China Archives - ET2C International

Buy Products from China? 5 Alternative Sourcing Markets to Consider

Industry Insights / / , , ,

Buy Products from China ET2C Int sourcing procurement find suppliers

Buy products from China? It is time to consider a more diversified sourcing strategy and consider alternative sourcing markets.

The US-China trade war was first, and then the Covid-19 pandemic followed soon after, both of which have shaken up long-established global supply chains in a relatively short period of time. Over the last year, many companies have established crisis management teams to provide focus across their supply chains. In this delicate moment, they had to assess the impact of disruptions. Moreover, they had to provide direction to employees and customers about the actions needed to mitigate the emerging risks.

Current restrictions for those who buy products from China.

The restrictions currently in place preventing travel and the movement of people have tested supply chains to their limits. Access to sourcing markets, visibility/transparency across production, quality are key components to deal with the uncertainty whilst building resilient supply-chains.

In this context, enhancing sourcing capabilities requires the development of a strategy that models environmental/geopolitical risks into the supply-chain. It needs to consider multi-jurisdictional manufacturing and outsourcing models. And lastly, building redundancy into the supply chain. In other words, diversifying the sourcing strategy to spread the risks of operating in offshore markets.

5 Alternative Sourcing Markets to consider if you buy products from China.

In 2016, Deloitte released the Global Manufacturing Competitiveness Index (GMCI). This study demonstrated the ongoing influence manufacturing has on driving global economies.

In particular, the report forecasted the rise of the “Mighty Five” – Malaysia, India, Thailand, Indonesia and Vietnam. The “MITI-V” were expected to be included in the top 15 nations on manufacturing competitiveness over the following five years. So if you buy products from China, should definitely consider these sourcing markets too.

Let’s take a look at some of the different opportunities and challenges importers might experience in each of these China sourcing alternatives.

1. Malaysia

European and US companies have ranked Malaysia as the second most favourable Southeast Asian country for opportunities to establish or expand their sourcing, selling or operations over the next six to 12 months, according to study commissioned by Standard Chartered.

Malaysia’s economy is the third-largest in Southeast Asia behind India’s and Indonesia’s, despite having a much smaller population. It’s considered an upper-middle-income economy, with its openness towards trade and investment largely credited for its development.

Malaysia ET2C Int sourcing procurement quality control

Overall Malaysia posted a $44.2 billion surplus on goods traded during 2020, up 33.3% from $33.2 billion in black ink one year earlier.

Malaysia’s top 10 exports accounted for over four-fifths (81.2%) of the overall value of its global shipments. They include electrical equipment, machinery including computers, rubber articles, optical, technical, medical apparatus, plastic articles, iron, steel, aluminum.

Benefits of sourcing from Malaysia

• Tariffs
Exporters in Malaysia benefit from no value-added tax (VAT) on exports, as compared to a tax of about 13 percent on exports from China. This lowers costs for importers that purchase goods made in Malaysia.
• Geography
Malaysia’s geography also offers significant advantages in terms of shipping goods. In fact, it is located on the Strait of Malacca, an important shipping lane. The country is home to Port Klang and the Port of Tanjung Pelepas, the second and third busiest ports in Southeast Asia, respectively.
• Workforce
Malaysia’s workforce is also highly skilled, ranking sixth globally on the World Economic Forum’s ranking of current workforce skills. Companies in Malaysia find it relatively easy to find employees with the skill set needed for their business given Malaysia’s high level of education and vocational training.

2. India

Considering that English is one of the official languages of India, foreigners manufacturing in this country do not face the same barriers of communication that often plague those who source from China.

Buy products from China ET2C International sourcing India
In addition, not only India has a large and growing workforce, but also the country is entering a new era of skilled manufacturing and production. Investment in smart manufacturing is coming to the fore and should create greater production efficiencies in the future.
For these reasons, an increasing number of companies are exploring alternative markets such as India to diversify their business and minimize risks.

Benefits of Sourcing from India

First, a wide range of raw materials is readily available within India including cotton, silk, jute, marble, metal, wood, bamboo, and others. The country traditionally focused on producing unique and handcrafted products not found in other countries.

There is also greater protection for Intellectual Property with more robust laws in place to implement such protection compared with other developing markets (China’s legal system is beginning to catch up in this regard, albeit there still gaps in protections).

India’s top exported categories overall are raw materials and industrial products. Other goods that you can import from India include handcrafted items made of various materials such as metal, ceramic, wood and textiles; apparel and fabrics; fashion accessories; leather products; and eco-friendly products.

3. Thailand

According to the World Bank, Thailand has a similar infrastructure as China when it comes to arranging international shipments and their timeliness.

Over the last years, the government has worked hard to plan public-private partnership (PPP) projects worth 1.09 trillion baht ($33.39 billion) during 2020-2027. In this general project, it included also the creation of the Southern Economic Corridor (SEC).
The SEC will reportedly focus on four main areas: tourism on the Gulf of Thailand and Andaman Sea, agricultural product industries and ecological and cultural conservation and above all trade with countries in the Indian Ocean.

ET2C Int sourcing procurement quality control suppliers vendors Thailand
In particular, the country is trying to link the Gulf of Thailand to the Andaman Sea, making shipping between the Pacific and the Indian Ocean faster and cheaper.

Thailand earned an overall $20.4 billion trade surplus during 2020, up 289.9% from $5.2 billion in black ink one year earlier. The top 10 exports include machinery including computers, electrical, machinery/equipment, vehicles, precious metals, plastics, optical, technical, medical apparatus.

4. Indonesia

Located mostly in Southeast Asia extending to some territories in the Oceania continent across from Australia, the Republic of Indonesia shipped an estimated US$183.5 billion worth of goods around the globe in 2019.
Indonesia is home to Southeast Asia’s second-largest economy and the world’s fourth-largest population.
Surprisingly, the country went from an -$8.5 billion trade deficit in 2018 to generate an estimated $27.1 billion trade surplus for 2019.

