Companies rush to replace ‘just in time’ supply chains with ‘just in case’ contingencies as Covid-19 upends global manufacturing

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Industry players and supply chain experts said the shifting of the supply chain model is most likely in the production of essential goods such as food and medical devices

Even as some firms look to disentangle their production networks from China, the country’s role in the global supply chain is too big to be replaced, say analysts

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Ongoing decentralisation of manufacturing bases from China to other countries may accelerate, but China’s role in the global supply chain is too big to be replaced, say analysts. Illustration: SCMP

Peggy SitoandEric Ng

Published: 2:30pm, 16 May 2020Updated: 2:36pm, 16 May 2020

QYK Brands was putting the final touches on its US$5 million medical mask production line in Garden Grove, California, when it hit a snag: export shipments by its Chinese supplier of melt-blown polypropylene – the non-woven mesh that filters out airborne particles – were disrupted by extra inspections. China is its only source of supply, since all of the US fabric production combined can barely meet the needs of the largest face masks manufacturer in the country.

Supplies from Sinopec, China’s largest petrochemical producer and Chinese resellers of its products, trickled almost to a complete stop in early April, as Chinese customs inspectors scrutinised every overseas shipment of medical supplies and devices to ensure they meet export quality and protect China’s global reputation.

That forced the three-year-old QYK, whose best-known product is the facial cleansing and massaging gadget QYKSonic, to consider sourcing the material from Russia, or South Korea.

“There are plenty of suppliers in China, but only Sinopec is reliable [because] the rest are middle men buying and reselling it while marking the price up three to four times,” QYK’s chief executive Rakesh Tammabattula said in a telephone interview with South China Morning Post. “What’s more, there is no way we can authenticate the filtration effectiveness of the fabric because we cannot impose any requirement to test the products before they are delivered … we have to take the quality risk.”

QYK, with around 40 permanent employees, is one of the thousands of global manufacturers that are finding themselves at the mercy of a global supply chain network entwined around China, dubbed the World’s Factory. As the Chinese government ordered workers to stay at home and halted production lines to contain the coronavirus outbreak, the aftermath of the shutdown has accelerated a rush by global companies to consider alternatives.

Many companies had already moved or mulled the idea of shifting manufacturing facilities out of China after it became embroiled in a gruelling trade war with the US.