. It can eventually eliminate the overcharging by suppliers. Therefore, Asia sourcing can be negotiated in changed scenarios with increased quality assessment due to the imposition of additional tariffs.