Let’s get a few things out of the way first… it’s possible to move your current production from a China based supplier to a new one in a different zip code in 90 days – i.e., resource. Yes, there are many factors that can add headwinds or tailwinds to your effort; product complexity, number of components, regulatory requirements, existing supplier contract, budget and risk tolerance to name a few. All these factors are variables in an equation for resourcing success that determines how fast you can transition supply.
The prolonged US-China Trade War has many who have explored moving production out of China from the sidelines now eyeing action. Politics and trade agreements aside, though important considerations, there are several additional longer-term trends that can spur you to switch to a new supplier in a different part of the world. Macro consumer buying trends – e.g., buying local, mass customization and sustainability preferences – are all additional factors that might have led you to consider pressing forward. The recent US announcement of additional tariffs on China imports might have simply been the tipping point to act on your prior plans.
I, like you, have gotten a bit of a headache reading the deluge of articles on the dynamic global trade environment. But you may put the Tylenol down. If you’ve decided to move your production this post will give you the winning playbook to avoid resourcing pain. Below are six steps to help you swiftly resource from China in 90 days.
Step 1. Form a Project Team (Day 0 to 7)
Be honest, if you look around your office and your team is busy managing current production supply chain operations, adding a major project to their plate is not setting them up for success. If you find yourself needing outside support to resource, get it. It’s much less expensive to acquire the help you need up front.
“Resourcing current production supply isn’t an initiative you want to get cute on by assigning a fraction of team members’ time, you need a dedicated team who has a clear project charter,” says James Ricci, Principal at Bloomfield Hills, Michigan based consulting firm 2764 Advisors, LLC.
Further, resourcing critical supply isn’t an ideal test bed for up and coming professionals, the very profitability of your company can depend on project success. You need experienced leaders in your foxhole that have executed high stakes production transitions before. As a tip, if you need resourcing expertise, hire a focused supply chain and manufacturing services firms in your industry instead of a larger, generalist consulting firm. Smaller specialty firms tend to offer more focused practitioners, or “doers.” They’re also more budget friendly.
Step 2. Build a Bank of Product (Day 8 to 35)
Moving production is not a “feel good” moment for any supplier. How they will react is a mixed bag. No matter how well you think you know your supplier, build a “bank” of product ahead of informing them you’re planning to resource and moving production. A bank of product and/or parts is extra inventory you can store in your end market(s) to draw upon and leverage as risk insurance as you transition supply, hence the word “bank”.
Temporarily warehousing a large short-term influx of product may seem simple, but it’s not. Obsolescence, multi-site shipments and shortage considerations can quickly slow your timeline.
“If you don’t have immediate available bandwidth and infrastructure to manage resourcing in-house at the onset of your initiative, you’re best served partnering with a third party to mitigate supply risk,” adds Sime Curkovic, supply chain risk management expert and Full Professor of Integrated Supply Management at Western Michigan University.
The current and planned US tariff hikes can provide you with cover to add volume to your current orders. The right bank size will vary, depending on your risk tolerance, and the time needed to calibrate production at the new supplier. As a best practice, 120 days of bank is a sound baseline number that will allow you to execute your transition in 90 days and ramp up production at the new supplier.
Step 3. Get the Maps (Day 8 to 35)
If you’ve historically relied on a contract manufacturer to design and build your product, “surprise!” you might not have the necessary information to produce your product elsewhere. Take a deep breath. This frustrating realization can be addressed, but secure the “maps” first in parallel with building your bank of parts ahead of announcing your transition.
The maps you need to successfully resource your product need to include all component part prints, technical specifications, quality checklists and assembly processes that are required to build your product. Further, is there specialized equipment or tooling required to manufacture your product? If yes, it’s vital you understand what this is, how it works and if you own it or your supplier does. Document this information as part of your assembly process map.
“Good design is good business, and it’s crucial that the detailed design intent is properly translated to the new supplier to ensure the value proposition and success of your product,” adds Grey Parker, CEO at Walled Lake, Michigan based Product Innovation Studio Sundberg-Ferar.
Engaging a product development firm to “reverse engineer” your product will allow you to start the new supplier off on solid footing while de-risking your long-term supply. Quality product design will reflect not just the needs of the users, but also efficiently match the design details to the intended factory floor. The migration process may require new materials, new capital equipment and/or new processes.
