Turkey: A Powerful Export Market for Global Sourcing and Strategic Sourcing plans

Strategic Sourcing plans should consider the opportunities offered by Turkey. As Sourcing and Procurement teams explore opportunities to shorten supply chains, look for alternative suppliers or find new fast growing potential markets to work with Turkey should be part of their thinking.

Many companies are already seeing the positive benefits Turkey can offer them as Turkey’s exports gain pace.  Turkish Export growth has seen three consecutive months of year on year growth. As demand and supply sides build to support deliver to challenges fuelled by

  • Several years of turmoil and global trade impacts
  • Reactions to the ongoing war in Ukraine
  • A wider desire to reduce China exposure in Supply chains
  • Rick and ESG benefits derived from moving some supply chain elements to Turkey

What can Turkey offer Sourcing and Procurement teams ? Why should it be considered as a core part of any Global Sourcing Strategy.

Turkey as a strategic sourcing destination can deliver a range of structural and economic benefits making doing business smooth and seamless.

  1. Geographical location: Turkey’s strategic location makes it a gateway between Europe and Asia, providing easy access to markets in both regions. It also offers access to major shipping routes, making it an ideal hub for international trade. The ability to rapidly visit suppliers without Visa restrictions is extremely valuable to many companies saving time and complex travel arrangements. Making building strong supplier relationships easier.
  2. Competitive pricing: Turkey’s lower labour and manufacturing costs, combined with its highly skilled workforce, make it an attractive option for sourcing products at competitive prices.
  3. High-quality products: Turkey has a long tradition of producing both a diverse range of products of very high-quality. Building on their traditional strengths in Textiles, Timber, Fruit and Spices to include more HI Tech industries

5. Trade agreements: Turkey has trade agreements with many countries, including the European Union, making it easier for buyers to source products and conduct business with Turkish manufacturers.

6. Ease of doing business: Turkey has made significant improvements in its business environment in recent years, including streamlining bureaucracy, reducing regulations, and improving the ease of doing business.

Turkey has a diverse range of exports but some of its biggest exports include:

1. Automotive parts: Turkey is a major producer of automotive parts, with exports worth over $20 billion in 2020. The country is home to several large automotive manufacturers and suppliers, and its high-quality parts are in demand worldwide.

2. Textiles: Turkey is one of the world’s leading textile producers and exporters, with exports worth over $10 billion in 2020. The country is known for its high-quality cotton and textile products, including clothing, fabrics, and home textiles.

3. Machinery: Turkey is a significant exporter of machinery and equipment, with exports worth over $9 billion in 2020. The country produces a range of machinery, including industrial equipment, agricultural machinery, and construction machinery.

4. Chemicals: Turkey is a major producer of chemicals, including petrochemicals, plastics, and pharmaceuticals, with exports worth over $8 billion in 2020. The country’s chemical industry is well-established and highly competitive.

5. Food products: Turkey is a major producer and exporter of food products, including fruits, vegetables, nuts, and processed foods. Exports of food products were worth over $7 billion in 2020.

Turkey’s biggest exports reflect the country’s diverse economy and its strengths in manufacturing, textiles, and agriculture. Alongside their traditional market strengths Turkey is fast building strong positions in several other markets.

1. Defense industry products: Turkey has seen significant growth in its defense industry exports, particularly in the Middle East and North Africa regions. The country’s defense exports have grown by over 20% annually in recent years, with total exports reaching $3.2 billion in 2020.

2. Electrical machinery and equipment: Turkey has seen strong growth in its exports of electrical machinery and equipment, which have grown by over 10% annually in recent years. Total exports in this category were worth $18 billion in 2020.

3. Medical devices: Turkey’s exports of medical devices have grown rapidly in recent years, driven by the country’s strong healthcare industry and growing demand for healthcare products. Exports of medical devices were worth $2.8 billion in 2020.

4. Iron and steel: Turkey is a major producer of iron and steel, and its exports in this category have grown by over 10% annually in recent years. Total exports of iron and steel were worth $14 billion in 2020.

5. Plastics: Turkey’s exports of plastics have also seen strong growth in recent years, driven by demand from Europe and the Middle East. Exports of plastics were worth $5.6 billion in 2020.

