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Coronavirus. When the Mask is a Must.

Industry Insights / admin / coronavirus, Covid19, Face Masks

Those who live in Asia or have traveled there are already familiar with facial masks.
Mainly used to reduce the chance of spreading airborne diseases and to prevent the breathing in of airborne dust particles created by air pollution, in Japan and Taiwan, it is common to see these masks worn during the flu season, as a show of consideration for others and social responsibility.

With the rapid spread of the coronavirus that causes COVID-19, the entire world is now concerned about personal protective equipment to stay safe. Consequentially, face masks became the most common tool to prevent further contagion.

It is difficult to say what the best mask is to help protect against a viral infection.
Certainly, disposable face masks block large particles from entering your mouth, while more tight-fitting N95 respirator masks are far more effective at shielding you from airborne illnesses.

Coronavirus surgical face masks mask — Artwork: @biogirlmj

Surgical Masks

Surgical masks, also referred to as ‘face masks’, create a physical barrier between the mouth and nose of the wearer and potential contaminants in the immediate environment.
They are commonly used by health professionals during surgeries and other health care procedures to catch microorganisms in liquid droplets and aerosols from the wearer’s mouth and nose.
Surgical masks are made in different thicknesses and with different ability to protect you from contact with liquids. These properties may also affect how easily you can breathe through the face mask and how well the surgical mask protects you. Obviously, the best would be to use a thick-enough mask without compromising its breathability.

If worn properly, a surgical mask is meant to help block large-particle droplets, splashes, sprays, or splatter that may contain germs (viruses and bacteria), keeping it from reaching your mouth and nose. Surgical masks may also help reduce exposure of your saliva and respiratory secretions to others.
However, because of its design, it might not filter or block very small particles in the air that may be transmitted by coughs, sneezes, or certain medical procedures.
With no doubt, surgical masks are more affordable than other models. However, they have to be changed frequently to avoid the spread of viruses and bacteria.

N95 Masks

Also known as ‘Particulate Respirator’, these masks take the name ‘N95’ because they can prevent from 95 percent of tiny non-oil based particles in the atmosphere, like dust, pollen, mold spores, and other dangers while working or going around.
Those with the adjustable nose clip provide a custom fit and secure seal, avoiding that the mask sleeps off. For this reason, they are considered more efficient than the common face masks.
N-Series respirators have a non-specific service life, and can be used as long as the mask is not damaged or breathing resistances are not detected. However, it is strongly recommended to change them often, in order to prevent from the spread of viruses and bacteria.

N95 face masks mask coronavirus — Artwork : biogirlmj

WHO – When and how to use face masks?

The World Health Organization shared some important advice to the public in order to explain the best practices for the use of the mask.

When to use the mask:

If you are healthy, you only need to wear a mask if you are taking care of a person with suspected 2019-nCoV infection.
Wear a mask if you are coughing or sneezing.
Masks are effective only when used in combination with frequent hand-cleaning with alcohol-based hand rub or soap and water.
If you wear a mask, then you must know how to use it and dispose of it properly.

How to use the mask:

Before putting on a mask, clean hands with alcohol-based hand rub or soap and water.
Cover mouth and nose with mask and make sure there are no gaps between your face and the mask.
Avoid touching the mask while using it; if you do, clean your hands with alcohol-based hand rub or soap and water.
Replace the mask with a new one as soon as it is damp and do not re-use single-use masks.
To remove the mask: remove it from behind (do not touch the front of mask); discard immediately in a closed bin; clean hands with alcohol-based hand rub or soap and water.

Are you looking for masks or other medical products?

We are currently working with our partners to provide a range of masks to meet the world’s needs and to combat this deadly virus. We have available 3 Ply, KN95, N95 and FFP2 masks with CE and FDA certifications.
In addition, we have other medical products from protective gloves, face shields, hand sanitizers, medical suits, gowns and goggles to meet your needs. Please contact us for more information at coronasupplies@et2cint.com .

Click here to download our Medical Supplies Offering.