The traditional stereotype is that hungry suppliers in Asia tend to be more willing to invest time and money in customer product development than established US suppliers. The saying that “nothing is free” applies here; as with any investment (regardless of geography) it often comes at a cost – i.e., you don’t get the maps. Either way, having all your product information in hand, along with professional product design guidance, will afford you more operational flexibility to source a supplier anywhere in the world.
Step 4. Quote & Select New Supplier (Day 8 to 56)
Notice this and Steps 2 and 3 are all in parallel. A multifront strategy is one of the secrets to speed and another reason you’ll need a dedicated team and/or external partner to drive multiple workstreams. Use a more loosely defined “Request for Proposal” compared to “Request for Quote” if you don’t have all the “maps” in Step 3.
Being up-front with what you have or what you don’t with your potential new supplier is key to sourcing speed. If you don’t have what you need, get down to brass tacks and ask suppliers to propose a solution. It will save both parties valuable time with the quoting song and dance. There are many manufacturing and value chain approaches to accomplish your product vision in the US, as opposed to China, but they might be different.
As an example, a Fortune 500 consumer products company recently explored building a product in the US instead of China. There were 14 specialty suppliers in the value chain with the US option versus one large vertically integrated contract manufacturer in China. The result was a US product piece cost lower than China, tariffs aside. It pays to be open to alternative approaches to get from A to B.
Step 5. Launch Production at New Supplier (Day 57 to 89)
Now is when you’d launch production with the new supplier. Plan for learning curves, setbacks and disconnects (why you have a bank). Transitions that work the best are when companies plan for and have the project team onsite at the new supplier day one.
“New product launches with new suppliers are high risk initiatives that need to be handled with care. The more resources, people and process support you can provide early on, the better off you and your supplier will be,” says Matt Stekier, Senior Manager of Supply Chain and Operational Improvement at Southfield, Michigan based management consulting firm Plante Moran.
Nothing takes the wind out of a new relationship faster than sending a “distressed supplier team” to a brand-new supplier. Investing in the relationship from the start by deploying a project team is “playing to win.” In addition, empower your onsite team to make decisions – it’ll add speed and ensure quality. Also, a little operational flexibility is key to building early rapport with your new supplier. For example, receiving product in alternative “non approved” corporate packaging can go a long way to maintaining continuous supply versus sweating every detail and risking disruption.
Step 6. Notify Former Supplier of Transition (Day 90)
No duh, right? Wrong. Breakups, as in your personal life, are hard. It’s how you handle them that makes the difference. Make no mistake, your former supplier won’t receive news that you are resourcing them as a positive, but your reactions to their response are pivotal.
“Direct communication that’s orchestrated properly across your firm’s leadership levels is imperative when delivering difficult news,” says Nicole Lentz, Principal at Rochester, Michigan based culture consulting firm Magnet Consulting.
Ensure you’re professional throughout the process. Thank your now former supplier for their support and try to find several examples of what they did well in the past. Also, if resourcing is mainly driven from the current US-China trade war, and the resulting tariffs, directly mention it has to do with that and nothing they did.
Business is a funny thing, the current landscape today could shift tomorrow. I can’t tell you the number of people that have worked at a supplier of mine in the past that now hold senior leadership positions at our customers, partners and suppliers. Relationships with people matter so move with the utmost integrity.
Ensure Sustainable Supply Success
You did it. You’ve succeeded where many of your competitors have struggled. But before you pat yourself on the back and shift your gaze to the next shiny project, document the lessons your team learned. Also, outline a new supplier performance plan to ensure sustainable success with your new supplier. A common mistake is to reassign project teams too soon, leaving your new supplier on their own to falter with an all-new product.
Unfortunately, your new supplier’s performance during launch can often paint a rosier picture of their steady state performance. When a supplier has the additional bandwidth of your team and focused short-term motivation to meet launch targets, their results can be artificially inflated. As with putting a man on the moon, a group of talented people can accomplish a lot with immense resources and a bit of pressure applied by JKF.
Keep a portion of your team in place to monitor your new supplier for an additional 30 days. Opt for a longer period and onsite presence depending on your product complexity and the supplier’s launch performance.
Now resource with confidence. You got this.