Tag: china

Written by: Alexander Parker, Account Manager (Tampa, FL)

Pro QC International works with businesses to develop and maintain their quality programs. Many of these clients have their primary suppliers based in China. Due to recent trade escalations between the world’s two largest economies, the United States and China, U.S. corporations are finding ways to adapt and avoid extra costs as the tensions continue to escalate.

Some prominent U.S. companies have already directly indicated that the U.S.-implemented tariffs will force them to pass down higher costs to customers and revise their earnings forecast downward. However, there is an alternate solution to pushing costs onto customers.

Large U.S. companies, like Honeywell, Hasbro, and Boston Scientific, have indicated that they will increase the use of supply chain sources from non-China countries to counter growing costs related to the rising tariffs. Compal, a Taiwanese contract manufacturer of electronics, has mentioned that while “assembling notebooks outside of China could cost at least 3 percent more per unit, the possibility of U.S. tariffs could wipe out its gross profit margin of slightly above 3 percent last quarter.” (Wu, 2018) (“Factbox – Impact of U.S.-China trade tariffs on U.S. companies”, 2018).

This is in fact one of the purposes of these U.S.-tariffs, to protect domestic industries and to make goods produced in an outside country less enticing. The goal is to eliminate the cost benefit that leads to companies purchasing from a country in the first place.

Despite some larger companies having opportunities to appeal to the U.S. government for exemptions from tariffs that would directly affect them, most companies do not have the resources or power to make such an impact on the U.S. movement. Being that these tariffs are out of their control, many companies, some of which include Pro QC’s own partners, have begun to diversify their supply chains to prevent and avoid major business disruptions. With tensions escalating and potentially further tariffs to be added in the upcoming months, companies are rapidly looking into this option before costs in China become too high.

For example, we have had clients cancel Initial Supplier Evaluations in fear that the tariffs will no longer make the potential new Chinese supplier a more affordable option than suppliers elsewhere. This uncertainty leads to a risk that is not worth taking.

Diversification to suppliers from various countries will lead to a more robust supply chain that allows for resilience in times of uncertainty like now. However, companies that have limited resources or time to find new suppliers may find it very difficult to locate and transition to these new facilities.

Pro QC can assist during this time with services like supplier selection and identification, supplier development, and inspection services to get new suppliers up to speed and ensure their products are meeting a company’s quality standards. If it is desired to replace an existing supplier, we provide help in identifying or transitioning to suppliers in countries that will not be affected in these trade disputes.

As written about in a separate Pro QC blog post “China Sourcing Alternatives: Thailand,” other reliable manufacturing nations, notably Thailand, as well as Vietnam, India, and Mexico, also offer affordable costs and business environments. With local Pro QC teams in each of these locations and services in a total of 88 countries, our quality professionals will assist in executing any range of solutions required.

It is important to remember that despite China potentially losing some market share to other countries, they will still account for a major portion of trade in the world. For example, China still accounted for 35 percent of global clothing exports last year. Rather than China backing down during this time of intense pressure, the Chinese government and factories are going to respond by searching for methods to increase competitiveness by finding alternative markets, increasing factory automation, and creating more value-added products. Factory owners are not going to be willing to give up and shut down their businesses, but will become increasingly more innovative. (McDonald, 2018)

This trade war will ultimately resolve itself, but when this will happen is unknown. China will remain a prominent player in the manufacturing arena, and removing all connection to the country may be impossible or too inconvenient for many companies. However, diversifying a supply chain can help create a buffer during times like these. Whether it’s needed to maintain relationships within China, or find a way to diversify, Pro QC is here to assist you create dynamic and innovative solutions.

Written by: Daniel Ben-Ezra, Pro QC Country Manager 

Many companies are looking for alternatives to China these days with regards to their supply chain. Most often the driver is costs. We’re seeing an increasing number of clients contemplating a shift, or already being in the process of implementing one towards other Asian nations with regards to their manufacturing base. This post is the first of a series discussing alternative options to China, and starts with Thailand.

Despite not being a low-cost production base, Thailand is seen as a viable option by many companies to set up a manufacturing unit or to source from. This stems from its reliable business environment, well-developed logistics infrastructure, vast natural resources and existing functional industrial base. The government of Thailand is also taking active steps towards improving the country’s position by pushing investments in technical equipment, allocation of SEZs along its borders, and developing cluster structures.

As share of GDP, major product categories produced in Thailand include food items, metal and construction materials, rubber, plastics, electrical appliances, cars and related components, jewelry and handicrafts. Coupled with its natural resources and easy connectivity with other ASEAN countries (notably Cambodia, Laos, Myanmar and Vietnam), Thailand makes a strong case for itself as alternative to China for specific product categories.

A downside to manufacturing in Thailand is that its labour pool is relatively expensive and unemployment stands at low rates. In order to tackle this, the Thai government has come up with the strategic decision of allocating 10 SEZs (Special Economic Zones) in the years coming. Planned along the borders, companies locating themselves within these zones would be able to enjoy low-cost, easily-commuting workers from areas such as Tak and Kanchanaburi (bordering Myanmar); Sa Kaeo and Trat (Cambodia), Mukadahan, Chiang Rai, Nong Khai and Nakhon Phanom (Laos); and Songkhla and Narathiwat (Malaysa). Other incentives to attract FDI include infrastructure creation, fast processing of licensing and permission applications and creating one-stop service centres with customs checkpoints. Additional incentives are planned for companies active in specific sectors, which include tax reductions, low or zero import duties for parts & materials exported afterwards, low interest loans and more.

Similar to China’s Made in 2025 initiative, Thailand 4.0 is a key element in the government’s mid to long term strategic development plan. It aims to create the foundation for production of high value added products and services, and focuses extensively on technology and innovation. Despite hefty competition from China specifically in that regard, manufacturers are moving into Thailand also for risk diversification and access to the ASEAN market.

Pro QC’s team of quality engineers are based in Bangkok and surrounding areas, from where we are able to provide nationwide coverage. For those companies looking to explore possibilities in Thailand with regards to their supply chain, we offer a variety of solutions. The careful screening of vendors is naturally a highly critical process that will influence subsequent developments. Popular services in this regard include our Supplier Verification and Quality Process Audits. Sample reports can be downloaded here.

They say you should walk 10,000 steps per day, and our engineers in China are hitting the mark as they road test these strollers through various road conditions.

Sebastian Oarcea, Pro QC’s Chief Engineer, explains the evaluation in more detail below.

Purpose:  To determine the functionality and performance of the strollers in a real-life operating condition.

Process:  One sample is subject of functional evaluation in reference with instructions manual provided and applicable standard prior to road test to identify potential failure modes.

The road test is performed with strollers loaded at maximum stated by manufacturer (both for occupant and luggage compartments, basket etc.) over terrain that mirrors the expected usage environment (including stairs, inclined road, grass and sand roads etc.).

The strollers are tested in ways that would parallel the way it would operate in normal home use.  Normally 5 samples of each model are included in this test.

Report: The final Summary Report evaluates and records the performance and physical aspects of the stroller during the test. It includes initial observations from the receiving of the product, packaging, compulsory markings and warnings, instructional literature, Mean Time To Failure (MTTF) with reliability data in hours of use and distance, comments (both positive and negative) and suggestions from testers, satisfaction score and daily reports. The test distance is about 50 km (for current road track 53km).