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Coronavirus. ET2C’s Office to Re-open on 16th March 2020

Company News / admin / China, coronavirus, Covid-19

13th March 2020

ET2C’s Office to ‘Officially’ Re-open on 16th March 2020

Further to the outbreak of the Covid-19 Virus over Chinese New Year, and the subsequent implementation of ET2C’s contingency plan for our Chinese based offices, we have now taken the decision to officially re-open our office sites across China.
Reviewing the data available, it appears that the outbreak has stabilised sufficiently to allow staff to return to our office sites. We do anticipate additional preventative measures to be in place for the foreseeable future.

At the time of writing, there are active cases in the following provinces/Cities:
• Guangdong – Of 1,356 cases confirmed, there are now only 59 active cases
• Shanghai – Of 344 cases confirmed, there are now only 20 active cases
• Fujian – Of 296 cases confirmed, there are now no active cases
• Zhejiang – Of 1,215 cases confirmed, there are now only 17 active cases
We thank all our clients for their patience over this period. Should there be any changes or updates that alter any of the above, we will notify you immediately. If you have your own enquiries, please contact your relevant account manager or at our usual contact addresses.

Canton Fair Spring 2020

It has been announced that the Fair will go ahead despite the backdrop of the now global pandemic of the Coronavirus. China’s premier has said, “Against the backdrop of foreign trade and foreign investment being hit hard by the epidemic, the spring session of the fair will have a particularly significance”.
There does seem to be some precedent for this. Although the spring session attracted some 200,000 buyers from 200 countries last year (top buyers were from Hong Kong, India, US, South Korea and Thailand), post SARS when the event was also put on in 2003, there were 23,128 buyers from 167 countries without a single case of infection.
Given the likely restrictions in place for foreign travellers at for this season, should you wish ET2C to attend for you in any capacity, please contact us.

FOR IMMEDIATE RELEASE

Coronavirus. ET2C’s Office to Re-open on 16th March 2020 Read More »

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Entering New Asian Sourcing Markets

Industry Insights / admin / Asia, India, sourcing, Vietnam

While upsetting the start of 2020, the coronavirus has highlighted the importance of having a diversified sourcing strategy. It is true that many companies were already casting their net outside of China to identify suitable suppliers as part of a broader strategy to ‘de-risk their supply chains’. Most recently, US businesses have found themselves looking for other sourcing jurisdictions as a means of mitigating the penal tariffs imposed by the Trump administration in 2019. Although these have now abated as part of the ‘Phase One’ deal, certain categories are still subject to additional tariffs and where this is not the case, US companies have taken the hint to look beyond China for some of the product ranges. Asian sourcing is now integral to buying from this part of the world.

Asian Sourcing Markets.

China, with its scale, will remain an important part of any sourcing strategy but it is likely that a ‘China plus’ (China plus one other jurisdiction) or ‘China plus plus’ (China plus more than one other sourcing jurisdiction).will be the strategy of choice for companies leveraging the benefits from the Asian sourcing sector for the foreseeable future. Over the past decade, alongside China, Asian nations with an abundance of low-cost labour have looked to export manufacturing as a means of growing their economies and creating wealth for their workers. Vietnam, Bangladesh, India, Indonesia, Cambodia, Laos and to a less extent Thailand can all be added to this list.

We have therefore been speaking to our teams based around Asia, to gather some insight into what considerations companies should review when entering new markets and engaging with new suppliers. It is certainly true that the Chinese manufacturing base has, over the last 15 years, developed an understanding of what it means to export goods to certain markets and have been able to tailor their services to align, in some cases seamlessly to their clients’ needs.

Insight

Our perspective comes mainly from a Vietnam/India sourcing context but does take into account other markets across the region. We have also looked to identify points that are common to most Asian markets rather than list market specific issues. These are as follows:

1.Do not underestimate culture & language.

Dealing with a Chinese supplier is wholly different from dealing with an Indian or a Vietnamese supplier. Whether it is an interpretation of an email, timelines, quality-assurance standards etc., make sure you are clear in communication and be rigorous in validating any information provided.

2.Cost should not be King.