Buy products from China ET2C International sourcing Indonesia
Mainly, Indonesia has highly positive net exports in the international trade of coal and crude oil.
The top 10 exports include also electrical machinery/equipment, footwear, iron/steel, vehicles, precious metals, machinery including computers, rubber, clothing/accessories.

Advantages to sourcing from Indonesia

Despite a smaller population than China and India, those looking to source from Indonesia will benefit from the country’s large workforce. Also, the general population is very young with the median age being 28 years old.
In terms of wages, the labor costs are relatively low with the average monthly salary ranging around $182 in the manufacturing industry. Indonesia also offers a much more stable political climate compared to Malaysia and Thailand.

5. Vietnam

Albeit much smaller than China, Vietnam offers a broad manufacturing sector with experience of exporting. Labour rates remain low, there is raw material availability and also a good range of product knowledge. Importantly, the Government has been investing in infrastructure of the past decade to create efficiencies with logistics and shipping. There are also some attractive duty benefits most notably with the recent ascension of the recent EVFTA.

Buy products from China ET2C International sourcing Vietnam Ho Chi Minh City

Top industries in Vietnam

Electronics, machinery, and steel are some of the biggest industries in Vietnam.
In terms of quality and high value in production, we must mention furniture, garden products, garments, shoes and kitchenware.

Buy products from China, but not only

It is interesting looking back over the past 5 years since the Deloitte 2016 report was initially published. The report is largely correct with the rise of other manufacturing hubs in different countries. Certainly, this trend has certainly been accelerated by geo-political and natural events. That said, it remains true that China is still an important part of the global sourcing arena, and will continue to be so. Scale and population size (albeit an aging demographic) still count and provide a significant advantage when compared with smaller markets.

Whilst Malaysia, India, Thailand, Indonesia, and Vietnam are the most popular, finding the country to source from comes down to your unique business needs. We have offices in a number of Asian manufacturing hubs. Moreover, we are continually looking to identify the best sourcing markets for our clients. We have recently opened an office in Turkey to offer new suppliers to our clients mainly in Europe.

At ET2C, we are constantly looking for the best suppliers for our clients both within China and beyond. For all enquiries, please contact us at contact@et2cint.com.

Buy Products from China? 5 Alternative Sourcing Markets to Consider Read More »

China Manufacturing: Any alternatives?

Industry Insights / / , , ,

China Manufacturing alternatives

 

China manufacturing is obviously the first option that comes to one’s mind when considering outsourcing any production. It’s scale, breadth of products and supplier network are unrivalled the world over.
Clearly, decreasing product cost is the main driver for any decision in favour of outsourcing.
However, outsourcing can bring many other benefits to your business, like for example increasing the flexibility of your supply chain.

In our previous article, we already listed the main advantages of outsourcing manufacturing:

  • Costs reductions
  • Raw material
  • Flexibility
  • Quality
  • Expertise.

Certainly, it is more affordable to outsource production processes to companies that have a comparative advantage in that area than to produce them internally and China is not the only option available.
In this article, we will be providing you with an overview on the main manufacturing jurisdictions in Asia.

China

Although China’s manufacturing base has had challenges over the past five years (notwithstanding the current impact of the Coronavirus outbreak), it continues to be the manufacturer to the world. There is no doubt that there is work to do though to retain a competitive advantage and with the Chinese Government’s implementation of “Made in China 2025”, and investment in smart manufacturing and technology, there is a promise of further efficiencies being driven through their factory gates.
How can we help?
As your China sourcing agent, we will help maximize your company’s sourcing potential in China’s complex manufacturing base. Contact us at shanghai@et2cint.com to know more.

Vietnam

Vietnam is one of the most dynamic and fastest-growing emerging markets and represents a valid alternative to China sourcing. First, the country is currently propelled by buoyant export demand and supported by strong foreign direct investment. In addition, the manufacturing sector benefits from a strong work ethic of the Vietnamese and their commitment to quality.

Vietnam China Manufacturing

Vietnam actually wants to remain competitive, with low labor rates, while bringing a greater quality for economic transformation. The young and skilled workforce is highly literate, willing to learn and trainable.

Advantages of sourcing from Vietnam

The country continues to attract business from US buyers due to the current tariffs imposed on Chinese products. Clearly, companies are also looking to de-risk and look to spread their supplier base across multiple jurisdictions.
Also, Vietnam has the largest investment in infrastructure in South East Asia, including in both private and public sectors. With nearly a billion US dollars being spent on new infrastructure projects, Vietnam is serious about increasing the speed and efficiency of its economy.

Vietnam China Manufacturing

The biggest industries in Vietnam

Electronics, machinery, and steel are some of the biggest industries in Vietnam.
In terms of quality and high value in production, we must mention:

  • Furniture. With an export value of USD 8.66 billion and 1,500+ medium to large furniture manufacturers, Vietnam is one of the most important outdoor and indoor furniture manufacturing countries in the world.
  • Garden product. This is a growth manufacturing sector in Vietnam, due to the available raw material and skill set within the workforce.
  • Garment. This sector has been developing strongly and plays an increasingly important role in economic growth of the country. Vietnam is the third-largest garment exporter, with major exporting destinations including the United States, EU, Japan, and South Korea.

Is sourcing from Vietnam the best option?

Vietnam is a growing economy but suffers from an inadequate infrastructure in banking, communications and transport.
However, while China has slightly lost its competitive edge over the past couple of years, mainly due to the increased labour cost and lack of investment, manufacturing in Vietnam still offers the flexibility of low volume, high mix production and competitive overall cost level.
If you think that Vietnam might be the right Sourcing solution for you, contact our team now: vietnam@et2cint.com.

India

India has a large and growing workforce, as well as access to raw materials. With a newly elected pro-business and pro-manufacturing government, the country is entering a new era of skilled manufacturing and production. Investment in smart manufacturing is coming to the fore and should create greater production efficiencies in the future.
For these reasons, an increasing number of companies are exploring alternative markets such as India to diversify their business and minimize risks.

