Question

1. There are a number of companies (assume five or more) competing in a particular industry in the US. They all have supply chains that are concentrated in China. Do you believe that any one or more of the companies in this industry will change the structure of their supply chains to reduce their dependence on Chinese-based suppliers? Explain.

Answer 1

Solution:

Companies across the world have preferred China as their preferred source of getting the raw materials or outsourcing the production because of various reasons that are favorable for the business. China acts as a hub for the western countries to capture the Asian market at a cheaper rate because of cheap labor available in China. This is why many companies have concentrated their business around Chinese suppliers to rip the numerous benefits they receive because of this. Thus, creating an over-reliance on the Chinese suppliers for their business in Asian markets.

After the COVID-19 pandemic, the companies which have over-reliance on the Chinese suppliers would want to reduce their dependence on the Chinese suppliers to ensure they diversify their supply chain and reduce the risks of business failure because of concentrating on only one supplier, that is China. Many businesses have suffered because of the COVID-19 outbreak and many businesses had to shut down their production, supply chian activities to curb the losses because of COVID-19. Hence, the companies may definitely give it a thought to taken the production or other supply chain elements out of China and diversify the supply chain of their business.

Already, Japan has done the same by removing their production plants in China and to move them to Japan to ensure mitigated business losses and we can se a similar trends from countries across the world to save their busness and reduce the losses. Hence, this is why the companies would want to reduce their dependence on China for their supply chain activities.