China’s Road to Restoration

China’s Road to Restoration

After reporting no new cases of COVID-19 in March 2020, people are going back to work in China—but companies still face a slow return to production. Not only do China’s original equipment manufacturers (OEMs) face many challenges in resuming their production capacity, but global manufacturers also feel the impact of shortages in their supply chains. Here’s how companies in China are rebuilding post-COVID-19:

Alternative solutions. Many global manufacturing OEMs are shifting orders to secondary or tertiary suppliers to make up for the missed deliveries from their primary suppliers, and are moving some core business priorities back to their own factories.

New products. When automotive business was down by more than 90% in China in February 2020, automaker Shanghai-GM-Wuling began producing medical face masks, which helped mitigate the COVID-19 spread and generated revenue.

Workforce. Some Chinese firms negotiated with local governments for permission to use chartered buses and airplanes to bring workers back from remote regions. Others used automation and technology to make up for labor shortages and to train new employees.

New competition. In certain sectors, such as electric vehicle (EV) production, the bargaining power has shifted to suppliers. CATL, for example, now supplies EV batteries to Tesla’s Model-3 production in China, shifting away from Panasonic’s sole supply. Toyota and Panasonic also initiated a joint venture to produce EV batteries.

Supply chain transparency. New infrastructure and technologies are needed to create transparency within global supply chains, and new predictive models will help corporate decision-makers adapt to similar events in the future.

Government collaboration. The U.S. and Chinese governments may eliminate some tariffs to fly more supplies and goods across borders.

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