As China loosens its COVID-19 constraints, it’s regaining its position as a traditional offshore base. Supply chain managers are excited about this development, but they still face amplified challenges in managing offshore Contract Manufacturing (CM). Drawing from SCRG’s experience in helping customers manage Contract Manufacturing / Vendor Management, let’s discuss some common challenges and their solutions.
Challenges in CM/Vendor Management and Their Solutions
1. Raw material shortages without warning can cause line shutdowns and impact production. To overcome this challenge:
-Plan for long lead time materials during the NPI stage and adjust orders accordingly.
-Set up reasonable safety stocks on critical parts to prevent shortages.
-Track delivery schedules and evaluate supplier performance.
-Identify alternative suppliers through a dual-source development plan for high-risk supply components.
2. Product shipment delays due to insufficient output or unexpected situations can lead to unmet shipment plans. To address this issue:
-Regularly review the CM’s production capacity and plan, attending daily operation meetings when possible.
-Negotiate with sales teams on balanced production forecasts to ensure sustainable and effective production for better on-time shipment rates.
3.Poor communication, inaccurate data, or untimely information from factories can create barriers due to internal management issues or business competition pressures. To improve communication:
-Utilize professional and flexible region on-site support to reduce communication errors and verify the actual situation at the factory.
-Establish communication with higher-level management in the CM to align objectives, expectations, and monitor outcomes.
-Get involved early in sourcing activities during the NPI stage to identify suitable partners and reduce potential communication barriers.
By implementing these effective solutions for common offshore CM management challenges, supply chain managers can achieve win-win situations. Remember, the key to success lies in collaboration, planning, and transparent communication.
Have you faced similar challenges in offshore CM management? Share your experiences and how you overcame them in the comments below!
Author: Derrick Zhao (Mr.), Managing Director, China at SCRG has extensive experience in helping customers navigate the complexities of offshore CM/vendor management. Derrick is passionate about finding innovative solutions to supply chain challenges and delivering value to clients.