Benefits of Sourcing from India

First of all, a wide range of raw materials are readily available within India including cotton, silk, jute, marble, metal, wood, bamboo and others. The country traditionally focused on producing unique and handcrafted products not found in other countries.
In general, Indian suppliers have more respect for their buyers’ IP than suppliers from other countries and there are more robust laws in place to implement such protection.

India Graffiti

India’s top industries

India’s top exported categories overall are raw materials and industrial products. Other goods that you can import from India include handcrafted items made of various materials such as metal, ceramic, wood and textiles; apparel and fabrics; fashion accessories; leather products; and eco-friendly products.
Are you looking for Indian suppliers? As your India sourcing agent, we will guide you through the complexities of the Indian market and identify product opportunities. Contact us at india@et2cint.com and let us help!

Summary

China is still an important part of the global sourcing arena, and will continue to be so. Scale and population size (albeit an aging demographic) still count and provide a significant advantage when compared with smaller markets. For example, Vietnam by comparison is only 90 Million people in total against China’s 1.6 Billion population. The annual GDP output of Guangzhou City, in Guangdong province, is more than the whole of Vietnam in 2019.
Certain industries have become more global and the garment sector is a good example of this. New territories often bring with them new challenges. At ET2C, we are constantly looking for the best suppliers for our clients both within China and beyond. For all enquiries, please contact us at contact@et2cint.com

China Manufacturing: Any alternatives? Read More »

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

Company News / / , ,

novel coronavirus

 

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 »

Choosing Between Air and Sea Shipping from China

Industry Insights / / , ,

Air Sea Shipping China

 

The invention of containerisation has been a game-changer for international trade feeding the beast of Consumerism this past century. Originating in the British coal mining industry of the late 18th Century to address the necessity to break bulk, which was a fairly time consuming and inefficient process, the first container system was implemented in Poland in 1919 by the engineer, Stanisław Rodowicz.

Containers are now commonplace and integral to the movement of goods and commodities across the world’s oceans. One of the main considerations when sourcing from China (or any other Asian country) is how to ship your products in the most cost-effective and efficient way. In this piece, we will be reviewing the implications of how to ship your goods.

 

How to Measure Costs

 

Sea Shipping

Clearly, shipping by ocean freight is the first option that companies consider when moving goods from Asian to their markets. In fact, ocean freight is approximately 90% of all outbound shipping ex China, primarily due to the cost-effectiveness.

Sea shipping container sourcing ship

When factoring the most financially astute options, consider that the expense should also factor in timing and local charges. And obviously also quantity, weight and volume (CBM).

There are three types of container for ocean freight:

  • 20 foot (ft) container (approx 28CBM)
  • 40 foot (approx (62 CBM)
  • 40 ft HQ (65 CBM)

Freight on Board

It is really important to understand at the outset for any production, or order placed, on an FOB basis (Freight on Board) what the CBM will be and the implications of how you plan to ship the goods. First thing, avoid shipping ‘air’/empty space, as this will directly impact the unit cost of your products. Also, from a transit perspective, it can lead to damaged goods in certain instances. For example, the goods could move within the container on rough seas. For this reason, the factory should make sure that they load the container effectively to minimise any movement of packaging. Clearly, this is something a sourcing partner on the ground can assist with.

In case the order doesn’t feel a container to the full, you have a couple of choices. You can:

  • Ship by LCL (less container load)
  • Consolidate with other shipments
  • Ship by Air (if time is short).

The best option would be to consolidate other production runs, which will require assistance from your freight forwarding company. Although there will be additional local charges incurred by the factories, which you will need to likely manage and additional costs on your invoice from the freight forwarder, this would likely be the most cost-effective option. The LCL option would mean your goods being palletised and added to another container. More touchpoints and waiting for other goods to be added will lead to higher per-unit costs and longer lead times in getting the goods from their country of origin to your warehouse.

Air Shipping

Air shipment is the most expensive method of transport. However, it enables goods to arrive within a much shorter time into your warehouse. Calculated on the higher of CBM (volume) and weight, it can be advantageous for smaller products. In fact, in this case the per unit cost will not be prohibitively higher relative to ocean freight costs. This is particularly true with higher-margin products that are better placed to absorb the airfreight costs.

Air China cargo shipping

Current Considerations

This is all in an age of Consumerism that is driving changing patterns in how companies purchase their products. Companies are mostly looking to benefit from more frequent orders but lower volumes to minimise working capital tied up with factories whilst leveraging the greater flexibility that smaller production runs present, particularly relevant within the fashion sector. Working closely with your freight forwarder and your local sourcing partners is therefore increasingly important to ensure that you are shipping your goods in the most efficient way.

New Sulphur Regulations: IMO 2020

It is also worth mentioning that cost structures for container shipping will be changing in 2020 (if you have not already had uplifts). This is due to the new Sulphur regulations that come into force in 2020. This is certainly a win for the environment and requires significant investment by the carriers across their fleets. The approximate cost of a 20ft from China to the United Kingdom (at the time of writing is) is $700 and a 40ft is just under $1,000, plus additional surcharges.

Export Import FOB sourcing

Risk Management

Whatever mode of freight you are considering when it comes to shipping goods from China or more broadly Asia, make sure that you have the necessary insurance (Goods-in-Transit insurance) to protect against any damage or loss. Containers, as robust as they are, are loaded onto carriers and pass through thousands of miles of open ocean. During these journeys, there will be knocks, rough seas and in some instances lost containers. In fact, hundreds of containers are lost every year at sea, which is now also presenting an environmental issue as highlighted by the first of its kind ‘Shipping containers at sea, an unacknowledged drift report’.

Also, liaise with your freight forwarding company and any local sourcing partner when it comes to a certain type of product. For example, when shipping wooden products from humid climates to colder temperatures. In this case, make sure they have the relevant anti-humidity or anti-mould safeguards in place. A container should be sealed and the seal number past to you as the consignee for checking on arrival. It should be untampered on arrival and should there be any evidence of tampering. Then you need to make sure that the Freight Forwarder is made aware before the container is opened.