ET2C Is a global sourcing company with over twenty years’ experience working with our clients to deliver their Sourcing Strategies. Our offices in seven countries, including Izmir Turkey, ensure you always have a team on the ground to be your bridge to your Offshore suppliers.

Giving you independent feet on the ground and confidence with fast responses, removing time zone and language challenges.

If you would like to explore sourcing opportunities within Turkey or to discuss your future supply chain challenges.

Please contact us at contact@et2cint.com

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Implementing a Strategic Sourcing Plan

Why you need a strong Global Sourcing Strategy for your business ?

Implementing a Strategic Sourcing Plan

5 reasons your business will benefit from a well-developed and executed Global Sourcing Strategy.

As the Canton fair opens for the 133rd time, bringing together business from across the globe. There is no better time to review and reflect on the need for a strong Global Sourcing strategy.As Sourcing and Procurement teams manage enhanced missions and a more elevated seat at the corporate table. Refining and delivering the Sourcing Strategy is even more important for corporate success.

  1. Cost savings: A well-executed strategic sourcing plan can help your company reduce sourcing and procurement costs by identifying opportunities to consolidate suppliers, optimize processes and build in new offshore supply partners.
  2. Improved supplier relationships: By working closely with suppliers to develop long-term partnerships, your company can benefit from improved quality, reduced lead times, and increased supplier responsiveness.
  3. Increased efficiency: Strategic sourcing can help your company streamline procurement processes, improve supply chain visibility, and reduce the time and effort required to manage supplier relationships. Speeding up Innovation, Npd and Packaging changes.
  4. Risk management: More strategic supplier partnerships can help mitigate the risks associated with supply chain disruptions, natural disasters, and other unforeseen events. Working together to jointly build a partnership for growth.
  5. Better alignment with business goals: A strategic sourcing plan can help your company align procurement decisions with broader business objectives, such as sustainability, innovation, and growth. Supporting the delivery of wider corporate ESG commitments.

Overall, a well-designed and executed strategic sourcing plan can help your company reduce costs, improve supplier relationships, increase efficiency, mitigate risk, and align procurement decisions with broader business goals.

Why you need a strong Global Sourcing Strategy for your business ? Read More »

Is Near Shoring still a good option for Sourcing Strategies as Globalised Trade Grows-min

Is Near Shoring still a good option for Sourcing Strategies as Globalised Trade Grows

Is Near Shoring still a good option for Sourcing Strategies as Globalised Trade Grows-min

Near Shoring Challenges as Globalised Trade Continues to Grow

The immediate rush and to change Sourcing Strategies, shorten supply routes and ‘Near Shore” is proving much tougher to achieve than anticipated for Sourcing

After the effects of the Global Pandemic, Ukraine War, US-China Trade conflicts and Inflationary pressures to name a few. There was a lot of talk about the need to shorten supply routes and Near or at least friendly shore sourcing.

The background to the rush to Near or Friendly shoring has been the nearly five years of open economic conflict between the US and China. US-China trade flows hit an all-time record of $690.6 billion in 2022. Connecting the countries by a larger movement of trade than any other Nations (without shared borders).

Suggesting that Globalisation is not showing signs of halting. DHL in their recent report suggest that the US-China trade relationship is beginning to show a “general pattern” of decoupling even as globalization more broadly remains resilient, according to DHL’s global connectedness index.

“International flows have proven remarkably resilient through recent crises, and they strongly rebut the notion that globalization has given way to deglobalization,” according to the report, produced with New York University’s Stern School of Business.

“Today’s threats to globalization, nonetheless, are real and demand serious attention,” it continued. “It would be a mistake to infer from the recent resilience of international flows that globalization cannot go into reverse.” What has been the real world experience of brands and companies looking to Near Shore as part of their Sourcing Strategy ?

US Apparel Companies Can’t See a Future Without China  

Brands are finding few factories outside the country that can produce the quality and quantity they require.

When Lanny Smith founded Actively Black Inc. in 2020, he hired factories in China to produce the brand’s athletic wear. But last year, concerned about production delays caused by China’s Covid lockdowns, Smith explored buying elsewhere. He shipped samples to a supply chain agent who’d assured him there were alternatives in Latin America. “He hit me back the next day and said, ‘You’re not going to find anybody who can do this in the Western Hemisphere,’” says Smith, 38, a former basketball star at the University of Houston.

