Eager to avoid the higher costs associated with tariffs, several American consumer goods companies are considering shifting, or already have shifted, their supply chains away from China. They are in most cases seeking alternative manufacturers in countries that offer similar manufacturing capacity for a comparable cost.

However, rapid changes to supply chains also may expose companies to greater risks. Establishing compliant, reliable and secure supply chains takes time, and failure to properly vet suppliers can have material consequences.

One US company took 20 years to establish its supply chain in China. To cultivate a partnership, companies typically vet new suppliers by executing multiple inspections and verifying compliance with company-specific policies and codes of conduct. Once suppliers achieve these initial requirements, they have to be monitored on an ongoing basis and must comply with periodic audits. Companies have to invest a significant amount of time and money to establish and maintain a secure supply chain. As China and the United States continue to introduce new tariffs and exchange threats, companies may forego these precautions as they attempt to quickly redirect production. This situation could be exacerbated given that the factories with available capacity to accept new orders are likely to have lower standards.