about intellectual property, and— for some —the desire to label their products Made in the USA. “There has always been a subset of consumers who might want to buy American,” says Scalzo. “That subset is growing.” BREAKING UP IS HARD TO DO Whatever its reasons for moving away, a U.S. company entrenched in China might face a tough transition. First, cutting old ties can be tricky. “For example, if you have shipped a mold or tool to China to assist with production, you’re never getting that back,” Coates says. Also, departure can turn a supplier into a competitor. After you’ve taught a manufacturer where to source materials and how to make your product according to your standards, when you leave, that knowledge stays behind. “They’re going to continue to manufacture your product and label it differently,” she warns. For a company that owns a factory in China, multi-year employment contracts can also complicate an exit. “You have to pay out to the end of that contract,” Coates says. In a plant with thousands of workers, that’s a big expense. The search for non-Chinese suppliers
Trade wars, pandemic lockdowns, rising costs, and shipping delays are among the reasons international companies are leaving China to build factories like this one in Thailand.
very different experience,” he adds. Even when you locate a capable supplier, you won’t nd the same supportive infrastructure that China provides. “It’s not just where your plant is, but where your raw materials and components are coming from,” Scalzo says. Those sources tend to be in China or other parts of Asia. “How do you begin to shift the entire supply chain going upstream?” he asks. A rm that moves out of China must also learn to navigate a new business culture. For instance, in Latin America, personal relationships are crucial. “You can’t just e-mail or text a supplier and say, ‘Can you make this product?’” explains Amy Wees, founder of Amazing at Home, an Austin-based consultancy for e-commerce merchants and co-founder of the EvoLatam Expo, an annual trade show in Mexico that introduces e-commerce brand owners to Latin American suppliers.. “You need to go in person and build those relationships to get things done,” she says. Also, suppliers in Mexico aren’t always well-versed in the nuts and bolts of contract manufacturing. “It’s not that Mexico doesn’t have those capabilities,” Wees says. “It just requires more of a partnership and conversation.” Companies migrating from China
or contract manufacturers can also prove challenging. “When you enter China, there’s a massive city that has 2,000 factories, of which 100 will meet with you,” says Kevin McGaffey, founder of Bangkok- based MOTOA Group, a sourcing company that specializes in nding alternatives to China. “You have time for 10. Five or six will say ‘yes,’ and four will be competitive. “Try that same thing in Gujarat, India, Haiphong, Vietnam, or Samut Prakan, Thailand, and you will have a
Companies looking for global sourcing advice have many options. Thailand Sourcing, for example, partners with established, certified manufacturers who produce only quality goods. The company sources 45 dierent commodities for customers in 50 countries worldwide.
42 Inbound Logistics • March 2023
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