For many companies buying from China has become more challenging in recent years because of increased tariffs, snarled supply chains, factory shutdowns under Beijing’s Covid Zero policy and rising geopolitical tensions. Factors which have combined to make many Companies and brand owners investigate changing their Sourcing Strategy to be China +1 or to seek to replace China completely. Whilst on the face of it the idea has a lot of merit and upside finding suppliers who can match China for quality and price is not so simple.

Quitting China as a sourcing partner isn’t easy, and most progress has been concentrated in industries such as semiconductors that are considered vital to national security or have high added value. Producers of lower- tech, lower-margin and less added value products such as clothing, shoes, housewares and luggage are finding that few factories outside China have the machinery or the skilled workforce to deliver the quality and specifications required.

Since the 1990s, China has spent hundreds of billions of dollars transforming itself into the world’s premier location for manufacturing. Its factories have the machinery and expertise needed to produce quality products at a volume and pace that’s difficult to match. Along the 80-mile stretch from Shenzhen to Guangzhou, companies can weave, dye, sew, trim, label and package anything from T-shirts to tuxedos. And China’s investment in highways, railroads, air hubs and seaports has created a smooth path from factory gate to consumers worldwide.

Twenty years of Global Trading growth between China and the World is not something that can be dismantled quickly and easily. China’s advantages as a sourcing destination are so great that many companies that have tried to move away have returned at least a portion of their production there. Even moving away from the Chinese mainland cannot guarantee moving away from China. As China has expanded its influence, support for infrastructure and factory investment to other countries such as Ethiopia.

When companies move manufacturing out of China, they often end up working with Chinese- owned suppliers or sourcing components and materials from the country.

Summary

Sourcing strategies are not always quick and easy to implement, the initial idea to relocate manufacturing from China to other Asian or African markets can suggest instant benefits. China’s experience of supplying and shipping products around the World is difficult to replicate. For some markets this may well require more product side compromises to deliver the geographic move.

ET2C Is a global sourcing company with over twenty years’ experience working with our clients to deliver their sourcing strategies. Our offices in seven countries ensure you always have a team on the ground to be your bridge to your Off Shore suppliers.

If you would like to explore Sourcing Strategy options or opportunities within China or in addition to China  or to discuss your future challenges.

Please contact us at contact@et2cint.com

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Challenges for Sourcing Strategies-Global Sourcing 2.0

Global Sourcing 2.0 will define the response of Procurement and Sourcing Teams to another year of volatility. Inflationary pressure continues to build and the business need for Environmental and Supply Chain Risk management gains momentum, creating huge challenges for Sourcing and Procurement Teams.

Procurement and Sourcing Team leaders who had hoped that economic conditions in 2023 would make their jobs easier than last year are already disappointed. As the new year began, the volatility and inflation of the previous year showed no signs of abating

Many of the dimensions of change impacting business in 2023 are likely to still be with us in some form at the outturn of the year. Procurement and Sourcing functions are responding to these wide-ranging challenges in an equally wide range of structural changes and ways of working adaptations. Sourcing teams are facing the New Challenge of Global Sourcing 2.0

Macroeconomic conditions straining procurement

Understandably, the aggregate effect of these challenges has overwhelmed many procurement functions. Procurement can play a critical role in solving today’s most pressing business problems, but it cannot do so on its own. Winning now requires an entirely new level of resilience improvement and value creation built through a coordinated enterprise-wide effort. Global Sourcing in 2023 requires Procurement teams to sit at the heart of business in an expanded mission.

-Protecting against Corporate margin erosion

-Deliver on Environmental and Social Risk in Supply Chain

-Build Resilience against the next Black Swan event

Accordingly, success in protecting margins, containing cost escalation, and dynamically capturing opportunities requires an expanded mission for the procurement function. CEOs should consider positioning their procurement leaders at the center of the company’s response to the current context, tasked with a clear mandate to protect margins. CPOs can then mobilize executives for cross-functional impact and escalate investments in the talent and systems required to achieve and sustain outperformance.

Visibility-Measurement-Action-Reduction

Procurement leaders can combat volatility, inflation, and shortages and build resilience by taking ten core actions. The first critical element required is to gain transparency over the pressures and change drivers in their supply chain. Only be creating true visibility can they start to identify the key decisions required to deliver high level objectives. This will require

support from all functions across the business and external partners to support Procurement in developing a more agile approach.

