How can you position your company to survive this collapse? We recommend immediately taking the following steps:
Step 1: Review Your Existing Contracts. At a minimum, it is vital that you carefully review your existing contracts so you are aware of your rights, obligations, and remedies moving forward. This task should not be left to the purchasing department alone. The potential adverse economic impact of the collapse of the supply chain is so staggering that the CFO and senior operations managers of your company should be involved.
Step 2: Realign. Diversify your offshore providers. If you have one supplier in China, at a minimum seek out multiple sources from different regions of China. Consider entering into agreements with companies in other Southeast Asian countries and even other parts of the world. If you then lose one of your suppliers, you will already have relationships in place to increase production elsewhere. This will allow you to be much more agile than you would be if starting a new relationship from scratch. The oversight of having multiple suppliers will absolutely require more energy on your part, but this is a much better alternative than your business coming to a screeching halt.
Step 3: Reshore. Consider using factories located in the United States to reduce shipping costs and speed delivery to your door. As Asian countries have transitioned over the past decades from human labor to automation, you may find that shifting production to the U.S. will be of similar cost to foreign manufacturing, especially combined with the saved expenses of shipping and other logistics. Since Mexico is both physically and politically tied to the U.S., look to Mexico as a potential supply chain location.