Summary

There are numerous factors to consider when it comes to shipping goods from China and other Asian countries. A good supplier will assist and guide you when it comes to CBMs, container loading, etc. Whether you are thinking of sea shipping from China or air freight, make sure you are leveraging the advice of your Freight forwarder or your local sourcing partner who are best placed to help you. At ET2C, we have our own experienced logistics department to help our clients with all their shipping needs, liaising directly with your freight forwarder at origin to ensure that not only the containers are correctly loaded and sealed but to make certain that the shipping documentation meets all your needs to import from Asia. For more, please contact us at contact@et2cint.com.

Choosing Between Air and Sea Shipping from China Read More »

How are trade tensions changing China sourcing trends

Industry Insights / / , ,

China Sourcing trade war tariffs

 

Where once the mosaic patchworks of paddy fields and sugar crops dominated the landscape of Central Java, now sit a swathe of vast garment factories which produce apparel for leading retailers and brands. Similarly, 4,970 miles to the West, across the Indian ocean, rising out of the flat and baron plains of Ethiopia are large industrial parks (Special Economic Zones) likewise pumping out thousands of garments for international companies. These emerging industries are gaining ground on China, so long the factory of the world, and taking market share.

Of course, there has been the natural progression of China’s manufacturing sector up the value chain. This has allowed wage and margin growth but has increasingly forced the lower value add end of the manufacturing spectrum (particularly soft goods, and ‘cut & sew’) to look beyond China’s sprawling boundaries. However, there have been some sourcing trends in 2019 that have further exacerbated this movement out of China. In this context,  what are the current China sourcing trends and how will China fit into any sourcing strategy going into 2020?

Sourcing Trends in 2019

‘Uncertainty’ and ‘Consumerism’ are broadly the two main drivers of these trends. However, with more choice of where products can be manufactured, there has been a trend to ‘de-risk China’. In essence, not put ‘all your eggs in one basket’ and with the Chinese economy slowing down it makes sense where possible to have alternate locations to manufacture your products (albeit this may bring additional challenges in some cases).

Uncertainty

Clearly, the highlight of this past year has been the US/China trade war. The unpredictability of the discussions and the imposition of punitive tariffs has led to US companies scrambling for alternate supplier-hubs. China is out as far as Trump is concerned in his high stakes game of poker with his Chinese counterpart. Undoubtedly, there have been Chinese moves on currency and slack on price with incumbent Chinese suppliers to mitigate the impact. But other markets around South East Asia have certainly been willing beneficiaries of American dollars. Conversely, should a deal be done later on this year as is anticipated (in some guise), expect this trend to at least slow down rather than stop altogether.

Uncertainty sourcing trends

There has also been uncertainty in most retail markets as the threat of recession has led Buyers to lower volumes but work through quicker reordering cycles. This has been further compounded in the UK with the quagmire of ‘Brexit’.

Consumerism

We have previously discussed at length the impact that the new generation of consumers is already having on incumbent supply chains. One of the main consequences has been the need for more agile and flexible production. Therefore, having an ability to manufacture products closer to your local market (“Near Sourcing”) has been one solution to address this need, particularly when complemented with larger volumes from Asia.

Customisation and personalisation have been sourcing trends in 2019 that continue to enhance the level of engagement with customers. Whether it be a mix of colours, some embroidery or a label, the capability to in some way personalise the product to an individual or business provides a unique proposition. Suppliers are therefore needing to invest in technology and stock planning to make this a possibility.

Consumerism Shopping

Lastly, and one trend that has been increasingly prevalent this past year, is the need for sustainability. There’s a growing movement of Brands across the retail spectrum looking for sustainable stories around their suppliers, products and packaging. There may be varying degrees of engagement with this piece depending on the ultimate consumer and their needs. But there is little doubt that it is changing the sourcing landscape for the better with the imposition of high ethical standards on many factory sites and also driving innovation through the products and packaging to meet company and consumer expectations.

Where Does China Fit in Then?

Yes, the outsource manufacturing sector is in a state of flux. China has certainly lost its almost complete dominance in manufacturing that it wielded some 15 years ago. Wage inflation and currency appreciation have reduced its competitive edge. But taking a step back and looking at the facts paints a slightly different picture.

Clothing and footwear

To take clothing and footwear – the industries most impacted by domestic cost increases – over the past five years, China has only lost 6.6% of the relative share of global exports. The main beneficiary has been Vietnam at 5.1% growth, followed by Bangladesh at 0.9% growth. China still makes 57.5% of global shoe production and the US makes over 80% of its shoes (even with the tariffs already in place) in China’s factories. There is a trend away from China. However, capacity and scale cannot be ignored or replicated that easily.

Furniture and household

Away from soft goods, another example is furniture and household fixtures. In fact in these sectors, China has gained 1.6% relative market share of global exports over the past 5 years. It still sits in a strong position even when you include alternate markets that can compete but perhaps do not have the capacity currently to take a significant share of exports. In addition, manufacturing wage gains in the lower-cost countries (albeit from a lower base). One just has to look at some of the protests in countries like Cambodia and Bangladesh around minimum wage demands.

Automation

Lastly, China is automating its manufacturing base and the rest of Asia is slow to follow. That does not mean there are not some excellent new factories being across South East Asia that have state of the art machines in situ and are well placed to address ethical standards. The difference with China the Government drives in part this investment in the lead up to ‘Made in China 2025’.

As a global producer, China will maintain its relevance for the foreseeable future.

China Sourcing Trends – Our Key Takeaways

There is no doubt that the sourcing trends in 2019 have eroded China’s dominance as the factory of the world. But, China’s current size and breadth of capability still present a significant advantage of some of its smaller neighbours. Some of the key points are:

  • A China + 1 sourcing strategy (invariably Vietnam) is still a compelling sourcing strategy
  • Other market opportunities will be dependent on product category, company and sales market
  • Look for China to ramp up investment in smart manufacturing
  • Partner with suppliers over the medium term to allow them to invest in delivering value
  • Flexibility & Agility will be key to identifying opportunities in new markets
  • US/China tariffs to likely drop off by end of the year

At ET2C, we look to partner with our clients to deliver sourcing solutions that work for them. With offices across Asia, we are well placed to help you identify the right suppliers and deliver value through to your bottom line. For more enquiries, please contact us on contact@et2cint.com.

