You are enjoying a good time earning lots of money with booming demand and extended season in robust sales of custom wheels during pandemic. It will definitely become marketing case study in future MBA program.
Besides, you may be working from home and going to office once a week, with your warehouse guys taking care of the inbound outbound work. Moreover, travelling to your Chinese suppliers is not feasible now. No self blaming of laziness, no need to fight jet lag, no need to go to smoggy workshop, and no need to drink Chinese white liquor. Business is still carrying on and never have had this good time in the past.
However, you are more than 9 months that you have not been visiting and checking out your factories on site. Have you thought of:
Is the factory still operating under the same goals and mission that you were informed before?
Recent US China decoupling theory, sourcing diversification outside China have been hot issues. Your factories delivery might have been normal, but do you know whether they are still running a development road in the industry? Or gradually and quietly retreating?
Is your factory still healthy?
Although Chinese government is encouraging banks to extend loans to factories, some factories are constantly facing lowered demand, fluctuating orders, still surging costs, difficulty in getting labors, non-loosing environmental protecting costs, and price pressure from customers. Are these factories running positive or negative cash flow? How will things look like when market goes down (we all hope it will not, but we all know it will sooner or later)
Is your factory selling your products in China?
China is pushing "Internal Cycle", or in short, domestic consumption market. A lot of export oriented factories are seriously working towards domestic sales and distribution. Are they selling your design and trademarked products? You will need someone to police for you in China and collect market info.
Is your factory keeping the same quality level?
RMB has been appreciated from 7.1 to 6.85 to 1USD within last 3 months. SMM aluminum costs surged from RMB13,000 to 14,500 for the same period. Labor costs never get down, and environmental investment still unavoidable. With the worldwide pricing on a downward market trend, how can your factory keep up with the quality with less resources? Especially wheels are safety critical car parts. Are your factories even extending the Product Liability Insurance Policy for you?
Is your factory still reacting promptly to New Wheel Development?
Under this strange market environment, with lots of backorder, but very dim future due to Covid-19 impact and worldwide headwind towards China, the factories aggressiveness reduce in an obvious way. One aspect is the slowing down in pace and reaction of new product development. Motivation from management has also been decreased. But they are under-estimating their own ability, as it will take very long time, or even never happening, for some sophisticated wheels to be manufactured outside China. Who will make a 32" two piece wheel with chrome barrel and painted milled assent center plus plastic insert outside China? There is a real need to push factory and motivate them to react during these days.
While you are still working from home enjoying your beer in front of your laptop with your dog running around your legs, it may worth thinking ahead a bit and try ways to tackle the above issues, which may turn into a supply crisis hurting your business when the perfect storm arrives.
I will suggest ways in next few posts that you still can do that remotely to reduce your risk of supply.
Or we, Wheelteams, with our experienced on-site Chinese engineers and inspectors can collect and dig out relevant information, compile into summary for your reference to decision.
With political unrest surrounding us, it is not impossible that market can downturn suddenly with supply environment worsen. You need good updated information beforehand so you can take wise steps ahead of your competitors.
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