Wide ranging Risk Assessment of Supplier Network

· Suppliers. What vulnerabilities—including financial, fulfilment, reputational, and environmental—do suppliers face?

· Supply. How are events affecting the end-to-end value chain? Which categories may be hard to secure in the foreseeable future?

· Cost. How are suppliers’ costs of goods sold (COGS) trending? Can we quantify the inflation or deflation they face? What do the results mean for our company’s P&L?

· Environmental. How are Key Suppliers measuring their Environmental impact and taking active measurable and visible steps to reduce as part of wider range of commitments

· Social, How is the Supply network mapped Globally against potential Social risks and are key suppliers.

Building New Skill Sets to Deliver an Expanded Mission for Procurement

As Procurement leaders wrestle with the new challenges of Global Sourcing 2.0 the need for a new range of additional skills becomes a critical need for delivery.

As Sourcing and Procurement teams play a more central role in business delivering their expanded contribution. The need to rapidly build skills will become a critical enabler to deliver their New Mission.

· Delivering a visible assessment of high level risk, across the entire supply chain

· Identifying Environmental impacts, particularly Emissions generated within Supply base

· Minimising impact on Key suppliers at potential risk of audit fatigue

· Building working Partnerships

Global Sourcing 2.0 represents a shift in priority and ways of working. From the old Procurement model of expecting Suppliers to make and supply to a forecast and at the cheapest possible price.

To one where there is a more collaborative approach to Sourcing Strategy based on visible shared data, shared Environmental and Social

commitments and strong partnership for growth. A shared vision of the future that can inform the future requirements.

We have long argued that an approach based on strong partnerships is a more successful Sourcing model than the focus on Cost and make to Forecast.

Summary

As more companies move to re structure the breadth of the Sourcing team mission within companies core competencies and skill sets need to be created, adopted and utilised.

Sourcing teams will need to rapidly build or bring in the skills required to bring full risk and impact visibility to their supply chain.

ET2C are a leading global sourcing company, with over twenty years’ experience supporting our clients to develop and deliver their sourcing strategies. We have seen a big rise in our clients demands for

-Emissions measurement and management

-Risk identification

-Quality and Compliance. Social & ethical Auditing

As many companies move rapidly towards a future defined by Global Sourcing 2.0. Drop us a line to see how we could support you in your challenges

Email us at Contact@et2cint.com.

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Canton Fair: A Tipping Point for Global Sourcing?

The 133rd Canton Fair will open in April as China Factory output accelerates, supporting an upturn in China Sourcing but does demand remain subdued?  

Dogged for months by shortages of raw materials, labour instability, a difficult Covid policy, quickening inflation and weakened consumer demand, the world’s industrial engine is still struggling to fire on all cylinders. For many weeks, anticipation has been running hot that China’s reopening would bring a tangible economic lift across Asia and perhaps the rest of the world. That day seems to have finally arrived, with purchasing managers’ indices — especially from China, but also beyond — showing the first glimpses that the World’s second-largest economy will start to lift orders in other corners of the globe.   

The Canton Fair comes at a time when China is reopening to the West post Covid and notably a combination of raw material price softening and low container rates, put the spotlight back on ‘cost’ for buyers where this is now their sole focus in the short to medium term.  The biennial trade fair is one of the high points of global trade events and is expected to welcome over 25,000 exhibitors and buyers from all over the world.   

Is Demand Picking Up?  

Although there is an expectation that this Canton Fair will be large (Buyers and importers will no doubt be chomping at the bit to get out and see some product rather than at a distance!),  what are the factors that will dictate the appetite to get out on that plane?   

1.Consumer Confidence , as a general trend, has certainly softened across many markets due to inflationary pressures which have hit discretionary spend.  Every market has its own domestic     economics that need to be assessed. There is however data coming out that points to a less bleak outlook than initially expected (UK is not likely to be in a recession in 2023 as initially thought) and    this could lead to a pick-up in confidence going deeper into the year.  

Shipping

rates have dropped to Pre Pandemic levels. A year ago container ships were queuing for births in ports to unload their cargoes, shippers were bumping containers and contract rates  were not worth the paper they were written on. Container rates were at an all-time high and shipping companies took full advantage of the market impact (note the amount of blank shippings to prop up the market).  A year on ships are being moth balled and sailings cancelled as demand has plummeted and spots rates dropped to Pre pandemic levels. The recent conference in the USA  Davos by the Sea brought into clear focus the strained relationships and tensions between shippers and shipping line owners. 

