EkaLore has run a series of articles on the impacts of inflation across the enterprise. Our previous post in this series dealt with Russia’s effect on world prices, today we’ll consider China’s impact.
Major outsource manufacturing resources have responded to clear signals that prices will go up. Even with changes in US tariffs with China, the effects outside China will be material. Intense sourcing competition and changes in logistics costs (let alone scheduling disruptions) have made years of expectations by manufacturing-dependent enterprises miss expectations. Expectations must change about the “China Price.” Improved costs and margins for enterprise buyers are no longer a given. The clear message to USA and EU enterprises is for costs from China to rise – even after tariff adjustments and other factors are considered
Ask these questions to gauge your enterprise’s exposure:
1) How dependent is the enterprise on low-cost manufacturing from outsourcers?
2) How cost-sensitive are customers to confrontation about price increases?
3) Are there cost-reduction initiatives already in progress to reduce costs a lot (short or medium-term)?
4) How sensitive are financial costs to increased interest rates?
5) If a cash-flow disruption occurs will this disrupt paying for outsource production?
If your answers to the above seem troubling, consider scheduling a short conversation with a Senior Analyst. EkaLore’s team can help enterprises with their operations and sourcing strategies – www.ekalore.com/contact
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