The lack of transparency in China supply chains

One of the members of the Linkedin China Law Blog Group asked “why there aren’t more companies in China that are totally transparent with their supply chain”.

The reason is that importers would take high risks by disclosing the names of their suppliers.

Here is my response:

If you are transparent about who in China manufactures your products, here is what’s going to happen:

- Your competitors will use the same manufacturers, will benefit from all the free training you gave them, and probably also the molds/technology they have developed for you. They might even get a lower price that what you currently pay…

- More importers will approach your manufacturer, simply because they will guess it’s better than average (or you wouldn’t still be working with them). Capacity gets filled up, lead times get longer, prices increase.

- The manufacturer uses your endorsement to convince potential buyers, with the same effect as the above point.

That’s why nobody is transparent… There is a very limited supply of good manufacturers in Asia. When you find one, keep it for you!

It takes a lot of time and efforts (and expensive mistakes) to constitute a good network of suppliers. For many importers, the Chinese supply chain they have established is their main competitive advantage.

What is funny is that the customs of certain countries make some data public. You can go to Import Genius or Panjiva and see the names of the shippers (that are usually the exporters, and not necessarily the manufacturers) of your competitors.

What do you think?

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Comments

  1. Renaud Anjoran says

    Thanks for the heads up. Of course government contracts are also awarded in an opaque manner, but for other reasons ;-)

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