David Young - ET2C International - Page 12 of 12

Containers: the outlook for 2022

Industry Insights / David Young / Containers, Logistic, sourcing

Containers are the lifeblood of Global Trade and the Pandemic has perfectly illustrated how important they really are. Now with Omicron still raging across multiple markets, what is the latest on global trade flows?

Overview

Containers are commonplace wherever you travel. Whether loaded up at a Port, on the back of a lorry on the motorway or sitting on a train carriage, they are an ever-present symbol of trade and the movement of goods. Introduced back in 1956, containers were a transformative catalyst for trade to become truly global by enabling cheap and easy ways to ship goods around the world.

The Pandemic disrupted the movement of containers around the world, which is much more a delicate dance that ebbs and flows with the seasons. Suddenly in April 2020, containers were not readily available where they usually are and there was a complete mismatch between supply and demand. For example, thousands of containers were being stored in warehouses by the UK Government filled with PPE, when usually they would be on their way back to the Far East in all likelihood.

The result has been an incredibly challenging year in 2021. Container prices on certain high demand routes went up by 6 times as demand for space far outstripped capacity. This was compounded with bottlenecks at Ports, labour issues, equipment shortages and carriers introducing blank sailings to re-jig container availability (or profiteer in some instances).

Containers – A Traumatized Sector

According to a recent survey conducted by Container xChange, the container industry is rethinking its strategy. In particular, 70% of respondents said that they have plans to diversify sourcing options and resort to holding more inventory. This is certainly the case, although there is still a broad resilience within Chinese supply chains that appears to have negated some of this migration out of China.

There is a further expectation that the industry is still downbeat about supply chain performance in 2022; 65% of respondents said that performance will either deteriorate further (11%) or remain the same (54%) in the year ahead. But this is also justifiable, the scars of 2021 are still very raw.

The container gridlock has definitely traumatized this industry and continues to do so. This has not been helped by shippers using boxes as storage, container line failures, inefficiencies in matching box owners to potential users, and longer transit times and port congestion that has made container rotation slower.
Ports in LA are still struggling to clear the backlog of container ships waiting off the Coast, although there are positive noises being made about this ameliorating into Q2 of this year.

Outlook for 2022

It is clear that the shipping bottlenecks have exposed one of the most serious threats to the global economy as it emerges from the pandemic: whether the worldwide traffic jam remains gridlocked or begins to flow again in 2022. If the bottlenecks persist, freight costs will remain high, space for cargo on ships will be limited and retailers and manufacturers will have to endure chronic delays. That could in turn fuel sustained inflation, prompt supply chain upheavals and accelerate the consolidation of shipping networks, fundamentally changing world trade.

The cost of shipping freight, as an example, into the US shows little sign of abating. It is true that there has been some softening of freight rates, but these may not be so much to do with supply constraints easing, but demand dropping around Chinese New Year (and higher stock inventories prior to the end of 2021). Across all modes of transport, record highs have been recorded based on year-on-year comparisons.

Looking across these different modes of transport, Bloomberg reports that there has been an 18.3% jump in shipping by truck and a 29% rise in Ocean Freight rates.

Delivering Inflation

More and more Central Banks are having to review comments made in 2021 that inflation was only going to be temporary. The reality is that inflation is now being imported in containers (freight rates and higher commodity prices would be built into the product landed cost) and if this has not yet hit the retail shelves, it is shortly about to only compound monetary policy decisions.

Blackrock,

the investment house, has recently pointed to a ‘new and unusual market regime, underpinned by a new macro landscape where inflation is shaped by supply constraints.’ They suggest that this was perhaps overlooked by the Mandarins setting looking at the cause of inflationary drivers. These have been predominately a result of supply constraints all along global supply chains. Whilst demand was high in certain sectors, production is always constrained by the weakest link in the supply chain.

