The integrated supply chains of China remain unmatched. The continued trade policy and tariffs are shifting faster. This makes most companies plan around it. It depends on China as the sole source of production is a liability.
Thus, china plus one strategy gives manufacturers a way to hold China’s advantages.
Understanding China +1 strategy
China +1 is a supply chain diversification strategy. A company keeps production in China, while adding another manufacturing location in another country. The strategy reduces dependence on China. Thus, it lowers the risk from:
- tariffs
- policy changes
- supply disruptions
Manufacturers have benefited from the strategy since they applied it. They do not simply expand, but simplify the supply chain.
Advantages of China +1
The advantages of this strategy help manufacturers to:
- build resilience
- reduce tariff exposure
- give supply chain room to breathe
How does China +1 work?
The strategy retains the core strengths of China. The volume production is only moved to a second location.
For example:
A certain product manufactured in China is now manufactured in another country where the second location is situated.
What changes is where the product is manufactured or made at scale. Yet, it stays anchored in China.
However, the challenge is to find effective alternative production locations. The manufacturing location must find a facility that meets the quality standards. They established an operation that renovates an existing facility for the fastest startup.
This is how they simplify the supply chain. They hired local management and workers to do the transfer process and ramp up production.
Purpose of the strategy
The purpose of the strategy is to extend what already existed in China in a second location. They do not build something new, but bring the same:
- standards
- systems
- institutional knowledge
The manufacturing process carries over, such as:
- quality
- process
- relationships
Nothing will change in the finished product. It still has the same quality even when manufactured in a new location. The supply chain is more flexible.
Necessity, not a trend
Many businesses view the strategy as a trend. But it is not, since it has become a necessity now.
Relying on a single country to source or manufacture leaves businesses at risk to uncontrolled potential forces. You cannot say that your country is developed today and will remain stable for the next few years.
The world is full of uncertainties. China +1 strategy can be a way to secure your business when uncontrolled forces take hold.
For example:
COVID-19 pandemic caused supply chain disruptions. The incident has blocked the Suez Canal. Thus, the supply chain becomes affected.
The China +1 strategy keeps your business operating amid the pandemic. Businesses build resiliency in their supply chain with this strategy. This enables them to adapt and respond to:
- unexpected events
- geopolitical shifts
FAQs
Does the China +1 strategy mean leaving the country?
China +1 strategy does not mean leaving the country. It means that you are moving volume production to a second location.
Does adding manufacturing operations limit its number?
No. A business diversifying its manufacturing operations presents any number of alternative locations.
What countries are adopting the China +1 strategy?
Many countries are adopting the China +1 strategy. It includes countries from Southeast Asia, such as:
How useful is the China +1 strategy to your business’s supply chain?
The strategy keeps your business operating without being affected by unexpected events and geographical shifts. You remain constant with your production.
Can the strategy save your business during geographical shifts?
Yes. There is no need to worry about the supply chain. You can still produce and distribute without being disturbed.