If You Thought China Was In The News A Lot In 2018 … Welcome To 2019

Supply chain risk management software company riskmethods offers some thoughts on the recent news on China exit bans and why supply chain professionals should take heed.

Last week, China made headlines when it detained some high-profile US and Canadian citizens from leaving the country, apparently citing economic crimes and violating the country’s laws and regulations. In response, the US renewed a previous travel advisory for the country, warning Americans to “exercise increased caution in China,” and explaining that individuals subject to a travel ban (who typically don’t know they’re subject to a ban until they try to leave) “may be detained without access to US consular services or information about their alleged crime.”

As China continues to pop up in the news, it’s worth asking what it means for procurement and supply chain organisations. Here’s the bottom line: Sourcing from China is risky right now. In fact, riskmethods' risk scores show China as one of the largest export nations with a high supply chain risk score. It also has a high position on the Corruption Perception Index, which, with the surging focus on corporate social responsibility and compliance in supply chains these days, is certainly no small thing. (See other nations with high supply chain risk scores.)

“The current state of affairs with China is a great example of why procurement has to move beyond traditional supplier risk management,” says Bill DeMartino, General Manager of riskmethods North America. “Monitoring the financial health of your suppliers isn’t enough—you have to be monitoring what they’re doing and where they’re based, as well as the supply paths your goods are traveling through.”

The other major concern for companies with Chinese suppliers is, of course, the ongoing trade war between the US and China. Tech companies should be on particularly high alert here, as they’re most likely to be impacted by the 25% tariff being levied on hundreds of billions of dollars of Chinese imports—the top commodity exports for China are related to computers and broadcasting equipment. Again, the importance of supply chain risk management can’t be overstated here; although there’s little you can do to influence the state of tariffs, you should have strategies in place that will allow you to mitigate their effect—for example, specific action plans for engaging alternative suppliers.

All of these recent developments demonstrate a critical lesson for those in procurement and supply chain organisations: ongoing assessment of the risk in your supply chain is no longer a nice-to-have. It’s one thing to assess supplier risk during the awarding process—but if that’s where your risk management process stops, you’re not doing enough to secure your supply or protect your reputation.

According to the Chinese Zodiac calendar, 2019 is the year of the pig—an animal typically associated with wealth in Chinese culture (and with luck in other cultures). In reality, 2019 may not shape up that way for organisations that rely on Chinese suppliers. Let’s see.

 

See also The Latest China Supply Risk You Need to Know About from our sister site MetalMiner

 

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official position of Spend Matters.

 

 

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.