Recent conversations with consumer product manufacturers in Australia have revealed an interesting new trend. The majority of these companies source from Chinese suppliers, and in buying for the Australian market, tend to buy small quantities of the product. This approach has worked well in the past, where Chinese manufactures were keen to get the export dollars, this is now changing. There was much discussion on suppliers rising the minimum order quantity, and in one case terminating the contract, a
What is driving this change to the environment? It appears to be that there is an increasing demand from Chinese consumers for similar products that were previously targeted for the export market.
The need to focus on security of supply is paramount, and this is another driver, reinforcing the need for companies to pay ever greater attention to the supply chain.
We expect companies to pay increasing attention to the security of the supply chain, in response to these developments. We will see 3 key areas of action:
1) Secure existing supply
2) Look for alternate suppliers
3) Re-establish manufacturing
For Australian manufacturing, options 1 and 2 are the most likely to be followed due to the high costs involved in manufacturing on-shore, with the search for alternate suppliers moving outside China.