Cost is germane to any purchasing decision and margin is often still the main metric that buyers are judged against. Often to make Asian sourcing work and new suppliers to be onboarded, a longer-term view needs to be adopted. This may mean entering into a trial phase to understand the factory’s capability under production conditions. It may mean that the cost is similar or even higher than the price point of your incumbent supplier. Possibly, see if you can get a Bill of Materials(cost breakdown) to further understand any cost drivers and/or anomalies.

3.Understand the complete supply chain.

China’s manufacturing sector is vast compared with some of its Asian neighbours. There are still some 300 million migrant workers in China. You look at Vietnam as the ‘workshop’ of the World and the total population is only 97 million. The point being that with scale comes the large supplier network, infrastructure, market competition and raw material availability. Therefore, you should understand the different aspects of the supply chain. Is the raw material locally sourced or from overseas? What does the labour pool look like? What are the cost implications of this? Are there additional lead times? There may be manufacturing limitations in a particular market; for example, the cost of a PU finish on metal worked products in Vietnam is expensive. Ultimately, this will all play into the commercial opportunity. It is important to do your due diligence.

4.Over-manage production & quality.

As with any new production, it is important to over-manage the production process and quality piece to ensure you are getting the visibility you need. Keep people on the ground to monitor the production and conduct the inspections as the products come off the line. That visibility is key.

5.Logistics.

Although there has been a significant uptick in investment in had infrastructure across the Asian region, make sure you understand which ports your products would be shipped to, how they get there and any possible bottlenecks. For example, certain ports may only have one shipment per week to your local market.

6.Be patient.

Do not expect the same type of relationship and information flow compared with factories that already know how you operate. There is likely going to be a learning curve as the supplier develops an understanding of your product. In some cases, you may not get to the price points you require initially, but, as above, this needs to be looked at over a medium-term horizon to develop viable suppliers in alternative markets.

Summary

There is no doubt that a broad Asian sourcing strategy will help mitigate risk and provide opportunities across the region. Entering new markets does come with challenges but as long as this is done correctly, then there are considerable benefits to your business.

At ET2C, we are well placed to help manage your China suppliers but also help you penetrate new sourcing markets and leverage the benefits using our on the ground expertise. Should have any queries on Asia sourcing, or more specifically Vietnam sourcing and India sourcing, please contact us at contact@et2cint.com.

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Asia Sourcing in Flux – Coronavirus, Asia & Beyond

Industry Insights / admin / Asia, coronavirus, sourcing

Introduction

The eyes of the world are watching the daily updates as the virus spreads. Context has left the building (seasonal influenza appears to be more infectious and more deadly at the time of writing). Just like with SARs, there is fear and hysteria. The WHO have now been let into ‘ground zero’ to help manage the contagion and the Chinese Government are putting more resources into managing the outbreak. Talk of containment are more frequent.

However, China is largely ‘on pause’. Mass quarantining on an unprecedented scale has been implemented across the planet’s most populous nation. 760 million people are in effective lockdown, with movements to and from apartment blocks being controlled and, in some locations, each household is limited to one family member leaving every couple of days. Places where people congregate are being avoided. In major cities, offices are quiet as staff work remotely at home. Restaurants, bars, shopping malls are ghostly silent. Schools have been suspended. Travel restrictions, both internationally and domestically have left transport hubs idling. China’s central bank is even going disinfect and store used banknotes before re-circulating them. Uncertainty prevails with no known end in sight, just the constant update to the numbers; cases confirmed, deaths and recoveries.

Asia Sourcing

What does this mean for China sourcing? What does this mean for Asia Sourcing more broadly? The Chinese manufacturing sector had already been hit in 2019 by Trump’s tariffs and this outbreak has further deepened the impact on factories across China.

From a China sourcing perspective, the current picture is one of confusion, with local municipal authorities implementing their own preventative measures. This requires each factory to submit detailed records of where workers have been, potential quarantines and additional preventative measures on the factory floor. The net result is that although large swathes of China’s manufacturing belt have ‘officially’ been opened from the 10th February, factories have not been granted permission to open at a local level or, if they have, they are still waiting for non-local workers to either return or complete a 14 day quarantine period.

The impact on the Chinese workforce.

Other than Hubei Province – on complete lockdown – you will need to understand the individual circumstances of each factory. How many non-local workers do they have as a mix of the entire workforce? When will permission to open be granted? What will be the capacity and output when they open? Are there any bottlenecks further down the supply chain with the supplier’s suppliers?