To take the example of the Fashion industry, supply chains will continue to face disruption as a result of logistical bottlenecks, material shortages and rising costs, according to The State of Fashion 2022 report by The Business of Fashion and McKinsey & Co. There remain significant challenges around product and resource shortages as chocked supply chains and rising shipping costs undermine operations. Over recent months, numerous companies reported difficulties in managing inventory flows or have tied lower sales forecasts to supply-chain blockages. Inevitably, in response, many have turned to remedies that include more nearshoring, in-store supply stocking, and agile operating models designed to respond flexibly to change.

Summary

It is by no means a simple picture. The challenges of 2021 will persist, and supply led inflationary pressures will push up prices along the supply chain. The tentacles of sourcing operations around the world will adjust their reach to counter some of these difficulties but such decisions will need to be married with other important business decisions around sustainability, which will likewise drive strategy in 2022.

Trade will continue to flow. Containers will continue crossing oceans and landscapes. The question is whether the blockages of 2021 can be addressed (or more supply of containers delivered) to get Global Trade back on its feet.

At ET2C, we are already working with our clients across multiple markets as their partner of choice and are well placed to help manage more complex supply chains. With a team on the ground, we make sure we provide the visibility required to our clients. For more information, please contact us at contact@et2cint.com.

Containers: the outlook for 2022 Read More »

blank

Electric Scooters & the E-Mobility Trend

Industry Insights / David Young / e-mobility, e-scooters, electric scooters

Electric Scooters are more and more common in cities across the world as part of an e-mobility trend. We took a look at this exciting growth market and some of the product specifications.

Electric Scooters – Market Overview

Now more than ever, sustainability and climate consciousness are not merely trends but a necessity. The number of battery-powered vehicles is growing exponentially worldwide; apart from the household name of Tesla, such brands as Volkswagen, BMW, Hyundai, BYD and many more are shifting towards electric power and making commitments to be all-electric within the current decade. It is safe to say that since their first introduction over a decade ago, electric vehicles (‘EV’) have rapidly grown in use and popularity as well as becoming more commercial (distance and affordability).
According to the International Energy Agency (IEA), EV sales surged ahead last year to capture a record 4.6% share of the new vehicle market; in the first quarter of 2021, sales more than doubled from the same period in 2020 in each of the three largest markets, Europe, China, and the US.

And e-mobility is not solely the reserve of the car market. Battery power is being adopted and used in many different modes of transport such as electric trucks, buses, bikes, electric scooters, segways and beyond. Statistically, e-scooters are one of the fastest-growing e-mobility segments; the global electric scooters market size was valued at US$ 18.5 billion in 2020 and is expected to reach nearly $41.98 billion by 2030, according to a study by Grand View Research. Electric-powered scooters have been on the market since 2008 and have a growing popularity among urban riders due to their low weight, agility, and convenience.

Electric Scooters and Micromobility

Micromobility is also a growing trend, particularly within cities. These are trips that are less than 8km in distance. You would have no doubt seen electric scooters in use in some cities whether through shared mobility providers or just out on the streets (or pavements!). This is though is not yet uniform and is down to location-specific factors. Certain countries have long traditions in micro-mobility (includes bicycles, mopeds, e-kickscooters) and there is certainly a greater update in such locations of micro-mobility (Italy 81% and China 86% as surveyed by Mckinsey & Co). Whichever type of vehicle used, there is no doubt that the electric scooter will become a more common sight.
Just as a comparison, the market for electric scooters is anticipated to be 160 million units by 2035 when E-bikes are estimated to be 40 million units. There are a number of factors underpinning the growth of this market.

a) Environmental Consciousness

Inevitably, there is an increase in consumer awareness regarding eco-friendly transportation. They have no emissions and reduce the carbon footprint (particularly important given the deliverables post COP26).

b) Commercial/Economical Solution

From the Consumer’s perspective, e-scooters are agile, reliable and affordable. Given the functional capability, they can be lightweight and also fold up making the electric scooter convenient to carry around especially in the rush hour traffic!

c) Government Incentives

As a result of their impact on the city environment, there are many Governments (including local) that have already implemented schemes and support programs promoting electric mobility (e-bikes, scooters and mopeds); the measures under such programs primarily include purchase and vehicle registration subsidies in countries such as the US, UK, Norway, China etc. These do often work better where there are shared mobility providers that are engaged with local governments to further enhance usage.

