I f you think China looks less attractive these days as a place to source or manufacture, you’re not alone. Increasing numbers of U.S. companies have sought alternatives to China in recent years, planning either to leave that country altogether or to diversify their sourcing. For instance, 88% of respondents to a 2022 Capterra survey of supply chain professionals at small and mid-sized companies say they plan to switch at least some of their sourcing to suppliers closer to the United States, while 45% say they plan to switch all of their suppliers.
seen before,” says Rosemary Coates, a supply chain consultant and executive director and chair of the Reshoring Institute, a nonpro t that helps U.S. rms start manufacturing in the United States. “Companies couldn’t get product out of China,” Coates says. “They had real dif culties with the factories opening and closing. That’s still happening today.” Along with production delays in recent years, port congestion and high shipping rates have also made some companies rethink long supply chains rooted in China. Consider the U.S. fashion industry. “When there was port congestion coming out of China, some U.S. buyers responded to the long lead times by buying and storing larger quantities,” says Raine Mahdi, founder and CEO of Zipfox, an online sourcing marketplace with an initial focus on Mexico. “But that means more cash tied up for longer.” With much shorter lead times on orders from Mexico, clothing brands can buy in smaller increments. Other factors turning U.S. companies away from China include ongoing geopolitical tensions, concern
Some rms open factories or strike deals with vendors in the United States, Mexico, or elsewhere near home. Others seek alternatives to China in South or Southeast Asia. And some, like one client of Washington, D.C.- based FTI Consulting, plan to source from different regions to support different markets. “The company is looking at India, Vietnam, and other places to support the EMEA [Europe, Middle East, and Africa] market,” says Ron Scalzo, senior managing director with FTI’s Corporate Finance and Restructuring section. “They are also looking at Mexico, or possibly onshoring in the United States, to support the U.S. market.” Outsourcing to countries other than China is nothing new; Mexican maquiladoras have served U.S. brand owners since the 1960s. But for companies that rely on China’s prodigious manufacturing ecosystem, several recent factors are prompting a fresh look at other parts of the world. TARIFFS, COVID, AND CONFLICT One factor is the trade war that revved up in 2018, when the United States imposed hefty new tariffs on Chinese imports. One document, known as List 3, named about $200 billion worth of goods from China that would incur additional tariffs.
“When that list came out, business contacts started asking me to look for alternative manufacturing sources for them,” says Erik Brigham, who at the time ran an export business in Thailand. Observing a demand for Thai suppliers, Brigham launched a new enterprise to ll the need, Bangkok- based Thailand Sourcing. Then came the pandemic and China’s Zero COVID policy. “The pandemic introduced risk into supply chains like we’ve never
Trade shows such as EvoLatam Expo, a conference that brings U.S. e-commerce merchants together with suppliers from Latin America, can be a good source of information when considering alternative sourcing locations.
March 2023 • Inbound Logistics 41
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