How are trade tensions changing China sourcing trends Read More »

5 Key Benchmarks for Your China Sourcing Agent

Industry Insights / / , ,

5 Key Benchmarks for Your China Sourcing Agent

Evaluating the Effectiveness of Sourcing Agents:

Properly vetting a sourcing agent in China can make or break your supply chain. Identifying a sourcing company with the right connections and a track record for success prevents costly delays and communication pitfalls. While it does cost money to hire a guide, a local perspective minimizes the likelihood of chasing dead ends.

Navigating Supply Chains
Sourcing agents in China operate as navigators for unfamiliar markets.

1. Integrity & Accountability

When it comes to finding the right partner for your company, there is no better option than an organization that has a track record of integrity and accountability. Trust and an ability to develop a long-lasting relationship with a sourcing agent will be integral to the effectiveness of the partnership. This gains particularly importance given the region that you will be operating in.

Whether it is supplier selection or management, product development, quality assurance or price negotiation, you want to be sure that your sourcing is agent is doing the work on the ground that will deliver an upside to your gross margins.

2. Quality Control

One primary concern when sourcing from China is the idea that quality will fall below acceptable parameters. There are factories which will cut corners and deliver products that do not meet expectations. Sourcing from a country halfway around the world creates a wide potential margin of error. Without measured quality-control checks throughout every step of the process, unsatisfactory materials become sub-par products.

While bad business deals do exist, strategic sourcing companies help you to navigate through unreliable sources to find high-quality suppliers and manufacturers. With a sourcing agent in China guiding you to certified suppliers, well-tested with a quality track-record, you can side-step the costly mistake of buying materials you cannot use.

By providing third-party quality control checks at every step of the process, your China sourcing agent should be able to provide an audit-level review of production meeting or exceeding standards. Early correction reduces transportation fees and emissions by preventing unsalable products from ever being shipped.

It is important to make sure that your sourcing company understands the certifications and standards required in the manufacturing of your product to ensure that they are capable of translating your needs to their suppliers and other contacts.

3. Risk Mitigation

No matter how many safeguards you put in place, there is always a risk that things will go wrong. But how wrong depends on the measures you take to prevent small hiccups from swelling into pricey delays. Having a dedicated team of sourcing agents on the ground can be one of the most effective tools for curbing potential error.

China Sourcing Agent warehouse logistics
From correcting a misfiled document to finding a missing shipment, sourcing agents are problem-solvers.

With sourcing agents working in the same time zone as manufacturing, communication with suppliers and manufacturers flows without interruption. At the first sign of unexpected issues, sourcing agents work swiftly to correct anything that needs to be done, from filing amended documentation to mitigating disruptions in the supply chain.

Instead of waking up to an urgent request sent while you were sleeping, you can rest soundly knowing that a qualified team is working to absorb the effects of missteps as they occur.

Business relies on taking not only risks, but well-calculated risks.When evaluating a company’s ability to mitigate risk, it is important to consider what services they offer. Companies with procurement and supply chain management services are more likely to be capable of responding with strategic solutions to issues beyond sourcing alone.

4. Network Strength

The best sourcing companies dedicate years to building up solid relationships with local suppliers and manufacturers, consistently vetting their powerful network of trustworthy partners to ensure that they are certified and capable of fulfilling quality orders.

China Sourcing Agent strategy
With the right supply contacts, your company can maximize its sourcing efficiency.

Relationships take time to develop, but tapping into the carefully cultivated pool of suppliers shortens the distance between both parties. Just as an introduction from a trusted friend can elevate a conversation with someone new beyond small talk, sourcing companies take the tedious scrutiny out of meeting new suppliers.

5. Transparency

Gone are the days in which Sourcing Agents did not disclose the source of the products. Visibility is a must across the supply chain and sourcing agents should be walking you through as much detail as your business needs. For example, Sourcing companies should understand the value of knowing where materials originate, how workers are treated, and frequent updates relating to scheduling. Not only does such information make your supply chain transparent and allow constant supervision, but compiled documentation is easy to track for auditing purposes.

Before employing a sourcing agent in China, it is always a good idea to research which certifications and standards they uphold. Increasingly, from an ethical standpoint, having a granular understanding of where your products are made is essential. You should look for sourcing agents that do not just understand this but also preach this. In such a vast market, there will always be contacts that, in addition to assuring quality, operate in line with your company’s values. You should also get some current client references from similar markets to your own.

Your China Sourcing Agent Should:

  • Have a track record of integrity and accountability
  • Assure Certifiable Quality
  • Deal with Unexpected Issues
  • Work with a breadth of Suppliers
  • Exercise Transparency across Production
  • Understand your sourcing strategy and drivers
  • Identify any issues early and present solutions

Where to Find Your Sourcing Agent

While it is possible to find independent agents through online searches or trade shows, working with a sourcing company should present a competitive advantage. They will provide the ability to scale your production in a low risk environment whilst breaking down the barriers of managing suppliers directly (culture, language, time zone, market knowledge, product knowledge, etc).

As opposed to a multiple contacts across a range of suppliers, sourcing companies should provide a single point of reference that utilizes their own internal resources to provide you with cover for a competitive price. For more information about how to select the best sourcing company for your business, check out our last article here.

Here at ET2C, we understand the importance of these elements because we practice them every day.

We can be your next China sourcing agent, working tirelessly to manage and enhance supply chains, mitigate risks, and drive efficiencies. With more than 2000 supplier contacts across China, Vietnam and India, ET2C is always looking to identify the best partner for your sourcing needs. Whether you would like to know about anything from reviewing sourcing certifications to introducing full-scale Supply Chain Management, contact us for all your strategic sourcing needs.