Beyond the factories, transporting goods to warehouses and through the Ports will likewise be problematic. There will be inevitable disruption as Carriers have removed capacity, and as output picks up it will take time to adjust to bring capacity back (and potentially address a surge in outbound shipments).

Asia manufacturing will undoubtedly also be impacted. China’s size and scale has cast a shadow across its South East Asian neighbours. For example, components that are usually shipped from China to Vietnam’s factories will be delayed. Chinese managers, who are often commonplace in factories beyond China, will be stuck due to travel restrictions imposed in some countries. There is therefore no doubt that the ripples of this outbreak are not solely limited within China’s borders but will be felt across the world from the factories of Asia right through to retailers and Brands.

Our Insight

Although this was certainly not part of our predictions for 2020, we have been speaking to our factories and partners across China to get some insight on what this will mean. Clearly there are still a lot of unknowns but China and its workers want to get back to work. They need to.

1. Impact on Shipments

As a broad estimate, we are seeing this adding between 2-4 weeks to shipments post CNY. You need to understand what the impact is at a factory level and when the situation can begin to ‘normalise’.

2. Stock Levels

Given the disruption, it is essential to try and ensure that you have priority when it comes to capacity. Add volume to upcoming orders, and quickly, to both confirm capacity and to replenish stock levels given the potential inbound delays. It may also help to place stand alone replenishment orders that can quickly be produced and shipped out.

3. Development Cycles

It may be that development cycles have been impacted and critical paths have missed certain milestones. Look at how you can fast-track these to make up time, or by using technology (for example, photos rather than waiting for couriers to ship to your home country).

4. Other Countries

Although it always takes time to onboard suppliers, it may be that there are opportunities in other markets across the Asia sourcing spectrum. India and Vietnam are good options.

5. Surge

Just like after SARs, when there was a bump in economic activity, it is likely that there will be a surge in both orders and shipments coming out of China once factories have worked through the preventative measures that are needed on site. In particular, this may impact freight rates in the short term. Make sure you are leveraging any relationships you have with your carriers in this regard to secure ship dates as well as good pricing.

Summary

The impact of this outbreak has been unprecedented, having been amplified by the timing around the CNY holidays and the movement of some 700 million people. We are constantly working with our suppliers in China to get timely and accurate updates to our clients.

At ET2C, we are always looking to find solutions for our clients. Should you have any queries on China sourcing or more broadly Asia sourcing and new opportunities, please contact us at contact@et2cint.com.

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Sustainable Packaging – Top 3 trends in 2020

Industry Insights / admin / Packaging, Recycling, Sustainability

An Evolution over the last decade.

There has been a growing movement towards sustainable packaging over the past 10 years. This has been spurred on by increasing awareness of the damage and impacts the output of consumerism is having on the planet. Plastic features highly across media outlets with images of sea life sharing their habitats with plastic bags, microplastics, etc. Governments have certainly played their part too, by banning plastic straws in certain markets for example.

Certainly, the focus on environmentally friendly packaging had a slow start over the first half of the decade. There was a lack of understanding around what it meant at a corporate level. Even though corporate sustainability goals existed, they were more centered around energy, water, transportation. We have since seen sustainable packaging become a more prominent component of retailers, brands and wholesalers corporate sustainability goals alongside an increased awareness on the end of the use of packaging.

The New Era of Sustainable Thinking

Around the period 2015 -2017, we saw the development of more and more recycling programs and new standardized labeling systems that set out and explain the recycling instructions to the consumer. Brands started to learn what the impact was on their value proposition. For example, many organisations, both in the private and public sectors, created plastic ban programs to reduce the waste of plastics and other materials that were having a detrimental impact on the environment.

In the past couple of years, this interest (particularly at a consumer level) in sustainability has surged. The concept of the Circular Economy has gained significant momentum and this has focused considerable attention also on sustainable packaging. With a more engaged consumer, it has resulted in a tipping point for many retailers and brands to remain relevant. A huge variety of innovative packaging solutions has been designed to reduce the environmental impact and meet customer demand for sustainable and eco-friendly options.

