Supply Chain in China? Proceed with Caution

If you're considering doing business in China, do yourself a favor and spend a few minutes with Kevin O'Marah's new blog post, "Six Reasons to Worry About China in Your Supply Chain."

After carefully making the point that it's China's government and not its people that is the root cause of the problems, O'Marah outlines a half dozen reasons why anyone who is thinking about major investments in China needs to proceed with caution.

Weigh the pros and cons carefully, he explains, because doing business in China is definitely a mixed bag.

There's no doubt that China offers some significant advantages. "China is a great market to sell into and a fantastic source for everything from steel to t-shirts," O'Marah says.

But, there are considerable risks, as well. Capricious trade rulings, rampant IP piracy, product health and safety concerns the list goes on and on. In short, China can be a supply chain professional's worst nightmare. From O'Marah:

I'm not saying China is a no-go for supply chain strategists, only that there's more to worry about than in most other placesand a lot more to worry about than in other big economies like Japan, Europe, or even Korea and Brazil. The rules by which China plays are notoriously unbalanced, and as a "developing" economy, it's gotten away with it for years.

So, before finalizing any contracts, do your homework. Be clear on your objectives. Know your limitations. And fine-tune your supplier risk strategies.

Of course, for many companies, the pros of doing business in China far outweigh the cons. Just this week, for instance, PepsiCo revealed plans to invest an additional $2.5 billion in China over the next three years. According to an article at ProcurementLeaders, the company says the new investment will be allocated to a variety of projects, including new manufacturing facilities, a "significant scaling up" of the company's research and development operations, expanded agricultural development and brand-building initiatives.

Likewise, Acer and Founder are now teaming up to secure a strong foothold in the growing Chinese PC market.

TAGS: Finance
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