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Will Australian Manufacturers be left High and Dry for China?

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In the past, globalisation’s mantra has been ‘build it where it’s cheapest’ and for Australian businesses, often that meant China. However as the pandemic hit and factories were forced to close, causing huge disruptions to the global supply chain, onshore manufacturers stepped up to the challenge to support the Australian people. Now the question stands, as freight becomes easier to manage and the short term supply chain risks are minimised, will Australian manufacturers be left high and dry?

In March 2020, Minister for Industry, Science and Technology Karen Andrews released a statement revealing the “overwhelming willingness of Australian manufacturers to offer their services” to help the Australian community. 

That willingness turned into action as manufacturers across the country pivoted their business models to produce PPE and sanitiser.

In Australia, our main importer of products is China, accounting for over one-third of all imports.

Through the pandemic, our nation’s reliance on China revealed a supply chain vulnerability on goods sourced from overseas, and many businesses are working on how to avoid being caught short again in the future.

In the early stages of the pandemic when things were uncertain, businesses sort short term fixes to ensure business continuity. Often this meant turning to regional manufacturers for assistance and rescuing. 

Although, now the vaccination has rolled out and imports from China are more reliable, what are businesses doing to diversify their supply chain import risks in the medium and long term?

The pre-pandemic global supply chain network was optimised to have minimum lead times at the lowest possible price. Now, knowing what we know, will businesses change their habits and focus on reliability over cost, or will old habits return and onshore manufacturers lose business to China once again?

The Australian Government Productivity Commission released an interim report on Vulnerable Supply Chains with a purpose of helping Australia’s preparedness to deal with possible future global supply chain disruptions.

To avoid disruption on this scale again, companies should critically re-examine their supply chains, restructure flows and networks to build resilience and seek to avoid over-dependency on a particular country or region by;

  • Solidifying more regional suppliers
  • Taking advantage of onshore manufacturing capabilities
  • Avoiding geographic clustering of suppliers

Andrew Liveris, then special adviser to the National COVID-19 Commission, stated, “Australia drank the free-trade juice and decided that off-shoring was OK. Well, that era is gone … We’ve got to now realise we’ve got to really look at onshoring key capabilities.”

Adopting Risk management strategies:

  • Prevention – locating essential supply chain elements in less disruption-prone areas, choosing suppliers that are less vulnerable to disruptions, investing in risk management for critical suppliers
  • Preparedness – holding buffer stock and supplier capacity, diversifying supplier networks and geographic footprint, use of contingent contracting, insurance
  • Responsiveness – invest in early detection and flexible manufacturing processes
  • Recovery – develop post-disruption recovery plans.

For businesses to understand the nature of potential disruptions to their supply chains is crucial for business continuity. If and when another disruption occurs, it is important to have planned alternative sourcing options and knowing who is reliable.

Don’t leave Australian manufacturers high and dry just for the sake of a few dollars, support onshore manufacturing and mitigate the risks of your businesses supply chains.

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