According to the Chinese calendar, 2008 is the year of the rat -- not the most auspicious symbol, perhaps, for the prospects of re-establishing American trust in China-centric global supply chains. Although last year's product recalls involved just a narrow segment of Chinese imports, the loss of consumer confidence in all China-made goods served as a wake-up call to every U.S. company sourcing from China, say Deloitte partners Clarence Kwan and Tim Hanley.
As they see it, reducing dependence on Chinese suppliers is difficult in the short term and potentially undesirable in the long run. Therefore, Kwan and Hanley say that U.S. executives must find ways to manage product quality risk more effectively, and point to a three-stage Chinese supplier development paradigm that should ensure a solid, profitable and safe sourcing relationship.
Stage One: When first selecting suppliers
- Apply your proven vendor selection process in China -- adapt but don't compromise.
- Don't overemphasize cost as a selection criterion -- quality, reliability, required lead times and scalability can all be just as important.
- Perform vigorous due diligence, including on your suppliers' suppliers -- otherwise, you will never understand the extent of the risk involved.
Stage Two: After the ink is dry
- Focus on building trust and sustainable relationships -- be accommodating within reason.
- Commit to your supplier and always seek "win-win" solutions -- that way, when you raise the bar, your supplier is more willing to go along.
- Communicate, communicate, communicate -- not just to enhance the relationship, but to create additional synergies as well.
Stage Three: Ensuring quality supply over the long haul
Whatever Happened to Quality?
- Don't rely on relationships alone to manage risk in the supply chain -- take concrete steps to monitor the supplier's adherence to standards of quality, timeliness and efficiency.
- Third-party compliance monitoring will never be as good as having your own pair of eyes on the ground. (Also, rotate your people periodically.)
- Not every problem originates with your supplier -- make sure your monitoring program takes in the full spectrum of the supply chain
- Don't be shy about letting the world know about what you're doing -- their increased confidence in your products means enhanced shareholder value for the company.