5 Key Benchmarks for Your China Sourcing Agent Read More »

The United States – China Trade War

Industry Insights / / , , , ,

usa china tradewar

 

Like with Brexit, uncertainty is on the rise as negotiations continue with no finite deadline. As the two largest economies in the world, the United States (US) and China trade war have put large amounts of pressure on the global economy. The tit-for-tat tariff battle has cost both economies billions of dollars, disrupted supply chains and rattled financial markets. In February, President Trump, for the second time, delayed his plans to increase tariffs on Chinese goods to 25 percent from the current 10 percent citing the amount of progress achieved in discussions. As both countries continue with discussions, the world waits in anticipation.

What is Next?

US Treasury Secretary Steven Mnuchin told reporters within the last couple of weeks that talks are progressing well, but there is still much work to be done. He stated that the current agreement would go “way beyond” previous efforts to open China’s markets to US companies and hoped that the two sides were “close to the final round” of negotiations. While no details of the deal have been disclosed, Washington is seeking changes to China’s economic and trade policies, particularly around their IP practices, while China wants more access to US markets, specifically finance. The big question everyone is asking: will there be deal and what will happen next?

Experts seem to agree on one point; a deal does not mean this trade dispute is over. Even if there is a “comprehensive” deal, it likely only marks the beginning of such negotiations between the two nations. The broad headline terms appear to have been determined based on media reporting. These include a mutual tariff rollback and softer US stance towards China. In return, China will no doubt have to commit to broad purchase commitments for goods and services. The inevitable sticking point is reported as being the framework on protecting foreign intellectual property rights. Negotiators are still grappling over its terms and how they will be enforced.

Alternatively, if neither side can compromise (and both sides politically likely need a deal) and a deal falls off the table, then there is a risk of further tariff increases which will have a significant impact on goods from China to the US as well as any reciprocal tariffs raised by China on US exports. Whether or not Trump will choose to enforce his tariff increase is yet to be seen – it has to be a last resort – but it is clear that the US will continue to hold the threat of tariffs over Beijing to ensure its commitment to the final deal.

 

usa china tradewar
Completion of a trade deal is likely only the beginning of further negotiation between the two countries.

Is Vietnam the Winner?

Inevitably, there has been debate as to which Country is likely the beneficiary for US Buyers to reallocate their dollars. Vietnam appears to have been mentioned the most times given how its manufacturing sector has developed over the past five years and has actually taken relative market share away from China; more so than any other Asian nation. However, there is still a lack of evidence to directly support this claim. The country, along with Southeast Asia as a whole, was expected to benefit from the lack of a resolution. One commentator told CNBC earlier in the year that it was still a bit early for Vietnam to be benefiting in any significant way from the trade disputes. Some reports have indicated companies have begun shifting production from China to avoid tariffs; however, others say this is just a continuation of the ongoing trend towards diversifying production outside of China.

From our perspective, although there are certainly opportunities to leverage what is an evolving export manufacturing sector, the ‘elephant in the room’ is likely going to be capacity in the short term. It takes time to develop. At Factory level, the commercials need to make sense before the investment is made available and that needs to be more than simply the imposition of temporary tariffs. There needs to be a structural shift.

To provide some insight, we recently visited a furniture factory in Vietnam who had just met with a large US retailer looking to relocate some production out of China. Although the meeting was positive and there was a clear commercial opportunity, the factory owner, when asking about volumes, realized that one SKU for this retailer would be 110% of their annual capacity. Compared with China, capacity in some of the other Asian markets is an issue in the short term.

 

vietnam FDI tariff tradewar
Recent figures on Vietnam’s FDI show accelerated growth in the recent year, source from Trading Economics.

 

Diversification of Sourcing Location

There is no doubt that US Corporations manufacturing products in China, if not producing in alternative markets already, are looking for alternative locations.

According to a recent survey by the Swiss Investment bank, UBS thirty-seven percent of respondents had moved some production out of mainland China in the past year. Another thirty-three percent noted they plan to move some production within the next six to 12 months. A part of this was driven by the imposition of tariffs and the need for diversification whilst the import duties were in place.

The location of alternative manufacturers will be dependent largely on the products and the complexity of the supply chains to be able to make those products. This will include raw material availability, infrastructure, regulatory and compliance requirements, labor force and capacity to name a few points that must be addressed.

 

usa tariff response tradewar
Overview by UBS on US’ companies considerations and actions towards tariff response

 

What to Consider Before Leaving China?

The US-China trade war has added new energy to shifting production out of China. Whether companies are moving due to the trade war and or are looking to diversify their sourcing locations there are many factors to consider:

  • Feasibility and risk of shifting out of China
  • Costs of moving existing supply chain
  • Ease of doing business in a new location
  • External expertise to help mitigate disruptions

 

Summary

The outcome of the trade war is yet to be determined. The current information from both sides appears to be at least framed in a positive light but there is no certainty as to what the conclusion will be. Many commentators are suggesting that both sides need a deal although the one thing that is certain is the US administration can be unpredictable.

At ET2C we are dedicated to building close relationships with our clients and ensuring we are not only informed but well versed in sourcing trends. We are currently working with our US clients to assess and look at alternative markets within Asia for their production. We offer multi-industry sourcing, procurement, and quality control solutions that help our clients get the most out of their Asian manufacturing base. Contact us for a discussion about your current supply chain.

The United States – China Trade War Read More »

Sustainability in Manufacturing: Made in China 2025 and the BRI

Industry Insights / / , , ,

sustainability in manufacturing

 

Sustainable manufacturing is becoming one of the key criteria for consumers when deciding what product to use. The process of sustainable manufacturing includes the creation of products through economically sound practices that limit the negative impacts on the environment. Consumer opinions, regulatory policies, and changing environmental conditions are all factors that have led to the emergence of sustainable manufacturing as a popular, profitable, and viable option for manufacturers that are seeking to capitalize on the green economy, minimize their impact on the environment, and reduce their consumption of energy and resources.

 

Made in China 2025 and Sustainability

Chinese manufacturers find themselves in a transitional period. The country is no longer the best location for cheap, low cost manufacturing, but it has not fully evolved into a high-tech, developed industrial economy. China is making great developments in its industry with new additions of automation and robotics in the factories, but there is still a lot of ground to cover. China is feeling pressures from both more developed industrial bases as well as more labour intensive export manufacturing regions. In order to overcome these challenges, China has launched the Made in China 2025 initiative to bring the Chinese economy to the cutting edge and make a high-tech, sustainable manufacturing base.