Sustainable Packaging Trends in 2020

Although everyone today talks about sustainability, finding sustainable solutions and providing them to clients is still challenging for many companies. However, ‘necessity is the mother of invention’ and many have searched for innovative solutions that could support the cause.

In this article we briefly listed the main sustainable packaging trends for 2020, highlighting both opportunities and challenges.

1. Design for recycling/reuse

Waste hierarchy is a tool for the evaluation of processes that protects the environment alongside resource and energy consumption from most favorable to least favorable actions. The hierarchy establishes preferred program priorities based on sustainability, using the common methodology when talking about sustainability. These are the ‘3Rs’ of Sustainability; Reuse – Reduce – Recycle.

Recycling

While waste management has become more and more important for governments and companies, growing attention has been paid to Recycling as well. As mentioned, sustainable packaging is still very challenging for most of the companies. In fact, in order to be recycled, post-consumer packaging has to fulfill a long list of requirements (e.g., separability, cleanliness, labeling, and coloration) – even to the point that different variation of plastics may need to be separated for a recycling plant to use the waste material effectively. It is not so obvious to many that manufacturers trying to fulfill those requirements may have to use more material and energy when they produce the packaging than they have done up until now. This will impact the price at a time when the consumer has an abundance of product choice.

Additionally, just because a packaging product is designed for recycling, this does not automatically mean that it will be recycled. Designing for recycling is certainly crucial to find sustainable solutions in the short term. However, cultural and educational components are involved and governments have to ensure that recyclability equals recycling. Both the education of the end-user and the availability of recycling systems is key.

Reusing

For the same reason, reuse is even more difficult to envision than recycling, given our current mindset. Manufacturers should therefore consider any additional impact on the material design changes. Also, they have to calculate the additional impact of transporting, washing, sanitizing (possibly even tracking) and refilling those reusable containers.

In conclusion, while companies have to re-think products and packaging, governments and organisations have to work on infrastructures and culture to make these changes truly effective.

2. Replace plastic with bioplastic

Another trend on the rise is the increased use of bioplastics to replace fossil-fuel-based plastics.
Bioplastics are plastic materials produced from renewable biomass sources (such as vegetable fats and oils, corn starch, straw, woodchips, sawdust, recycled food waste, etc.) and their demand has largely increased in the last decade.

The most common types are:

• Starch-based plastics
Thermoplastic starch currently represents the most widely used bioplastic, constituting about 50% of the bioplastics market;
• Cellulose-based plastics
Mainly cellulose esters, (including cellulose acetate and nitrocellulose) and their derivatives, including celluloid;
• Protein-based plastics
Bioplastics that derive from proteins from different sources.

Of course, benefits in using bio-based plastics are obvious. However, to make a realistic estimation of their true benefits, it’s essential to investigate many factors, such as the origin of the components used and the resources needed to cultivate and collect them.

3. The return of paper

Paper is even more frequently suggested as a substitute for plastic packaging than bioplastics (for example, paper cups and bags). However, paper packaging generally requires several times more mass to fulfill the same function as its plastic counterpart.
In fact, paper as an alternative – as with so many ‘environmentally-friendly’ industries – also has an environmental impact. You need approximately 17 trees to produce one ton of paper so replacing plastic with paper could likely create a severe supply problem. If we were to replace all plastics with paper, we must either cut down more forests or find areas for reforestation.
In addition, the paper industry is the third one that most fossil fuels need to. Moreover, it the first one in the industry sector with the greatest need of water and chemical additives to bleach the paper, additives which are highly polluting for the environment.

Major global accreditation systems

To check if the paper belongs to well managed environmentally logging, you can consider the major global accreditation systems:

ISO14001 – international environmental management system
FSC – Forest Stewardship Council – Promotes responsible stewardship of the world’s forest www.fsc.org
Chain of Custody – covers all wood processes from the forest to the consumer
PEFC – Program for the Endorsement of Forest Certification – recognizes sustainable forestry management practices www.pefc.org
EMAS – Eco-Management and Audit System – European Council regulation.

