Building supply chain resilience—evaluating foreign suppliers and managing risk
Having a resilient supply chain is no longer optional in this fast-paced and highly competitive global marketplace. Supply chain resilience is critical for businesses to navigate through disruptions effectively, and the ability to do so can make or break your company’s success. By ensuring the ability to adapt swiftly to unexpected events like natural disasters, geopolitical shifts, or pandemics, resilience safeguards operations and minimizes disruptions. It fosters stability, maintains customer satisfaction, and protects revenue streams. Moreover, resiliency enhances risk management in supply chains, builds trust among stakeholders, and promotes long-term sustainability.
A resilient supply chain is a prerequisite to maintaining competitiveness and mitigating uncertainties. Partnering with a professional supply chain management company, like Nelson Miller Group, can help you diversify your suppliers and help you build supply chain resilience by evaluating and leveraging foreign suppliers, while proactively addressing the risks involved for you. Let’s look more closely at how a globalized supply chain helps to build resilience and how you can best navigate the inherent risks of international supply chain outsourcing to your organization’s ultimate benefit.
Importance of foreign suppliers to the supply chain
Why do companies outsource their manufacturing to foreign suppliers, anyway? Supply chain resilience aside, outsourcing provides a number of benefits that help make organizations more competitive. For an in-depth review of the leading outsourcing benefits, check out our post “nine benefits of supply chain management outsourcing.” A growing number of OEMs are realizing these benefits. In fact, Deloitte’s 2022 Global Outsourcing Survey reported that nearly 70% of companies outsource at least some aspects of their manufacturing, with a significant portion of this outsourcing being to foreign countries.
Despite the growing trend towards globalization with larger organizations, small and medium enterprises (SMEs) have been slower on the uptake. The World Economic Forum reports that “SMEs account for more than 90% of businesses and more than 50% of employment worldwide, yet their participation in international trade is limited.” Because smaller organizations tend to have less resources to support supply chain outsourcing, many are missing out on its potential benefits. That’s where a professional supply chain management organization can step in to facilitate global sourcing and procurement without putting additional pressure on already time- and budget-constrained staff.
A supplier risk assessment
Despite the many benefits, outsourcing your supply chain isn’t a decision to be made lightly. When trusting another organization to manage your manufacturing, inventory, and fulfillment, an inherent amount of risk is involved. Completing a supplier risk assessment—whether using your own staff or leveraging the resources of an end-to-end supply chain management partner—ensures you can take advantage of the many outsourcing benefits while appropriately understanding and managing your risk. Let’s review some of the most common risks, perceived and actual, with international supply chain outsourcing.
Risk. Quality concerns with foreign suppliers
A popular but false belief is that foreign suppliers provide poor-quality products, thus disrupting supply chains. When discussing this issue on a global supply scale, China is always the front-runner. What many don’t know is that China has an outstanding reputation in manufacturing knowledge and the ability to produce high-quality, affordable parts at a level that is unmatched by any other country in the world. In 2019, the United Nations Statics Division reported that China was responsible for more than 10% above what the US produced in global manufacturing output. In many ways, China is advanced in comparison to US manufacturers. Chinese manufacturers seek out advancements in manufacturing processes with the goal of making high-quality parts at a faster and more affordable rate.
Outsourcing component manufacturing to foreign suppliers can save your company precious time and money. A partner in supply chain outsourcing will provide you with a boots-on-the-ground global connection to foreign supply chains. As an example, Nelson Miller Group recently secured a major contract with an American OEM because their customer was unable to find the quality necessary for their part’s production in the United States. The customer’s domestic supplier had dropped them with short notice, and a Chinese manufacturing source was able to pick up production of the product right away, even providing some manufacturing enhancements to the product. Using a supply chain management company that works closely with reputable foreign suppliers, like those found in China, is the best move in ensuring supply chain resilience.
Risk. Complexity of working with foreign suppliers
Outsourcing manufacturing internationally presents unique challenges stemming from language barriers, cultural differences, and time zone misalignments. Effective communication can be hindered by language disparities and cultural nuances, leading to misunderstandings and friction between businesses and their overseas partners. Moreover, navigating time zone differences complicates coordination and responsiveness, potentially slowing down decision-making processes and impacting production schedules. These factors collectively contribute to operational inefficiencies and logistical complexities, necessitating careful planning and proactive measures to mitigate risks.
To address these challenges, a supply chain partner will invest in cross-cultural training and establish clear communication protocols to foster understanding and collaboration across linguistic and cultural divides. Even better, they’ll have staff and offices in-country to ensure your manufacturing is executed flawlessly. Above all, building strong relationships based on trust, transparency, and mutual respect is paramount for overcoming language and cultural barriers, ensuring effective outsourcing partnerships, and maximizing the success of manufacturing endeavors on a global scale.
Risk. Evaluating foreign suppliers without visiting them in-person
As your business continues to grow, it will likely become necessary for your company to evaluate foreign suppliers without having an actual “on-site” visit. If your company size is limited or you’re unable to travel to many global manufacturers, you may want to consider outsourcing to a supply chain management company like Nelson Miller Group. We have a broad network of reliable suppliers all around the globe and can execute the vetting process for you when a new supplier is needed. This will make it easier for you to sit back and operate your business from home base. This will result in your company saving precious time, valuable money, and help to avoid potential quality concerns.
Most companies don’t have unlimited resources to be able to hire additional personnel or add incremental travel expenses, on top of taking their business global. Having the safety net of a global network will naturally build your supply chain resilience. You’ll be able to expand your company with confidence, knowing that your supply chain partner will handle all the ins and outs of global management, with your best interest as their utmost priority.