Inflationary cost

pressures on Brands, Retailers, Wholesalers and Importers. Pressure on cost has returned in many companies to counter inflationary pressures forcing prices up in front of the  consumer.  As we lived through the turmoil of the pandemic, the overriding issues for supply chain teams was to get product on shelf. As demand softens and inflationary cost pressures build in  companies the focus for sourcing teams has shifted back to a focus on cost.  Will China be a main beneficiary of this?

The Reopening of China

Has been rapid, and appears to be have weathered any Covid storm (we did not see any interruptions to factories even post CNY).  It is seen as a potential catalyst to energise economies across Asia and the wider world back into growth.  China factory output  has expanded at the fastest pace in more than a decade.  The sudden access to this market could  not come any sooner.

Inventory Levels 

Are still high across some sectors. This is impacting buying decisions as companies look to manage higher stock levels due to large buys in 2021/22 and weaker demand.  It is key that this stock is sold through to set companies up for the remainder of the year.

Summary

The Canton Fair appears to be aligned to the reopening of China, and the expectation has to be that many people are anticipating travelling out to Guangzhou and further afield within China to see suppliers for the first time in 3 years.

The need to drive cost benefit to the bottom line is supported by vastly reduced shipping costs compared with the past 18 months and China is still well placed to off cost advantages.   The Year of the Rabbit may just be as prosperous and lucky as intended!

For more information on the Canton Fair, China and other sourcing markets please drop us a line at contact@et2cint.com.

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Ethiopia-Sourcing Opportunities for Textile and Garment Industry

Textile and Garment Industry Growing Sourcing in Ethiopia

Ethiopia’s sourcing opportunities for companies in the textiles and garments industry have been steadily growing, reaching $171m in exports, but it has taken a major hit from the onset of the pandemic followed by the Tigray civil war in the north. Will it be able to weave its way back to its former glory?

Located in the Horn of Africa, landlocked bordered by five countries and split by the huge Rift Valley. Ethiopia is Africa’s oldest independent country, a founder member of the United Nations and the has the second-largest population (after Nigeria) of over 122m people

Ethiopia is still the fastest growing economy in the region, with 6.3% growth in FY2020/21. Over the past 15 years Ethiopia’s economy has been one of the fastest growing in the World averaging over 9%.

Exports dropped to $140m in the first year of the pandemic alongside the start of fighting in the Tigray region in 2020. However, the biggest blow came from US-imposed sanctions in January 2022. Ending Ethiopia’s preferential market access under the Africa Growth and Opportunity Act (AGOA) has deprived the industry of its biggest client (80% of textile exports). 

Industrialisation and free trade

Few countries in Africa have been bolder and more focused in recent years than Ethiopia. The origins of this orientation towards Industrialisation can be traced to the country’s Agriculture Development-Led Industrialisation (ADLI) strategy, which was developed in the mid-1990s. Its aim was to enable Ethiopia to make initial gains in industrialisation through robust agricultural growth and linkages between the agriculture and industrial sectors.

The Ethiopian government heavily invested in transitioning from an agriculture-based economy to an industrialised one to attract the private sector.

“We initially produced plastic shoes in 1993 but switched to textile in 2008 and expanded to garments in 2012. The plastic industry was saturated, [so] government incentives encouraged investment in horticulture and textile,” Eyob Bekele, Desta Garment’s general manager, tells The Africa Report.

Ethiopia has more than 65 international investment projects under its name. The Ethiopian government has initiated several design incentives to accelerate this sector. It is proving to be a boon for the apparel marketers.

Textile Production in Ethiopia

Ethiopia has a long history of textile production. Nowadays, it is a booming sector for marketers to conduct sourcing activities in Ethiopia. A range of factors contribute to Ethiopias success as a centre for textile production

Various factors made this country a prime apparel sourcing destination. This country has a wide availability of raw materials under its name. This easy access to resources is intriguing modern-day apparel marketers at large.

In the last 6 years, the textile and apparel industry of Ethiopia has shown huge progress. This recent surge in the apparel production made Ethiopia a prime garment exporter to the foreign markets. It is indeed promising for brands, retailers, and suppliers.