Sustainable Packaging Solutions

AT ET2C, we’re serious about sustainability and its benefit to our existence as well as the ultimate commercial benefits for purpose-driven companies. For this reason, we are investing in sustainability in 2020 continuing to look for options for our clients both on product and packaging. We have FSC certification already and are looking at other standards.
We have recently created a special offering based on alternative and sustainable packaging solutions, particularly for bags and food containers. If you want to know more, download our brochure here and contact us at contact@et2cint.com. We’ll be glad to support your sustainability objectives and their implementation.

Download the NaturePlast Biodegradable Bags brochure here

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NOTICE – Novel Coronavirus Update

Company News / admin / coronavirus

3^rd February 2020

Although the situation regarding the outbreak of the Novel Coronavirus continues to be incredibly fluid, we have been speaking to suppliers today and our expectation is that factories will be returning to work in most provinces from the 10^th to the 12^th February.

That said, we anticipate delays to both production and shipments due to a delayed normalisation period post CNY. Factories remain unsure about how quickly staff will be able to return to work and the impact that current and future travel restrictions will continue to have on their business operations. There will likely be some form of disruption along the supply chain, including right through to deliveries to Port and the Ports themselves.

There are travel restrictions imposed on flights to/from China to numerous countries around Asia and the rest of the world. It is further anticipated that other carriers/countries will follow to enhance preventative measures.

ET2C continues to engage with our local partners in China to obtain updates on the situation. We will be writing to clients directly over the next coming days on shipments that were scheduled this week and next.

Even though our offices in China are scheduled to return next week, there will likely still be some disruption to staff physically being in the office although we are implementing contingencies to ensure that service levels resume as quickly as possible. We will continue to provide timely updates as more information becomes available via a range of channels; our website, mail-outs, social media and direct emails.

Should there be any changes or updates that alter any of the above, we will notify you immediately. If you have your own enquiries, please contact your relevant account manager or at our email, contact@et2cint.com

FOR IMMEDIATE RELEASE

NOTICE – Novel Coronavirus Update Read More »

NOTICE – Novel Coronavirus Update

Company News / admin / coronavirus

30 January 2020

With the current escalating outbreak of the Novel Coronavirus, we are currently working with our local partners as well as liaising with local government officials to understand the likely impact on the manufacturing and logistics industry.

Clearly this situation is incredibly fluid and continues to evolve on a daily basis. Given what we know already, there is a high likelihood that there will be disruption to both factories returning to work (given travel restrictions imposed in certain regions) and planned shipments in February able to be moved out to Ports.

As of yesterday, some international carriers are suspending flights to Mainland China and it is further anticipated that others will follow to prevent further contagion. Although the holidays have only been extended to the 3rd February in most regions, we expect a further extension in line with Shanghai to the 9th February.

ET2C are working closely with our partners in China to obtain live updates of the situation and how it will impact our client’s individual shipments. As soon as we have greater sight of the impact, we will be contacting clients with individual updates.

We are assessing possible contingencies for all our clients as well as to protect our staff. We will continue to provide timely updates as more information becomes available via a range of channels; our website, mail-outs, social media and direct emails.

Should you have your own enquiries, please contact your relevant account manager or at our email, contact@et2cint.com

FOR IMMEDIATE RELEASE

NOTICE – Novel Coronavirus Update Read More »

Quality Assurance vs Quality Control: a basic guide

Industry Insights / admin / quality assurance, Quality Control

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Quality Assurance vs Quality Control: a basic guideRead More »

Quality Assurance vs Quality Control: a basic guide Read More »

The Benefits of Outsource Manufacturing

Industry Insights / admin / manufacturing, Quality Control, sourcing

With more and more competition cropping up all the time, most businesses are looking for ways to differentiate themselves. Outsourcing your production can be the perfect way to reduce overheads and increase the flexibility of your supply chain. In this article, we will be providing you with an insider’s look into the many benefits associated with outsourced manufacturing, particularly from an Asian perspective.

Why Outsource Manufacturing?