In the process of developing their manufacturing into a high-tech, automated industry, China is also investing in the creation of sustainable manufacturing. By relying on and using AI, and the digital economy, China is transitioning their manufacturing base to a modern, developed economy. This also reduces the use of heavy industry and relies more on mass customization consumption and makes use of Industry 4.0 practices, thus making this method of manufacturing more sustainable.

This reduces the use of heavy industry and relies more on mass customization consumption, hence increasing overall market sustainability.

Can the Digital Economy Keep the Belt and Road Initiative Sustainable?

One of the key areas where China is experiencing conflict between development and sustainability is with the “Belt and Road” initiative (BRI). Globally, the BRI has received criticism and has been questioned about its sustainability and the long-term impact that it will have on the environment. However, in 2017, President Xi Jinping addressed some of these concerns by announcing that cutting-edge technologies and business practices from the 4th Industrial Revolution are being brought to the BRI.

President Xi Jinping said, “We should pursue innovation-driven development and intensify cooperation in frontier areas such as digital economy, artificial intelligence, nanotechnology and quantum computing, and advance the development of big data, cloud computing and smart cities so as to turn them into a digital silk road of the 21st century.” The “Digital Silk Road” could bring new green technologies and sustainable manufacturing practices to emerging markets. This would help lay the ground work for the development of a more sustainable, and environmentally-conscious global market in the future.

The BRI/Digital Silk Road and the Made in China 2025 initiatives are efforts working towards creating a sustainable digital economy that can bring new opportunities to small and medium global actors, incorporate new markets into the global economy, develop high-tech manufacturing bases, and employ sustainable economic practices.

 

Green Manufacturing in China

Green manufacturing is a key development and a central trend in China’s transitioning manufacturing sector. Moving forward with the Made in China 2025 initiative and the BRI, along with the global environmental and economic forces, manufacturing in China will make a significant shift to become a potential leader in green manufacturing and sustainable industry.

The 4th Industrial Revolution, Made in China 2025, and sustainable manufacturing all pair well together. The digital aspects of the 4th Industrial Revolution and the automation of manufacturing in Made in China 2025 can reduce the waste, energy consumption, and environmental cost of production. Xin Guobin, vice-minister of the Ministry of Industry and Information Technology said that “Green Manufacturing Association of China will also explore a new development mode by connecting green manufacturing and the internet and establish a green manufacturing system and ecosystem for the country’s green and sustainable development.” By using the Internet of Things and modern software to connect the manufacturing process at all stages waste can be cut down and the production process will be more sustainable in the long term.

sustainability in manufacturing
Quote from Xin Guobin, vice-minister of the Ministry of Industry and Information Technology

Sustainable manufacturing is not only a trend in China, but also globally. For example, there has been an emergence of innovative sustainable manufacturers outside of China in countries like Vietnam and Indonesia (industries such as apparel). In order to remain competitive within the global economy, China needs to continue this evolution to maintain its value proposition to Global retailers and Brands. The initiatives set out by the Government only go to build on the environmental inspections carried out in 2017 and also accelerate investment in sustainability on a broader scale. China therefore has one of the fastest growing sustainable manufacturing sectors and it is a great location for foreign businesses seeking to outsource their production to ethical and sustainable manufacturers.

Sustainability in Manufacturing: Made in China 2025 and the BRI Read More »

The Middle Path: How India is Capturing the Eyes of the World

Industry Insights / / , , , ,

india is capturing

 

Eyes are glued to TVs and news outlets everywhere. One of the biggest fights of all time is befalling and everyone has a stake in it. Yet, this isn’t a match hosted by the UFC. This is a fight between two of the greatest economies of all time. One can imagine an announcer calling out to the audience as an irate Uncle Sam battles an angry panda, just as so many political cartoons have depicted. However, no gloves with the words “tariffs” or “duties” are being used here. Instead, these two giants are making waves throughout the Global economy with decisions that will impact the livelihoods of billions of people. However, there is one country that both of these super powers are turning to pull them up from the damage of the trade war: India.

 

An Economy that Can Compete

India’s economy has been quietly chugging along while the two superpowers compete. As this is being written, India currently has the World’s fastest growing economy for large nations with a GDP growth of 7.3% that is expected to rise within the next two years, as stated by the World Bank’s official site. As China’s middle class grows and tariffs increase, many business people see India as a ripe place for business. India’s response? Bring it on.
India has already been seen making hefty investments in up-and-coming industries like AI, automation, and robotics. A CNN report focusing in on the development of robotics and AI in India displayed autonomous vehicles in labs and parking lots, complete with ambitious young entrepreneurs enthusiastically declaring their faith in their products’ success as the Indian economy continues to grow.

As India’s economy grows, so have the number of high-tech industrial plants and ports.

It’s not just the investors that are optimistic, however. A Financial Times interview with Anand Mahindra, one of Fortune Magazine’s Top 5 most powerful business people, exhibited the businessman’s enthusiasm for the growing economy and his expectations for India’s future. Mahindra expressed that the “nature of manufacturing has changed… lots more embedded IT tech.” More information technology being produced in India could mean that supply chains within the country will flow more smoothly as this technology finds more uses within the market.

 

The Great Migration of Business

Furthermore, many companies have already started moving to India, adding a feeling of urgency to start investing in the rapidly rising economy. An article in the financial times describes the Chinese Smart TV business, Xiaomi, as one of the companies who have embraced the bourgeoning Indian economy. The company quickly set up a state-of-the art facility in Turapati, which now employs over 850 people and can produce over 100,000 LED TVs a month. The company has also noted their keenness regarding the huge potential buyer population and the rising levels of incomes within India.

india
India finds itself in the perfect position between the two superpowers, China and the US, to become the new international hub of commerce.

