Every year after the Chinese New Year Holidays,Chinese manufacturers are tormented by the same question: how many of my employees will return to work?
Chinese New Year is known as the world's largest annual human migration with literally millions of Chinese workers traveling from the industrial mega cities to their smaller hometowns. With the so called end-of-the-year bonus in their pockets, chinese workers will simply make up their mind about future career prospects after consulting parents and friends “back home”.
This year more than ever in recent history the mood is turning sour. After a two-year long trade war with the US, the inevitable landing of a 20-year booming economy and now the coronavirus outbreak, we are due for some disillusionment. The vast majority of factories are still closed after the government extended the holiday and the coming few days will be very stressful for plant managers. Although China has proved to be resilient and they will surely recover, the timing is uncertain and the impact on supply chain will be painful.
The true challenge of a purchasing manager is to evaluate the situation and talk to someone. In Asia no one likes bad news and no one is ready to lose face so you should prepare yourself to read between the lines because it is unlikely that someone will bluntly tell you that your order is delayed or even cancelled. On the bright side Chinese are industrious and hard working and I would not be surprised if your sales contacts are checking their emails even during holidays.
You may get a reply, but can you really rely on it?
In the worst case scenario the virus will spread outside of Wuhan and the Chinese government will restrain population movements, plants will shut down for months, flights will be cancelled, ships will not leave port while more extreme measures may be coming. Even if your vendor is open there is no guarantee that its own suppliers will deliver the materials and components needed to make your products. What should you do? Wait and see or be proactive?
The main lesson here is the old adage “not to put all your eggs in the same basket”. Too many US companies have been relying heavily if not exclusively on Chinese manufacturing. Just a matter of time for the whole dependence on China to blow up in someone's face. As my former CEO used to say “time to do some soul searching”.
Southeast Asia has a more diverse population and risks are more diluted. I am writing this post from Singapore 1600 miles south of Hong Kong. All the companies that I am visiting in the region are up and running, the population is very disciplined, the government is in full control of the situation with only Singaporeans and work permit holders authorized to come back into the country from China (who are subjected to a 14 day quarantine).
If you are interested to learn more about the attractiveness of Singapore and Southeast Asia and working with Kusu Corporation to diversify and streamline your supply chain please check our website https://www.kusucorp.com/ refer to my blog posts https://www.kusucorp.com/blog and if we can help in anyways feel free to email me at email@example.com