Sourcing Markets

Given the prevalence of E-Scooters in China, it will be no surprise that there are many brands and manufacturers already established; particularly in China’s Southern manufacturing base (leaning more towards tech with some of the specifications).
Although a large growth market, it is important to make sure that you understand the product, import duties and regulatory environment. For example, in the UK, electric scooters are not able to have license plates currently and are not allowed to be used (unless specific exceptions) on the road or pavements.

It is therefore worth considering the following:

i) Certifications

A Lithium battery safety certificate, as well as MSDS documentation, are a must when importing an e-scooter. Other certification requirements may vary based on the local regulation for the importer country. Shipping and importing any batteries is always highly regulated given the risk for fire.

ii) Import duties

Anti-dumping and anti-subsidy duties on e-bikes imported from China must be considered depending on whether the restrictions are in place for the importer country.

iii) Warranty

The industry standard is a one-year aftersales service for quality issues and 1% components provided for free. Given the nature of the product, having the ability to service it will always form part of the sales process.

iv) Quality control

Given the value and compliance requirements, make sure you undertake an upstream QC pre-shipment. Essential.

v) Specifications

Some key specs to think about for electric scooters include mileage on one charge, speed, charge time, control panel and tyres. There are lots of options and make sure that you have the model you require.

ET2C x JD.com (OPTIONAL)

As part of our partnership initiative, ET2C has entered into an agreement with JD Worldwide – JD.com’s international business – on electric scooter sourcing for primarily the UK market.

The partnership will leverage JD’s extensive supply chain resources for electric scooters and ET2C’s global sales network and in-market experience to make ‘sourcing simple’, whilst ensuring our clients have access to the most complete buying solutions.

Summary

At ET2C, we are always looking for innovative products within growth markets. There is no doubt that electric scooters will be a prevalent feature of city living within this next decade. The industry will be further supported by the rise of sharing apps and government incentives. We have all the capabilities on the ground and product knowledge in China to support our clients in this exciting area.
For more information, please contact us at contact@et2cint.com.

Electric Scooters & the E-Mobility Trend Read More »

blank

Top 8 Powerful Sourcing Trends 2022 To Read Now

Industry Insights / David Young / Global Supply Chain, Sourcing Trends

Sourcing Trends for 2022 have echoes of last year, although the length of the Pandemic has accelerated certain offshore manufacturing strategies. …

Top 8 Powerful Sourcing Trends 2022 To Read NowRead More »

Top 8 Powerful Sourcing Trends 2022 To Read Now Read More »

blank

Global Supply Chains in 2022

Industry Insights / David Young / Global Supply Chain

Global supply chains have been the subject of many articles, column inches and broadcast journalists’ notes over the past year, and with good reason. As we start 2022, is this disruption coming to an end – we look at five key trends for the year ahead.

Overview

Global supply chains have been significantly disrupted throughout 2021 primarily due to imbalances in supply and demand. The media spotlight has emphasised how supply chains nowadays are interwoven webs that span out across borders and oceans. Globalisation and efficiencies within the shipping industry (containerisation) have enabled supply chains to scale creating significant benefits for consumers.

As companies look to build resiliency and ‘flex’ into their supply chains in 2022– potentially identifying new suppliers in new markets – the level of sophistication is likely to increase, albeit there should be a greater capability to address the disruptions this past year has presented.

For any company, the situation caused by the global pandemic has revealed weak points but also opportunities. Having a good understanding of the current scenario and identifying the factors that will impact the global supply chain in 2022 will present a strategic advantage for any business aiming to build greater resiliency.

Global Supply Chains: What to Expect in 2022

1. Logistics Capability

With the factory shutdown in China back in February/March 2020, there has been a myriad of factors that have created disruption to logistics capability including repeated market global lockdowns (Hong Kong has just taken measures in its 5th wave), bottlenecks on supply routes, container shortages and consequential factors like freight rates and delivery times.