The whole premise of outsource manufacturing was initially built upon a significant reduction in the cost of goods. Rather than having to invest in a manufacturing plant, manage large numbers of factory workers and cover large unwieldy variable monthly overheads – all that would form part of your product cost – it was possible simply to pay a unit cost for a product. When access to mass market third party manufacturing was available, particularly at a time when China became a member of the WTO back on the 11th December 2001, companies had a choice as to whether to retain their own manufacturing plants or reduce overhead and create a more flexible and dynamic supply chain.

Outsourcing to Asia.

Outsourcing to Asia has generated significant margin opportunities due to the comparable, lower, operational costs in these developing Asian economies. Some of the main savings have been historically generated as a result of lower labour wages. Although manufacturing wage gains are fastest in low-cost countries, the savings that can be factored into the cost of goods are still significant.

Some examples of average monthly manufacturing wages by country and the annual wage change over the past couple of years:

China, approximate monthly average salary, $500/ Wage gain, 6%
Thailand, $450/5%
Indonesia, $380/9%
India, $280/10%
Vietnam, $250/8%
Cambodia, $200/11%
Myanmar, $150,12%.

This is a relatively predictable path for developing economies as growth of the manufacturing sector has a direct impact on blue-collar workers’ salaries, as part of the broader wealth creation piece. Just to reiterate the point, Poland, which is one of the largest manufacturing economies in Eastern Europe, has an average wage of $1,400 per month, and the relative increase is approximately 5%.

Cost still a Key Benefit?

Back in the early 2000s’, the cost savings were significant when production was outsourced to Asia. Is this the case still today? Are there any other benefits of outsourcing your production today?

1. Cost

Cost will always be a factor behind looking to outsource production. Certainly, it has to make commercial sense, and this is the primary driver for looking at Asian manufacturing. Even with China’s cost base having increased significantly in 2019, with tariffs now in place from the US and likely to remain so for the foreseeable future, there are still manufacturing efficiencies and technology capable of helping the ‘China machine’ retain some of its relative competitiveness.

2. Raw Material Availability

With the scale of manufacturing that has risen across Asia for the past three decades, there has also been an evolution in raw material supply channels. In particular, China has developed sophisticated supply chains that lead not only to access of raw material but also sub-components and accessories. In fact, this helps reduce costs as everything can be sourced locally (and often nearby your plant).

3. Flexibility

Finally, outsource-manufacturing has enabled companies to better manage their working capital and reduce significant investment in their own manufacturing plants. It is one of the reasons that in this internet age, a start-up can grow so quickly given the barriers to entry have been markedly reduced, if not removed altogether.

4. Quality

With the right quality strategy, it is possible to deliver excellent quality from Asia. There are a significant number of factories which have developed an excellent understanding of quality requirements for export.

5. Expertise

Using outsource manufacturing can immediately enhance the expertise and capability from a knowledge capital perspective. And this applies to any company as long as it is possible to find the right partner to make your products. Even the simplest products have to go through a range of different manufacturing processes and essentially buying this expertise greatly reduces any potential learning curve. It has also greatly reduced any barriers to entry.

Summary

There is no doubt that outsource manufacturing is an integral part of any Brand, Retailer or Wholesalers’ supply chain strategy. One only needs to look at one of the largest brands in the world, Apple Inc, who use Foxconn as part of their iPhone manufacturing strategy. Undoubtedly, it is essential to understand the risks of manufacturing your products overseas. It does not come without risks and understanding these, creating some form of ‘upstream’ presence and ensuring you have visibility at all stages of the production, will make sure that these are effectively managed.

At ET2C, we are capable of walking you through each aspect of the manufacturing process. For more, please contact us at contact@et2cint.com.

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Sourcing Trends: Our Predictions for 2020

Industry Insights / admin / business, sourcing, Tariffs

Sourcing Trends – What happened last year?

Sourcing Trends 2019. The past year has presented a range of challenges. Traditional ‘bricks and mortar’ retail models have struggled to connect with their customers in a new digital world. On an economic level, there has also been weakness in certain currencies that has impacted the cost of goods Ex-Asia for markets such as Australia. Maybe most pointedly, 2019 has also seen an increase in protectionism coming to the fore.

