Sourcing From Asia: What US Companies Need To Know

Editor’s Note: Rohan Thambrahalli is the Founder and President at UpstartWorks

With companies across the globe restarting operations in the new normal, executive leaders are balancing the standard way of doing business against the innovation needed to build growth in 2020.

Businesses that source products or materials from China are in a particularly challenging situation. While many of the country’s factories are now up and running, supply chains remain disrupted, supplier relationships have been paused, and leadership teams are unsure of how to restart sourcing from Asia.

In many ways, much of the long-standing advice about sourcing from Asia remains the same - yet there are new pitfalls buyers must watch out for, and a few potential advantages savvy business leaders can use to their advantage.

Refocus On The Basics

China’s $14 trillion dollar economy shrank 6.8% in Q1 2020, representing the first economic slowdown for the country in half a century. While economic contraction is the unfortunate norm throughout the world, China’s leading status as the world’s manufacturing giant puts warehouse and factory owners in a precarious position. They need new partnerships to accelerate growth - in short, they need your business.

While the coronavirus has changed the way we live and work, it has not undone our underlying cultural values. In China, the term guanxi refers to the close business relationships executives share with one another. The adage ‘it’s not what you know, but rather who you know’ sums up this attitude quite nicely for a Western audience.

When starting to source from China, think more about who you’ll be working with rather than the products themselves. Your supplier is going to be a close ally as you both work together to grow your connected businesses.

Having partners on the ground in China - or utilizing a sourcing agency to help with communications and quality control - can ensure you remain in clear, consistent contact with your suppliers. Moreover, these partnerships can quickly lead to an expanded network for your business through word-of-mouth communication. As a result, doing the basic due diligence to find the right candidate is more essential now than ever.

Consider New Horizons

In April, Japan passed the largest stimulus package in the country’s history, specifically earmarking $2.2 billion dollars to help manufacturers relocate their facilities outside of China. Onshoring, and a renewed focus on cutting-edge technology like large-scale 3D-printing, are now taken seriously by even major global corporations as a method of restarting growth.

Yet a shift out of China does not mean you have to source products locally, which is a near-impossibility for many companies with high manufacturing costs. Large corporations like Nike and Adidas had already shifted the majority of their manufacturing from China to Vietnam, as recently as 2018. Given that Vietnam - a country of 95 million people - managed to conquer the coronavirus with only a handful of cases and zero deaths, it’s likely that more and more companies will begin looking to Southeast Asia as an alternative source for goods.

The latter half of 2020 will bring a renewed vigor to companies seeking long-term, stable supply chains with their international sources. With the fashion industry in tumult, it’s likely that manufacturers throughout Asia will be seeking new products and opportunities to keep their factories running. This is a chance for you to expand your search for sourcing and ask the right questions to find new investment opportunities.

Adapt To The Virtual World

Major trade shows such as the Consumer Electronics Show in Las Vegas have been postponed, at least until 2021. The opportunity to network with suppliers and learn more about new products hasn’t gone away entirely, however. The Canton Fair, for example, has moved entirely online for its 127th iteration, allowing retailers the chance to view products at home with 24/7 convenience. Alibaba now has its own online trade show as well, signaling that this shift to digital isn’t slowing down any time soon.

Conversations that once happened in person are now acceptably initiated online, allowing you a greater reach and breadth when considering sourcing. There’s no denying that this is new territory for the world of ecommerce at large, but it also represents a new opportunity to expedite your search with some of the leading suppliers on the continent. Don’t pass up these and future events in your search.

The pandemic’s impacts vary depending on the industry, country, and restriction measures put in place to combat coronavirus’ spread. There’s more now to consider than ever before when finding sourcing. By approaching the search with new online tools, and considering countries that once may not have been on your radar, you can not only find the right advantages, but utilize them to expand your growth for 2020 and beyond.

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