Facing new constraints like post-tariff distributed supply chains and the coronavirus, where will manufacturers invest their resources in order to optimize in 2020?
A woman worker assembles earphones for export in a factory in Suining in southwest China's SichuanBarcroft Media via Getty Images
Since the 15-25% tariff threat to electronics shipped to the United States from China began in mid-2018, brands have worked to avoid them. For the most part, they’ve been successful, but likely not in the way you might think. Many companies took advantage of a loophole in the tariff regulations that if at least two “transformations” took place outside of China, then the product didn’t count as being made in China, even if those words are stamped on the back.
But there are real downsides too. By doing the “transformation trick”, brands have taken on much higher levels of complexity and longer lead-times since transformations that used to take place in separate rooms or buildings are now happening in separate countries. Instead of one line, they have two. Instead of a six week supply chain, they have inserted an extra two week shipment and customs step.
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