China slowdown and supply uncertainty for outsourcers

An opinion piece in the Wall Street Journal (September 7, 2012) describes supply issues faced by US companies that outsource manufacturing to plants in China. Some companies face demands for more money to buy raw materials, others find the company disappearing overnight etc. The remedy suggested is closer oversight of the plants with physical on-site visits, adding an insurance coverage for transactions or securing guarantees from the plants foreign owner, if appropriate. Should supply risk be considered an added cost to outsourcing to China, that would diminish the benefit of the wage gap ? Is there a role for risk management firms to establish oversight services to guard against supply surprises ? Given the added oversight of the Chinese government and laws to increase wage rates, should suppliers expect the future of manufacturing in China to be both uncertain and more expensive to coordinate ? Is insourcing now more likely to be an optimal strategy for US manufacturers ?

About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged , , , , , , , . Bookmark the permalink.

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