The headline of this protectionism has clearly been the US/China ‘Trade War’ and the impact this has had on sourcing strategies – and not just for US companies. The escalation in tariffs on Chinese products throughout the year caught many by surprise. Particularly, how quickly they were implemented without any real policy guidance but rather cajoled on by the President’s unpredictability.

At the start of 2020, we have therefore been sitting around our crystal ball to set out our predictions for the sourcing trends over the coming 12 months. What will the consumer want? What will be the impact on the outsource manufacturing sector? Which markets will be most relevant? Any new technologies? Clearly, these are only our insights and thoughts, no one can really predict the future!

Predictions

1. US Tariffs

Although it is fair to say that there has been a slight de-escalation in tensions between the US and China towards the end of 2019, we expect the ‘Phase One’ deal to be more of a place-holder. The main terms of any trade deal, namely IP protection, currency manipulation and market access, have largely been brushed under the carpet at this stage to help both leaders.

Prediction: We therefore expect tariffs to remain in force largely for 2020 on Chinese goods to the US. Probably, they won’t be at the level of the phase 4 tranche that was never implemented back on December 15th. Most likely, they will remain in place until the agreement on the ‘Phase Two’. This will lead to a continued ‘de-risking’ by US companies over the medium term.

2. US Tariffs (part 2)

Trump has already pointed the finger at other countries when it comes to what he sees as unfair trade practices. India has already retaliated against the US removal of trade privileges under GSP midway through 2019.

Prediction: Expect other Asian countries (possibly Vietnam) to be caught in the US-President’s vow to readdress any unfair trade practices.

3. RMB/USD Exchange Rate.

Given the warming (or perhaps de-frosting) of the US/China relationship, there will likely be a gradual appreciation of the RMB towards the rates earlier in 2019.

Prediction: Expect the RMB weakness, which was used as a tool to counter the impact of US tariffs to be largely rolled back as negotiations continue on a positive track to 6.7 RMB to the Greenback towards Q4 in 2020.

4. Ex-China Sourcing

Although China will continue to be an important market, companies will continue to look outside of China for select ranges or product categories to ensure that they have market diversification. Surely, this will be a key sourcing trend for this year.

Prediction: Other Asian markets to continue to take relative market share from Chinese manufacturers. Scale and capacity to be increasingly important and therefore the main beneficiaries are likely to be India, Vietnam, and Indonesia. Certainly, their markets will be important but on a much more targeted (product/market) basis.

5. Radical Supply Chain Transparency

A key element of a sustainable supply chain and providing the consumer with complete transparency of factories, raw material origins, ethics and even carbon footprint will continue to be sourcing trends that should not be ignored. It is becoming an increasing component of any buying decision.

Prediction: Retailers (particularly in the fashion sector) will provide more visibility, also by using new technologies. For example, they will use Blockchain platforms to provide complete traceability of the product purchased at retail.

6. New Competitors/Capacity Constraints

Companies will need to be more careful about supplier selection as well as ensure all legal protections are in place at the start of any relationship. In fact, the rise of platforms like Amazon, will enable factories to develop their own ranges and compete in your markets.

Prediction: Suppliers competing in sales markets with cheaper substitute products via Amazon and other platforms, effectively cannibalizing capacity and competing for the same consumers. Also, domestic sales markets taking up capacity again.

7. Rise of Innovative Materials

For sure, companies will continue to develop and invest in sustainable and innovative materials as part of the sustainability demand.

Prediction: Part of this innovation will inlcude plastics and packaging for sure. Also, a new type of biodegradable plastic will become more available to the mass market and new packaging solutions to enter the Asian market (for example, for shoe boxes).

8. England to win Euro 2020

Who knows, we won a world cup back in 1966, and it’s about time we win a European Championship!

Summary

International Trade is closely aligned to global growth and the movement of goods across borders. The ‘impending recession’ that economists pointed to back in 2019, with the arrival of the inverted yield curve, has seemingly been avoided and 2020 will hopefully bring greater certainty for retailers and manufacturers alike. Therefore, an air of predictability would be a welcome tonic and help companies manage any sourcing trends in 2020.

At ET2C, we are always looking to the future to ensure that we are providing our clients with the most relevant services and products. Please contact us at contact@et2cint.com.

HAPPY NEW YEAR of the RAT.

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