Managing supply chain risks in US-China trade partnership

Abstract

For the past twenty years, manufacturers have been outsourcing their production to China to take advantage of low labor costs. From years of experience, companies have implemented and redesigned systems to be the most effective and cost efficient, which has led to increased dependence on interconnected supply chains that are vulnerable to associated risks. US companies are recognizing the risks and starting to mitigate the risk as the impact becomes greater and more probable. This paper discusses the outcomes and impacts of the occurrence of major supply chain risks from both a macro and micro point of view. A diagram outlining risks associated with Chinese trade is also included. The macro-level addresses the actions the US government – and the country as a whole – must take to maintain a viable relationship with China. On the micro-level, the analysis is presented on the most relevant risk management options. A risk mitigation prescriptive business model that covers both macro and micro views is also presented.

The discussion is limited to the most relevant issues facing the United States when it comes to trading with China. It is also known that information reported on China is not always accurate or representative of reality. To offset this fact, broad research from various sources has been conducted to present an acceptable range of data.

This study augments the nascent research on the potential outcomes of risks occurring in the China supply chain, and makes a case that risks are not only probable, but that the outcomes are acute.