Risk. Navigating complexities and instability of foreign governments
In international manufacturing outsourcing, governments can significantly impact your supply chain resilience, either positively or negatively. Factors like trade policies and agreements, infrastructure, response to global events like COVID-19, and more can either strengthen or undermine supply chain resilience. A professional SCM management partner knows how to best navigate these complexities and can help you achieve supplier diversification to minimize risk to your organization.
As an example, in an effort to curb carbon emissions and reduce energy consumption, China implemented government-mandated power outages in 2021. Because Nelson Miller Group has “boots on the ground”, we were able to assess the risk beforehand and identify new sources in provinces who have been unaffected by these outages; thus, building supply chain resilience for our customers. Because we’re experts in offsetting risks, we have a safety stock solution to act as a buffer. Even throughout a global pandemic complicated by complex foreign government mandates, we were able to deliver components to our customers without a single interruption. By letting our supply chain management professionals handle expanding your company geographically, you’ll have peace of mind knowing that you have a “back-up” plan.
How to evaluate foreign suppliers
Effectively evaluating foreign suppliers is a critical supply chain risk mitigation strategy to protect your organization and ensure a resilient supply chain. Here are some areas you should consider as you evaluate whether potential suppliers:
Assess financial stability. Review the financial health and stability of potential suppliers. Request financial statements, credit reports, or other relevant financial data to evaluate their solvency and ability to fulfill orders consistently.- Evaluate quality and compliance. Assess the quality management systems and compliance standards of the supplier. Look for certifications such as ISO 9001 or industry-specific certifications. Conduct audits or site visits to ensure that the supplier meets your quality requirements and complies with relevant regulations.
- Conduct due diligence. Research the reputation and track record of the supplier. Look for reviews, testimonials, or references from other clients. Check for any past legal or regulatory issues that could indicate potential risks or concerns.
- Assess supply chain resilience. Evaluate the supplier's own supply chain resilience. Inquire about their sourcing practices, backup plans for disruptions, and redundancy measures. Understanding their ability to manage risks within their own supply chain can provide insights into their reliability as a partner.
- Consider geopolitical and environmental factors. Assess geopolitical stability and environmental risks in the supplier's region. Consider factors such as political stability, the regulatory environment, climate-related risks, and potential natural disasters. Understanding these factors can help you anticipate potential disruptions to your supply chain.
- Negotiate clear contracts and terms. Clearly define expectations, responsibilities, and terms in contracts with foreign suppliers. Include provisions for dispute resolution, liability, intellectual property protection, and confidentiality. Clarity in contracts can help mitigate risks and ensure alignment between your company and the supplier.
- Establish clear communication channels. Establish effective communication channels with the supplier to maintain transparency and address any concerns promptly. Regular communication helps build trust and facilitates early identification and resolution of potential issues.
- Monitor performance continuously. Implement systems to monitor the performance of foreign vendors continuously. Track KPIs such as delivery times, quality metrics, and responsiveness. Regular performance evaluations allow you to identify any deviations from expectations and take corrective actions as needed.
If all this sounds like a lot, that’s because it is. As mentioned above, outsourcing your operations (and, by extension, your company’s reputation) to a third party is a big decision that must be approached logically and methodically. A trusted supply chain company like Nelson Miller Group comes with a built-in network of properly vetted suppliers, many of whom they’ve been working with for decades. A SCM partner will additionally be accustomed to thorough supplier evaluation and supply chain risk mitigation strategies, allowing you to leave the “dirty work” to them while you focus on other business priorities.
Making your supply chain unbreakable
As your company expands, you’ll no longer be able to rely on one single source for your manufacturing needs. You’ll likely need multiple locations in different geographical regions for warehousing and supply production. Supply chain reliability will help you improve the quality of your products without running into unnecessary setbacks. Partnering with a company to handle supply chain problem-solving means your business will run with ease and leave your customers satisfied. Consistent service through your supply chain will mean less delays and interruptions which, in turn, will improve your brand’s reputation and increase customer loyalty.
When you partner with a company like Nelson Miller Group, you gain exceptional customer support, assurance of supply, and increased savings. A supply chain management company evaluates and manages risk and overcomes complexities with foreign cultures and governments. Your supply chain doesn’t need to be complicated, but it should be indestructible. Here’s the bottom line: a disruption to your supply chain means loss of profit and confidence of your loyal customers.
Since first opening our doors in 1937, Nelson Miller Group has been an industry leader in creative, engineered solutions for manufacturers. Our highly experienced supply chain professionals assist in every step of the manufacturing process, from design to production of quality products. Through our strategic partnerships, firm commitment to unsurpassed customer care, worldwide sourcing capabilities and offices in the USA and China, clients achieve a sustainable reduction in their total acquisition costs and build supply chain resiliency.
At Nelson Miller Group, we’ve spent years cultivating relationships with proven suppliers and securing the most competitive prices for our clients. We proudly offer the best custom-tailored solutions in the business, and with exceptional customer care that places a high emphasis on human relationships and connections. Our services encompass all areas of the procurement process, such as:
Nelson Miller Group can improve your supply chain resilience by simultaneously globalizing your supply chain and implementing critical supply chain risk mitigation strategies. Contact us to learn more about how we can provide supply chain management in the global expansion of your business.
About NMG
NMG has more than 85 years of experience partnering with organizations to bring their industrial, IoT, lighting, medical, telecommunications, consumer, and aerospace products to life. We solve your most complex challenges in engineering design, manufacturing, and supply chain management.
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