‘Chinese Supply Chains Still Relevant in Post-COVID Economy’ - Interview with IDE's Manufacturing Engineering Manager
We spoke to Manufacturing Engineering Manager Shing Yan Kong (SYK) about his role in developing and managing IDE’s global supplier partners with focus on ongoing supply from China. We also discuss IDE’s particular approach to selecting and managing Chinese suppliers.
IDE: 2020 had some unique challenges for many manufacturing organisations. How did these affect IDE’s supply chains?
SYK: Covid led many of our clients to become acutely aware of supply chain risks. Events in early 2020 made people concerned about the reliability of supply globally but particularly from China. We assisted our clients to predict and mitigate challenges that arose during this time.
IDE: What kind of challenges did IDE face?
SYK: Lockdowns and provincial movement restrictions meant that key facilities could not produce goods for extended periods or could not ship goods that had been manufactured. We implemented recovery plans including alternative sourcing arrangements, prioritisation of production, and special freight arrangements.
Transport restrictions meant increased lead times and higher expenses - for example airfreight from China to Sydney went from $3 per kg in Jan 2020 to $9 per kg in March 2020. We explored all options to keep product moving; we worked with shipping agents and suppliers to reschedule and redirect shipments. We also implemented novel solutions like the redesign of one client’s packaging to fit 25% more product.
Travel restrictions mean that due diligence and key processes such as compliance auditing, negotiation and problem solving have become far more difficult to execute. However, we are able to use our in country personnel in China to perform audits, investigations, and interviews to maintain our presence locally. Our Mandarin and Cantonese fluent staff in Australia were able to maintain oversight and provide support to our supply partners during the upheaval.
IDE: What is the outlook for Chinese suppliers in IDE’s supply chain?
SYK: The benefits of Chinese supply that existed pre-Covid remain highly relevant despite some of the challenges of 2020. China is so large and populous that there is significant choice in scale and scope of supply partners, all the way from basic single-operation tool shops competing on price and flexibility, to high-tech and capital-intensive manufacturing producing at high-quality and volume.
We have explored other South East Asian supply partners in Malaysia, Indonesia, and Vietnam, but it is hard to find partners with the stability, capability, and price that is available in China. Specifically for medical devices, Chinese companies have become far more proficient in risk management, process control and other compliance requirements under guidance of western companies to meet western standards such as ISO 13485 and 21 CFR 820.
Chinese suppliers still have significant benefits for our clients so we will continue to include these options when making and evaluating operational plans.
IDE: What situations would you recommend are relevant to a Chinese supply chain?
SYK: Chinese supply chains are especially good when you need a single source for multiple processes, or a geographically concentrated network to bring a product together. For example, one of our suppliers is capable of performing PCB assembly, injection moulding, pad printing, assembly and in-house testing. They are not process leaders in any one of these fields but they are able to rapidly create product of acceptable quality at competitive prices. Due to this process plurality, they also have the flexibility to handle considerable changes to product, which is particularly useful for new product introductions.
Whilst Chinese suppliers are an efficient way to integrate established processes such as injection moulding or PCB assembly, there are other important factors in selecting an appropriate supply chain to meet a client’s operational needs. For example, it may be useful to have production close to the end customer to improve flexibility to change product mix or ensure speed from order to delivery. It may be necessary to closely manage and optimise a novel process, provide judgement for rework, or interpret test results.
IDE: Why use IDE to manage Chinese supply chains?
SYK: IDE offers most value when engaged early in the product realisation process which helps us understand the operational requirements of our partner. Our preferred way of working is to provide turn-key supply including planning, risk management, design, process development, part approval, process validation, and ongoing management. This gives us the context and responsibility to get the best outcome.
Our capabilities are particularly strong when it comes to managing risks associated with supply chains and manufacturing in China. Our manufacturing team has maintained relationships with Chinese suppliers, consulting service providers and logistics firms for almost 10 years. These long-term relationships have resulted in ongoing investment in supplier capabilities and established trust in compliance and intellectual property stewardship. Our team has ongoing connections in Southern and Eastern China and we are proficient in Mandarin and Cantonese. The team’s cultural awareness and sensitivity to regional work practices helps reducing instances of misunderstanding and maximises likelihood of co-operation, especially over sensitive issues.
IDE offers significant value to anyone wanting to mitigate financial and compliance risks associated with manufacturing in China, particularly start-ups. Partners may source product from China through us under our ISO 13485 certification to reduce regulatory compliance burden. We have boots-on-the-ground in China with trusted auditors and representatives to evaluate new suppliers and manage issues at existing suppliers.