Originally published on May 15, 2020, updated August 27, 2021
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In this guest post, the team at Movley discusses how COVID-19 has impacted suppliers and how to mitigate the issues you may face in the months ahead.
Back to work does not mean back to normal! With factories re-opening and production resuming, the landscape looks very different from what it did a few months ago.
Supplier bankruptcies have skyrocketed, and our reports show product quality has taken a nosedive. Here’s everything you need to know about the current state of manufacturing in China, and what it will mean for your business going forward.
The impact of COVID-19 on suppliers in China has certainly been immense. This is what’s happening now.
This all amounts to a pretty serious shrinkage in factory outputs. Many suppliers simply cannot return to the level of production they were at prior to the outbreak. Many others are not even trying.
The new, rapidly changing landscape in China is creating the following risks for importers:
The Risk: Suppliers have been hit hard by the coronavirus outbreak, by both the shutdowns themselves as well as the subsequent production difficulties. Importers rarely find out a supplier is going bankrupt until after it happens. This can leave them high and dry, scrambling to find a new supplier in time to fill orders and at a loss for cash deposits, R&D investments, and infrastructure (such as tooling and product molds).
To help combat the threat of supplier bankruptcy, importers should:
If you suspect your supplier is at-risk of shutting down, you should start looking for a new supplier as soon as possible.
The Risk: Movley has noticed a considerable increase in manufacturing errors and product defect rates, and a decrease in overall product quality.
Suppliers still operating are improving their margins and lead times by aggressively cutting costs in raw materials and skipping quality control steps in the manufacturing process. They are shifting to cheaper, lower-quality material suppliers. Even products that are visually similar to their pre-COVID counterparts are breaking down or wearing out far sooner than usual. For example, your fabric might look the same but fade much faster. This means bad reviews, product returns, and even lawsuits in the short-term and especially in the long-term.
Even products that are visually similar to their pre-COVID counterparts are breaking down or wearing out far sooner than usual.
No products are spared from this dip in quality, not even PPE. When Movley conducted quality inspections on a medical-grade FDA approved factory manufacturing KN95 for healthcare workers, we found that 15% of the masks inspected had holes in them!
Something like this just goes to show the lengths to which suppliers will go to cut costs during this crisis, and how dangerous that can be for the importers or the end-users buying their goods.
When it comes to mitigating quality issues, the best strategy is to be more stringent than ever in your quality control testing. We recommend the following in the time of COVID-19:
Being this rigorous in your quality control may sound like a pain, but it’s nothing compared to how painful the fallout from a batch of defective products can be for your Amazon business. Good quality control only costs a few extra cents per unit.
Suppliers in China are going through a truly tumultuous time, one which can lead to a lot of risk for importers. The new challenges certainly are serious, but they’re not insurmountable.
Being proactive, attentive, and scrupulous is the best way to defend yourself from the new and hazardous Chinese manufacturing environment, and ensure your business makes it through the pandemic unharmed.
Originally published on May 15, 2020, updated August 27, 2021
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.
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