Managing China supply chains in challenging times

Whether you are selling to Chinese consumers, using China as an Asia service base or sourcing from China, managing a steady and sustainable supply chain structure is crucial to running successful operations in China and beyond.

But over the last few years, the Covid pandemic and a series of serious geopolitical crises have increased the challenges of supply chain management, causing logistical disruption, rising costs and labour market concerns. This can and has had a financial and – in some cases – existential impact on companies.

Learn more about managing China supply chains at the UK-China Business Forum 2024 on 20 March. Click here to register

The pandemic reiterated the centrality of China to global supply chains. As parts of China went into and out of lockdown, many companies considered sourcing from suppliers outside of China. But this merely mitigated rather than eliminated the risk – core components of so many products still come from China.

While the specific uncertainties of the pandemic years are behind us, a number of ongoing challenges remain, both China-specific and global. Most recently, the attacks in the Red Sea have shown that global shipping routes are very vulnerable to disruption. Moreover, companies are increasingly coming under pressure to make their supply chains more sustainable as consumers become more concerned with the carbon emissions generated by the sourcing and transportation of the products they consume.

As a result, some companies have started to explore strategies like ‘reshoring’ (bringing manufacturing and services back to the company’s home country) or ‘friendshoring’ (relocating production and supply chains to allied countries that are considered politically and economically ‘safe’). A 2023 survey by the Institute of Directors found that around 20% of UK importers have already made alterations to their supply chain, with 15% are considering making alterations.

Nevertheless, China-linked supply chains still have the advantage both in terms of cost and in terms of quality, with the Chinese government investing heavily in technological innovation and human capital. And given that China was the UK’s 5^th largest trading partner in the four quarters to the end of Q3 2023, supply chains between the UK and China are – and will remain – a priority for most companies.

That being said, companies that rely on distant sourcing strategies may need to consider establishing an on-the-ground presence that allows them to respond more quickly to ripples in the supply chain. And like many aspects of dealing with China, communication is key. It is important to build relationships across all the stakeholders, and where possible and applicable, to open up communications across all those parties – think of multiple point supply ‘networks’ rather than point-to-point supply ‘chains’.

So, how can you deal with vulnerabilities in your China supply chain? As part of the UK-China Business Forum 2024, CBBC will be hosting a panel on supply chain management that will bring together experts and companies on the ground to explore options and strategies. The panel includes Marco Forgione, Director General of The Institute of Export and International Trade; Jane Liang, Chief Procurement Officer at Diageo; James Grayland, International Director at Heighten; and Lise Bertelsen, Executive Director, Public Affairs at the China-Britain Business Council (moderator). Click here to register.