Ethiopia is very likely to become a middle-income country by the end of 2025. Delivering on a key objective of the Ethiopian government.

The government of this country is taking every step to make the apparel sector more globally competitive.

The Ethiopian government is addressing the necessary structural reforms to reshape the country’s economy. Their ambition is to create thousands of jobs while attracting foreign currencies at large. The long term goal being to reduce the poverty of the country.

The Growth and Transformation Plan 1 and 2 outline a plan to create 15 export-geared, world-class, and eco-friendly industrial parks. All these parks should have a well-built infrastructure, safety options, and low carbon emissions. Many parks also enjoy Government facilities on site to support Banking, Import and Export licenses and Customs Clearance.

Chinese Investment in Ethiopian Development

China has invested heavily in Ethiopia alongside five other resource-rich countries – Nigeria, South Africa, Kenya, Ghana, and Tanzania.  China supports Ethiopia in playing a greater role in international and regional affairs and stands ready to communicate and cooperate with EthiopiaSupport includes building the Addis Ababa-Djibouti electrified railway, also known as the Ethiopia-Djibouti railway, the first trans-boundary railway on the African continent.

These deep ties have helped develop Ethiopia’s infrastructure to be able to support economic growth and have seen significant investment by Chinese companies. Currently, there are about 400 Chinese construction and manufacturing projects in Ethiopia, valued at over $4 billion. 

  • Abundant workforce

Ethiopian has a large population and skilled workforce who provide a relatively inexpensive labour force

  • Strategic location

Ethiopia’s location on the Gulf of Aden allows fast access to Northern European ports. Reducing potential transit from Asia by over 11,000 Km.

Djibouti to Rotterdam 8,577 km

Shanghai to Rotterdam 19,600 km

  • Infrastructure investment

Ethiopia has invested in road and rail. Particularly the rail link to the neighbouring country Djibouti which provides deep water sea port access to Europe and North America.

  • Duty free access to the European Union & USA

Ethiopia enjoys duty free market access to both the EU and USA under the terms of the African Growth and Opportunity Act (AGOA) EU Africa trade

  • Agricultural development & Access to Raw Material

Ethiopia is a cotton growing Nation with access to large amounts of additional cultivatable land. Climatic conditions are ideal for cotton development and there is good access to Hydro-energy for factories.

Summary

Ethiopia should be a destination on every Sourcing Teams list for review as an apparel or textiles supplier. As a strategically well-placed country, with both a strong agricultural sector, freed trade agreements and good infrastructure links. It should be a country on every

ET2C Is a global sourcing company with over twenty years’ experience working with our clients to deliver their Sourcing Strategies. Our offices in seven countries ensure you always have a team on the ground to be your bridge to your Offshore suppliers.

If you would like to explore sourcing opportunities within Ethiopia or to discuss your future supply chain challenges.

Please contact us at contact@et2cint.com

Ethiopia-Sourcing Opportunities for Textile and Garment Industry Read More »

Malaysia Sourcing: Asia Manufacturing

Malaysia sourcing is a great alternative for any sourcing strategy, but what are the opportunities?

Overview

Malaysia Sourcing is a unique opportunity. Located between two and seven degrees north of the Equator between the Andaman and South China Sea, Malaysia is formed by 13 states. A population of over 33m people live on the islands that are 60% covered by Rain Forest. Its landmass is similar in size to Germany, Norway or Finland.

Economic development:

Malaysia has the third largest economy in South East Asia .Since gaining independence in 1957, Malaysia has successfully diversified its economy from one that was initially agriculture and commodity-based, to one that now plays host to robust manufacturing and service sectors, which have propelled the country to become a leading exporter of electrical appliances, parts, and components.

Openness to trade and investment has been instrumental in employment creation and Malaysian Income Growth, with about 40% of jobs in Malaysia linked to export activities. Malaysia’s economy has been on an upward trajectory, averaging growth of 5.4% since 2010, and is expected to achieve its transition from an upper middle-income economy to a high-income economy by 2024

Key Export Categories for Malaysia

  1. Electrical equipment
  2. Plastics and Plastic products
  3. Medical apparatus
  4. Forestry products
  5. Pepper

Malaysian advantages as a Market for Strategic Sourcing

Malaysia has several factors that make it a country that should not be overlooked in any sourcing strategy. It offers a dynamic and vibrant business environment with a well-developed infrastructure, a productive workforce and supportive pro-business Government policies.