The shift to India has so many factors playing into it, but much of it revolves around the country’s open economic environment, which starkly contrasts against the dangers the trade war poses to companies who currently operate in both the US and China. One of the factors motivating the migration of businesses is that it is mostly risk-free. In other words, moving trade from China to India does not mean that connections with China will be lost. An article from the Eurasia Review spoke on how “Chinese President Xi Jinping and Indian Prime Minister Narendra Modi agreed… to explore bilateral and multilateral cooperation in a mutual spirit of candour and cordiality.” Moreover, sources from the Financial Times inform us that the “QingDao declaration” has seen China and India cast away anti-trade policies like protectionism in favor of free trade and cooperation. As relations warm between China and India, more businesses are seeing India as a prospective home for international commerce.

 

Make in India

India has also promoted domestic and international trade with Modi’s “Make in India” campaign. While the movement sets inspiring wide-ranging objectives, some of the smaller policies of the movement set extremely promising and ambitious goals. For an example, the Draft Electronics policy will see India invest to double its cell phone production by 2025. The country already annually produces 500 million cell phones, so an additional 500 million will create a huge demand for factory employees, supply chains, and knowledgeable management. India is moving to make the country an “import-free nation” as well, according to ZeeBusiness, creating a one-stop shop for “facilitation of investments/ businesses, coordination with the state governments, establishment of joint ventures, obtaining speedy approvals and hand-holding companies till the manufacturing unit becomes functional.” India’s open-arms approach to trade, combined with the right government policies, could make India the next international hub for trade.

India’s policy sets out to meet the opportunities provided by the current political-economic situation by setting ambitious goals for international trade.

Final Thoughts

To conclude, there is still much uncertainty with the eventual outcome of this Trade War. The gloves are off and neither side have so far blinked. Some commentators are suggesting that American populism and nationalism continues to be on the rise. Time Magazine’s article “How Trumpism Will Outlast Trump,” speaks on how Trump’s rhetoric has given birth to a new wave of nationalistic intellectuals, who have been working their way into many high-ranking government roles.

Others are pointing to mere politicking around the mid-terms and a helpful bounce in the polls for the Trump administration. The same opinions are pointing to the fact that if tariffs are beyond medium term, then they will only serve to hurt Trump’s electoral base; those that shop at the likes of Walmart and other low cost retailers.

Whoever history sides with, there is every reason for US companies, if they have not already, to be looking at alternative export manufacturing jurisdictions and India displays promise as it proves itself as the center of a new era of international trade. For more information on India, please contact us at india@et2c.com .

The Middle Path: How India is Capturing the Eyes of the World Read More »

What is USMCA and how are Chinese goods directly related?

Industry Insights / / , , , , ,

USMCA

 

Following up on the trade talks between USA, Canada and Mexico to renegotiate what was NAFTA, President Donald Trump recently reported that Canada will be joining the renewed agreement previously reached with Mexico (now called USMCA). This was completed after several trade talks and rounds of negotiation in regards to key chapters of the so-called deal about main issues such as intellectual property, digital commerce, agriculture, and automobiles, among other topics.

 

Tensions begin to calm.. with a deal

Before this, there was some tension and discussion towards what could happen with Canada if they could not meet American demands or fairly negotiate auto-tariffs in particular according to the New York Times. Although the Canadian nation did not refuse to continue bargaining, Prime Minister Justin Trudeau managed to firmly state they could not guarantee they have ceded to all US requests.

Now, according to Morning Star the new deal will mainly impact the automobiles industry. “A new rule stipulates that at least 40-45% of a car must be made by workers earning at least $16 an hour. That’s more than five times the amount Mexican auto sector workers currently earn.” Also, the United States will have access to the Canadian dairy market, which they have struggled for many years.

NAFTA to USMCA
The shift from NAFTA to USMCA will affect significantly the Auto Industry. Now is the time for auto manufacturers and auto part makers to strategize how their organisations can optimise their position within a newly framed North American auto industry.

In addition, all parties involved will have to sign the agreement before the year ends and have expressed they feel comfortable and benefited, especially the US as “both Canada and Mexico are its largest single country export markets”, as stated by Edward Park, investment director at Brooks Macdonald.

 

China’s influence

But where do Chinese goods stand in all of this? As the known commercial war between USA and China around the tariffs that Trump has placed over Chinese merchandise has certainly cause some uncertainty as they are both the most powerful countries in the world, some specialists and economists have pointed we will be able to see further moves until President Xi Jinping visits Trump in upcoming weeks. Others do mention as well that if the American President “gains traction in signing US friendly trade deals it is likely to solidify the harder line that the administration is adopting with China.”

President Trump and Chinese President Xi Jinping are looking more likely to meet late next month at the Group of 20 summit in Buenos Aires to discuss their escalating trade dispute.

Moreover now that Mexican President Peña Nieto is finishing his term and AMLO’s new administration is about to take over the Mexican nation, it is crucial that all advances over the past months finalize for the Americans. Some experts also have mentioned this new government figure of what AMLO represents and is looking for China to increase business and have more influence over Latin America. This is because AMLO’s interests and policies could be alike to some of China’s and may put at risk Trump’s plans.

What is USMCA and how are Chinese goods directly related? Read More »

Get In Touch

Want to know how ET2C can help your business? Get in touch today and we’ll show you how.

Contact Us

Case Studies
Sustainable Packaging
Read More
Virtual Factory Tours
Read More
The Benefits of ET2C's Buying Office Solution
Read More
Third Party Quality Control
Read More
Sourcing Services for a Young Growth Company
Read More
Leveraging Benefits of Asian Sourcing
Read More
View All

Our Thinking

View some of our latest blog posts below.You can see all of our posts by clicking the button below.
The Challenges in Sourcing High-Quality Melamine Tableware: What You Need to Know
Read More
Why South American and Mexican Retailers Should Source Toolboxes and Organizers from Turkey: Key Advantages Over China
Read More
The Growing Global Sourcing Demand for Toolboxes and Organizers: A Multi-Industry Surge
Read More
View All

Providing your business with enhanced sourcing and procurement solutions since 2001.

Explore

Recent News

Signup To Our Newsletter

© All rights reserved ET2C

Scroll to Top