Diversifying Suppliers in Uncertain Markets

"Every man lives by exchanging." - Adam Smith

In an effort to restrict imports by increasing the price of goods and services purchased from China and now Mexico, President Trump has U.S. companies scrambling to diversify their supply chains. IMF researchers and others have noted, "tariff revenue collected has been borne almost entirely by U.S. importers."

The ISM gauges 18 manufacturing industries, and many of the survey's respondents commented on tariff issues as being a factor for the slow down in their industry. "Ongoing tariffs [are] impacting costs and influencing supplier realignment on country of origin."

Considerations for countries like India have been met with additional actions from the U.S. executive branch, as it was announced that India will be removed from a special trade program referred to as the Generalized System of Preferences. The program exempted Indian goods worth more than $6 billion from import duties in 2018 (Source: Congressional Research Services).

The initial announcements of tariffs in China resulted in affected companies looking at other countries within SE Asia, Mexico, etc. The influx of sourcing activity has resulted in its own set of challenges, such as shortages in the labor market among countries of renewed interest. For this challenge, Pro QC is assisting in the recruitment of local quality and engineering professionals that can either be leveraged on a contracted basis and/or directly hired.

As a partner to many companies affected by the unstable trade market, Pro QC has worked diligently in recent months with clients to identify new suppliers and assist in the process of development given narrow deadlines and uncertain economic policy.

Pro QC and sister company EDS International have worked together to help with the identification of new suppliers in several countries outside of China. The goal is finding new options that have the capabilities, capacity, cost, etc. to meet expected volumes. Sourcing engineers on the regional teams can identify which items affected by current tariff activity would be recommended for which other regions.

Recommendations for potential suppliers are supported by on-site visits by sourcing and quality professionals and cumulative qualitative and quantitative data.

As the process of getting a new supplier up and running goes through its course, Pro QC has local resources capable of confirming activities and communicating through expected deadlines. The time between approval and the first shipment can be expedited when leveraging local expertise.

As production starts, it's noted clients will want to assess quality from first article, through to pre-shipment. The expectations should be notably positive given involvement and oversight throughout the process.

When issues do occur, Pro QC offers local expertise on-site. The teams identify root causes and develop/execute corrective actions where needed.

While various countries continue to convene and assess ways to mitigate the risks to U.S. businesses, Pro QC remains a stable, experienced resource that can support short and long-term strategies.

Learn more about EDS International here: