There has been a lot of talk about “reshoring” in the wake of COVID-19.
Reshoring can take many forms. It usually refers to a company moving manufacturing facilities or services back to the United States. Other times, it means that a manufacturer will try to change its supply base and “move” it back to North America.
For some, the reshoring discussion often begins and ends with China. One of my favorite blogs is the China Law Blog that is authored by Dan Harris and the lawyers at Harris Bricken. They recently published a two part series on mitigating the supply chain risk when deciding whether to stay in or exit China, which was written by consultant David Alexander.
The point that David makes, which aligns with my experience, is that “[t]here is no substitute for in-person operations verification, negotiating costs, and preparation for production.” In other words, if you have never visited your supplier in China (or frankly, anywhere), be careful.
More broadly, I encourage any manufacturer to take to heart the points made by Harris Bricken in a recent post about how to address supply chain problems that arise. While it is fundamental that having the right contract in place is critical, the reality is that litigation with your suppliers is counterproductive in many ways and often can be avoided by proactive measures during the course of the relationship.