AS MORE and more companies are attracted by China’s low-cost labour force to shift their manufacturing base to the region, some appear not to have embraced fully the potential risks. Douglas Kent, CEO of UK-based eKNOWtion, advised companies to look at the whole equation and find ways of mitigating the risks involved, in his address at the recent Sapics Supply Chain Vitality conference at Sun City. His advice: l Be realistic – some concepts won’t work l Uncover the hidden costs l Think carefully about where in China you want to do business. l Be prepared for the staggering lack of local talent at management levels l Assess the expansion carefully before migration and undertake due diligence. “Obviously China offers an incredible opportunity – low costs, excellent quality, outstanding outbound infrastructure and a potential domestic market that boggles the mind,” said Kent. “but you need to understand the potential risks.” The following table provides an overview of some of the weighted risk values in China and other regions. “Some companies are mitigating the risk of outsourcing to China by second sourcing with another Chinese provider,” he said.