The recent sharp drop in the delivery times index reflects surging demand and/or widespread supply constraints. In such situations, as buyers need to closely manage stock levels, it is usual for suppliers to have greater negotiating power. Also, and importantly, such delays can have a significant impact on working capital availability potentially constraining cashflows.

Many reports forecast that container capacity will continue to be constrained over the coming months which will lead to a shortage of imported products. However, there is an expectation that the situation will ameliorate into Q2 after the usually Chinese New Year rush – notwithstanding a lot of companies have already ‘stocked up’ to address the lead times. Anyway, assuming that these disruptions recede and that access to sea and airfreight reverts back to pre-pandemic levels, it will likely take some time before the market normalizes.

To build resiliency, companies should look to re-design alternative supply chain flows and focus on strategic sourcing.

2. Production Lead Times

Production lead times have already been pushed out in 2021. Certainly, in China, there has been disruption caused by an electricity shortage on the back of some lofty environmental commitments. A bull market in commodity prices has left some suppliers struggling to access the necessary raw materials on time. And this is all overlaid by the disruption in logistics that will inevitably push out delivery times should raw materials need to be moved both in the market or externally.
According to Deloitte, some industries (like semiconductors/chips) will continue to face shortages next year (Supply of raw material not meeting current demand of strategic materials) although this should be less severe than the past 12 months in particular.

3. Doubling down on Technology Investment

The pandemic, by ‘pressure testing’ global supply chains, has helped highlight weaknesses. One of these is certainly the lack of visibility, as there are many stakeholders and participants within the extended network. To overcome this issue, companies will increase their investment in technology to enhance critical supply chain planning capabilities by adopting more advanced digital enablers. In particular, they will invest more into advanced technologies – such as cognitive planning and AI-driven predictive analytics – to significantly improve visibility and consequentially become more responsive to major disruptions.

4. Commodities

The global economic recovery, accommodative monetary policies, bad weather, structural shifts in the energy sector and supply chain disruptions have propelled commodity prices higher to make commodities the top-performing asset class in markets this year. In particular, in 2021, some commodity prices rose to or exceeded levels not seen since the heights of 2011. For example, natural gas and coal prices have reached record highs.

In addition, the events of this year have highlighted how changing weather patterns due to climate change are a growing risk to energy markets, affecting both demand and supply.

In 2022, commodity prices are likely to stabilize and potentially soften on the back weakening demand. The market still has the potential for more supply and demand elasticity fueled by rapid technological advances and demographic shifts.

This transparency will need to also cover the pricing and costing. Organizations will likely increase spending on analytics tools and software packages to increase the visibility across bills of materials and the respective price drivers. This will drive greater supplier consolidation and ESG segmentation, helping in reducing the variation in quality and pricing for the same type of product/service across geographies.

5. Workforce and labor

The multiple disruptions caused by the pandemic have significantly affected also the employment sector, facing uncertainties and severe labor market shortages, which have further complicated the post-COVID-19 recovery scenario for many industries. The Omicron variant continues to create challenges in markets when it comes to workforces and access to additional labour. Movement across borders is severely impacted particularly in Asia. And with the Lunar New Year approaching, there is uncertainty about labour availability should workers be able to travel home; will they be able to then return?

Summary

Global supply chains are changing and evolving at a faster pace than pre-Pandemic. This is partly driven by necessity but also the times have accelerated plans and spending that were waiting on the sidelines. Modern operations are increasingly focused on technology and innovation and this will help companies manage increasingly complex supply chains. Disruptions, although to start ameliorating, will undoubtedly continue into 2022. This time, though, it is fair to say that companies are better prepared and with the right capabilities in place, will manage appropriately.

At ET2C, we are already working with our clients across multiple markets as their partner of choice and are well placed to help manage more complex supply chains. With a team on the ground, we make sure we provide the visibility required to our clients. For more information, please contact us at contact@et2cint.com.

Global Supply Chains in 2022 Read More »