For more than two decades, China has proven the quality of its manufacturers when it comes to PCB and technical parts.
The country offers one of the best packages regarding price and quality but also leads the way for standard to high-tech
demands with deep knowledge and some of the best equipment in the world. Therefore ICAPE Group decided to develop its
factory network over China and settled a dedicated headquarters to manage its customer’s projects on-site and ensure
the best quality. In 2022, 300 employees are working at the Asian Headquarters, located in Dongguan, in several
departments such as customer services, purchasing, quality, laboratory testing…
But if China has many arguments in its favor when it comes to large volumes or high-tech products, ICAPE Group wanted to propose a alternative manufacturing solutions outside of China Mainland for specifics demands. Depending on location, we could improve lead times, reduce shipping costs, find low carbon footprint solutions, and mitigate any environmental and geopolitical risks. With this objective in mind, a new sourcing department, managed by Mr. Soon-Yves Pernelle has recently been created and the first results are excellent. Over the last two years, the factory network of ICAPE Group extended to autonomous territory Taiwan and countries like South-Korea, Vietnam, South Africa, and Portugal. Let’s learn more about this new department with Mr Soon-Yves Pernelle, how it works and what are the advantages to extend ICAPE Group’s factory network with factories located outside of China Mainland:
Mr Pernelle, how do you proceed to find and select new suppliers in ICAPE Group’s AVL ?
Our Sourcing team follows a multi-step process that starts with making contact and gathering information on potential suppliers. The information collected can be general, such as the evolution of turnover and labor cost over the last three years. We adapt our questions depending on the type of production capabilities and capacities within the factory. At the end of this collection, we can better understand the profile of the company and decide whether or not to go further. The following stages are organized by factory visits with our buyers and our engineers during which we can assess on-site whether the information collected is consistent with reality. If the factory passes these stages, we can decide to involve this potential supplier in concrete projects.
What are the essential criteria to join the AVL ICAPE Group?
For a supplier to join our AVL (Approved Vendor List), we have four main criteria: reliability, quality, competitiveness, and lead time. Firstly, we must make sure that all the information communicated is correct and reflects the reality in the factory. We must of course obtain the best product quality. Our special relationship and purchasing power we represent for our suppliers allows us to have good leverage to obtain the best prices. And finally, ensure that what we deliver arrives at the right time for our customers so that they can move forward with their day-to-day activities. Apart from these four criteria, we also judge other elements such as the motivation of the supplier to work with us. The supplier must find his account because they must adapt to our requirements. If they make this effort, they can see their business volume increase. The collaboration must absolutely be a win-win relationship with our partner.
What are the main technologies/commodities on which you found competitive factories outside China Mainland?
Chinese industry has still a dominant position for many commodities as there are numerous actors, a complete local supply chain to purchase raw material, components, manufacturing equipment. As energy and labor costs has been increasing for years, Mainland China is more and more in competition with other developing countries, we can find Overseas suppliers at the same price level or cheaper in South-East Asia for example. For American market, part of the advantages come from the 0% importation tariffs on electronic products versus 25% taxes on many Chinese goods. At Icape Group, we have started this year good suppliers in Vietnam for commodities that requires a lot of labor and manual operations like cable & wire harness assembly. We are trying to start other commodities like plastic injection, but this is not so easy.
Is there a process difference between accepting a Chinese factory and a factory outside China in our AVL?
There is no difference between the acceptance process of a Chinese factory compared to a factory outside of China. A plant, regardless of its location, must go through the same rigorous steps. The only difference that could be noted at this stage is that we historically have a stronger presence in China Mainland. We must therefore use new tools and adapt when we cannot systematically travel on-site outside of China Mainland. For example, in some cases, we may require making factory visits by video. This will be completed by a face-to-face visit on a more ad hoc basis.
How is the on-site quality control of factories outside China Mainland?
Before starting a project, we ensure that the samples are systematically sent and inspected in one of our three laboratories in China, in France, and in the United States. At the same time, we carry out an advanced documentary check. In the short-medium term, our objective is to be permanently present in countries where we are developing activities like Vietnam, to have the possibility of sending people to the factories to inspect products before shipment. In the long term, we are considering the possibility of opening a services office dedicated to Sourcing and pre-shipment inspection.
Sourcing suppliers outside China Mainland is also a way to maintain service, quality and prices for US customers?
It is true that products from countries like Vietnam, Malaysia or the Philippines are subject to low import taxes in the United States, unlike Chinese products. The advantage does not end there. Sourcing outside China Mainland allows us to offer our customers the opportunity to diversify the origin of their products and thus reduce their dependence on Chinese industries. This is a big question that many international companies have had after several global events have disrupted international trade: the Covid epidemic, the global shortage of components on the market, geopolitical tensions (China & USA trade war). In the event of global supply concerns, having alternative sources is one of the solutions to secure and reduce the risks.
To learn more about ICAPE Group’s sourcing department, please contact us here.