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Debate on how feasible for a manufacturer to move their facility from one country to another country. What are some major supply chain fixed and variable costs, service time and ecosystem aspects that Sonos’s managers should have taken into account when making the decision to relocate to Malaysia?

The speaker maker Sonos Inc., which sells voice-activated, internet-connected speakers and other audio electronics, plans to source all of its U.S.-bound products from Malaysia by the fall. The U.S. being the company’s core market, generating more than half of its revenue, has been working on relocating orders with Chinese suppliers to Malaysia to diversify its supply chain in response to the trade tensions between China and the U.S., reports The Wall Street Journal (28 May 2021).
Several manufacturers of textile, footwear and other low-margin products have been relocating out of China for years due to rising cost of production. Tariffs have exacerbated the trend, specifically following the ‘trade tensions’ between China and the U.S. Many tech companies, however, find it more difficult to relocate from China to other countries. For example, Sonos’s efforts of boosting production capacity in Malaysia have been hampered by the coronavirus restrictions, challenges in hiring workers and shortage of semiconductors. “It has taken longer than we thought it would, but we’re still very much on track with our Malaysia strategy,” said the company’s financial chief officer. Among China’s major attractions are well-developed chains of suppliers and reliable infrastructure, much of it built in the past 20 years. A plentiful labor force skilled in precision manufacturing as well as trained engineers and pro-business government policies also make China appealing. And for those companies looking to sell into the large Chinese market, producing in the country is more competitive than importing.

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