The Importance of Sourcing From Multiple Countries in Tandem

For years, many companies have relied primarily on China for their manufacturing needs. And for good reason: China is a powerhouse of manufacturing. Even as other countries in the region ramp up their manufacturing, it is difficult to beat the capacity and expertise of China. 

But over the past few years, companies worldwide have been evaluating their supply chains and shifting to or adding manufacturing partners in other markets.

In fact, nearly a quarter of European firms are considering moving some or all of their manufacturing. Businesses based in the U.S. and other countries are making moves as well. Apple has started shifting some of their manufacturing from China to Vietnam and India. Samsung made similar moves a couple of years ago. And Hasbro has diversified its production, moving some of its Chinese production to India and Vietnam. 

This doesn’t mean that China is no longer a competitor in the manufacturing world—to the contrary, they continue to offer viable production options.  Having factory partners in multiple countries offers the opportunity to lower risk of disruptions, especially during uncertain times as we have been seeing as of recent. 

Sourcing from multiple countries is quickly becoming the norm for manufacturing companies worldwide.

Why Consider Sourcing From Multiple Countries?

Over the past few years, events like pandemic-related shutdowns, geopolitical tensions, and increased costs have prompted many companies to diversify their production, moving some of their manufacturing from China to other countries. 

That well-known adage about not putting all your eggs in one basket has proven to be true: too much exposure in a single country (any country) has the potential to put your company at risk.

Diversifying your sourcing helps mitigate that risk, improving your organization’s chances of weathering any storm.

Sourcing Is a Balancing Act

Effective sourcing is a balancing act. It’s all about determining the right factory in the right location for the products you’re manufacturing and the quantities you need.

China has built up tremendous infrastructure over the past 20 years. Their vast array of manufacturing processes and products has and will continue to serve as a potential advantage. 

But when determining which factory and location are right for your business, it’s important to consider the specific expertise each country offers. For example, one of Vietnam’s areas of expertise is shoes—there are an abundance of shoe factories there. So if you’re making shoes, manufacturing in Vietnam could be a very viable choice for your business.

Looking at the expertise each country has and seeing how that aligns with your business is simply a healthy business strategy. It’s also wise to consider dividing up your supply chain so it’s not all in one country when the volume is able to support it.  

Leveraging competition across different countries makes for a healthier, stronger business.

In the end, you need to place your production in the right place, for the right execution, for the right price and the right quality.

Factors To Consider When Choosing Sourcing

Regardless of which country you manufacture in, there are a variety of elements to consider, including:

Geopolitical Tensions

Geopolitical issues—such as tariffs on trade (including the U.S.-China trade war) and recent tensions between Taiwan, China, and the U.S.—are bound to affect overseas manufacturing. 

No matter your political stance, there’s no denying that geopolitical tensions affect business. Tension can breed uncertainty and unpredictability, which are kryptonite for business stability.

Natural Disasters

Unpredictable and destructive, natural disasters like floods, earthquakes, and hurricanes can significantly impact your supply chain. If all of your manufacturing takes place in a single area, and one of these events happens there, you can expect to experience some amount of business disruption.

This is another reason why sourcing from multiple factories and/or countries, when volume warrants it, can be a smart move.

If one of your manufacturing facilities is hit with an earthquake, you can lean on your partners in other regions or countries to fill the gap until the facility is back up and running (or until you can find another partner in that area). 

Pandemic-Related Lockdowns

Factory shutdowns due to illness or pandemic precautions will necessarily impact manufacturing as well. For example, China’s zero-tolerance approach to fighting COVID infections has meant tight restrictions and frequent shutdowns that have disrupted business operations. 

As the pandemic continues, it is certainly possible we will see continued disruptions in other countries as well. Even where entire factories are not shut down, loss of labor due to illness will continue to have an impact on the supply chain.

Factory Shutdowns for Regional Holidays

Partnering with factories in multiple locations can help mitigate supply chain disruptions caused by factory shutdowns during local holidays. One example is Chinese New Year (CNY). 

CNY is a seven-day public holiday in China that takes place at the end of January or beginning of February each year. But the factory shutdowns last much longer. During the 2-4 weeks surrounding this time, nearly everything in China shuts down or operates with minimal staff, including factories. And once factories are open again, it takes time to ramp back up to regular production.

After this break in production, it can take the supply chain as long as a month to catch up. Having alternate sources to tap into in other countries can help keep your supply chain moving during factory shutdowns like this.

Logistics

Depending on where you manufacture, you may experience longer lead times.

For example, when you ship from Vietnam, it can take longer to get to the United States than when you ship from China, increasing your lead time.

Logistics are an important part of ensuring your products are manufactured, shipped, and received on time. Issues like longer lead times can impact not only your business directly, but also the retailers who sell your products. Sourcing from multiple countries gives you options to help prevent and mitigate logistics issues.

MOQs

Outside of China, it can be difficult to find options for lower MOQs. For instance, if you need 1,000 units of something, it will be hard to find a factory that will do that work for under 5,000 units outside of China.

So while you may be able to avoid factory shutdowns (for CNY, for instance) by moving some manufacturing out of China, it may be difficult to find a factory that offers the MOQs you need in another country.

Raw Materials

Another of China’s strengths is that a lot of the raw materials used in manufacturing are oftentimes produced within the country. This helps ease the supply chain and lower MOQs. 

Other countries may not be able to get their raw materials as easily. Many factories in Asia pull their materials out of China, so there’s still a dependence on China, even if you move your manufacturing to, let’s say, Cambodia. While Cambodia has a lot of cut and sew manufacturing, for example, many factories will still rely on getting their fabrics from China. 

Rising Labor Rates

Increasing labor costs in China have leveled the playing field somewhat for other countries in the region.

While China is still considered a low-priced labor market, we can no longer assume it will be the least expensive option. And while labor rates are increasing across the board, recent increases in China have been larger than in other countries, as shown in this research by Statista.

This has led many U.S. companies to add manufacturing partners in other Asian countries, such as Vietnam, India, Indonesia, and Malaysia.

Sourcing from multiple countries gives you options, and can help you mitigate increasing labor costs  

As you can see from the above, there are always pros and cons to consider in determining how to be positioned to support your needs with the optimal supply chain.  

Flywheel Can Help You Keep Your Supply Chain Agile With Sourcing From Multiple Countries

For years, many organizations have been hesitant to work with manufacturing partners in multiple countries. But ultimately they are finding it wise to diversify their supply chain, adding partners in various countries to help prevent and mitigate disruptions.

Implementing sourcing from multiple countries—rather than relying on a single country for your manufacturing needs—will keep your business agile, resilient, and adaptable, protecting you from supply chain challenges.

And having partners on the ground in each country where your production takes place that you trust will help you respond quickly to crisis events, lowering your risk and keeping your business running smoothly.

This is where Flywheel sourcing comes in.

Flywheel can manage a global supply chain to bring you information, pricing, and pros and cons for your project from factories in multiple countries, with guidance to help you make the best choice for your business. 

We ultimately can help you manage a very complex supply chain under one roof making the process and daily management easier and more efficient for your organization.  We do this with teams on the ground in both the USA and Asia supporting your needs so you can focus your time on what is most important to you.  

Contact us to learn more and discuss your needs.