@Risk

Are you sourcing chemicals from China?

If so, take a few minutes to read “China sourcing can be a key differentiator,” an article published yesterday at ICIS.com.

Recently, serious problems with quality, purity, safety and delivery have made many companies second- guess their China sourcing strategies. But, in the article, authors Tony Chu and Michel Bulliard contend that companies shouldn’t shy away from sourcing chemicals from China –as long as they use intermediaries capable of handling the wide range of challenges involved.

What are the typical challenges? The authors’ list includes: logistics, cultural differences, tax and regulatory compliance, communication, local and national government rules and regulations, technological capabilities that can vary significantly between chemical producers, and fluctuating economic stability among suppliers.

(Plus, any company that’s sourcing from China also has to deal with the sticky issue of intellectual property, too. According to Chu and Bulliard, “buyer beware” remains the best approach with regard to IP.)

Wow. That’s a lengthy list of challenges, to be sure. And it serves to highlight the simple fact that dealing directly with suppliers in China entails significant risk.

Can those risks be effectively mitigated? Chu and Bulliard think so.

Start by prioritizing collaboration –a fundamental element of any supplier risk management plan. Then, the authors recommend adding a capable intermediary –one that has locations in both the West and China –as another critical component of your sourcing strategy.

From the article:

Because quality and purity are such a critical issue, particularly for complex intermediates destined for use in pharma, agrochemicals or personal care products, it is desirable for the intermediary to have a state-of-the art quality assurance/quality control (QA/QC) team in China that is staffed with trained analytical chemists and compliance specialists who can communicate with Chinese suppliers and Western customers. Compliance specialists at supplier sites can train quality personnel, help implement effective QA programs and work with suppliers to ensure monitoring of raw materials and quality release of final product. Analysis of all materials in China to confirm that products meet specifications before they are shipped to the West avoids many of the problems that have recently made the news.