China+1 or ABC?
Rationalizing your strategic sourcing decisions in today’s fine chemical landscape
The latest catchphrase for the strategic sourcing crowd is “China+1.” It has several meanings for business investment and commerce, but we’ll borrow it here to denote that procurement practices need to expand beyond China to other countries to diversify supply chains for raw materials and intermediates, mitigating production risks for fine chemical and downstream products.
The origins of C+1 date back about ten years, in response to yet an earlier initiative that focused on Chinese manufacturers as low-cost-country-producers to dramatically improve cost positions for Western companies. “Make China Happen” was the battle cry at the time, and a paradigm shift resonated throughout industry corridors.
However, Make China Happen created sourcing complacency. Indeed, reputable Chinese manufacturers were discovered during this time, which led to new business, collaborations, joint-ventures and in some cases, movement of physical production to China for tighter supply chain integration. However, the fashion was fast and ran its course, exposing questionable practices and growing levels of scrutiny. Many Western manufacturers unable to compete exited during this period, but those that endured were able to enjoy business from new customers as well as those returning with hats in hand, looking for mercy.
So the newfound interest in C+1 begs the question…who indeed is the +1? Many presume it is India, but is the Indian chemical industry ready to seize the day? Right now, it’s the shiny object that many are intrigued with, but will India prove itself as a sourcing partner? While some Indian manufacturers are certainly up to the task, others simply advertise as such, and so the due diligence and vendor scrutiny begins yet again. Questions to ask these prospective partners:
Do core competencies align with your requirements?
Does genuine custom-manufacturing capability exist?
Can these partners execute, reliably, safely?
It comes down to way more than lists of pots-and-pans assets, or enthusiasm to win global clients. There has to be demonstrated evidence of success, and not at your expense.
So the question becomes, is the +1 India’s alone, or can the fine chemical industries of other countries step up instead? The answer is…Yes! Eastern Europe. Southeast Asia. Japan. And don’t forget the USA. The right companies are lean, ready, and hungry, so cast a wider net when looking for second/third sources and business contingencies.
This approach may be coined as the “ABC” strategy, i.e. “Anybody But China,” and is not meant to be pejorative, but rather demonstrates that broad markets should be in play for sourcing alternatives. The mantle is up for grabs, and a broad strategy will prove best to lessen risks and strengthen your supply chain.
Want to know more about building an ABC strategy? Reach out for a free initial consultation today.