“The focus will have to be on making it easier — ease of doing business,” he said. “That is one of the key opportunities for Malaysia.” Malaysian Trade Minister Tengku Zafrul Aziz

Malaysia has a well-developed infrastructure after investing in Roads, Rail, Ports and Airports to ensure good connectivity. The population has a high level of fluency in English (a legacy of British colonial rule).

The strategically strong position of Malaysia on the Straits of Malacca is on the major trade routes between Europe and China.

Summary

Malaysia has many assets that make it a sourcing country that should be a part of any companies Sourcing Strategy. Whether you are looking to build you first offshore sourcing plans or diversify into a Multi country strategy.

The ease of doing business, high levels of transport connectivity, Pro business government policies and skilled workforce make Malaysia a strong sourcing option.

Malaysia’s economy has been on an upward trajectory, averaging growth of 5.4% since 2010, and is expected to achieve its transition from an upper middle-income economy to a high-income economy by 2024. 

ET2C Is a global sourcing company with over twenty years’ experience working with our clients to deliver their sourcing strategies. Our offices in seven countries ensure you always have a team on the ground to be your bridge to your Off Shore suppliers.

If you would like to explore sourcing opportunities within Malaysia for your sourcing strategy or to discuss your future challenges.

Please contact us at contact@et2cint.com

Malaysia Sourcing: Asia Manufacturing Read More »

COP26: a Focus on Decarbonization & Supply Chains

COP26 a Focus on Decarbonization Supply Chains ET2C Int.

COP26 presented an opportunity for World Leaders, the business community and other stakeholders to come together and agree tangible outputs to attempt to reverse climate change.

Overview

COP26 brought a melee of Politicians, CEOs, UN Ambassadors, Environmentalists and protesters together in the Scottish city of Glasgow to discuss how we can possibly reverse the damage already done to our planet. With an immediate purpose of moving towards carbon neutrality (“net zero”) by the middle of the century, countries were tasked to present ambitious targets for reducing emissions. And this all with the aim of keeping the 1.5 degrees rise in global temperatures within reach. This would only be possible with a broad commitment to accelerate the phase-out of coal burning, dramatically reduce deforestation, speed up the transition into electric vehicles and encourage investment in renewables.

At the outset, amidst a palpable wave of optimism, the pledges and commitments came thick and fast as the event opened with World leaders attending and setting out their aspirations. Even with some noticeable absentees, there did appear to be a road map to making a real difference. But as the curtain came down on the event, there was the inevitable watering-down in the language of some of the agreements leaving some activists pointing to a lack of enforcement or mandatory provisions being included. So after all the talking, what were the wins and losses of COP26?

 

COP26 ET2C Int.
Fig 1. Scorecard, Bloomberg, 13th November

 

There were some clear ‘wins’ albeit not as clear cut as some people would have liked. The rhetoric during the event was heavily laden with the need for ‘now’ and ‘protecting future generations. It will have to be seen if there is now sufficient momentum and financial clout to make a tangible difference to the climate precipice that we all find ourselves on.

COP26 & Supply Chains

Globalisation has led to greater connectivity across the world, which has, in turn, lead to greater movement of people and goods across oceans and through the air. For supply chains, containerization enabled goods to move across oceans with greater ease and subsequently in greater volumes. All this has resulted in a significant carbon footprint. The fact is that 62% of carbon output is related to supply chains. And with 80% of goods being transported across maritime routes on container ships, there is a clear need for the shipping industry to move to carbon neutrality as part of this broader target of a net-zero by the middle of the century.

carbon pollution

As companies involved in sourcing, producing and the movement of products across borders, what does this all mean for our own businesses? There is no one solution and the answer is layered with complexity. Perhaps the simplest solution is to stop doing anything that has a carbon impact, which is not particularly practical and would not have a positive economic input. The challenge is that there is a reliance on the ‘collective.’ A company that is shipping from Asia relies on the carbon output of the factory and, even more relevant, the shipper and various modes of transport to get the goods to and from the Ports. These are not aspects that one can directly control.

The Collective

This though is the point. There needs to be a collective. As COP26 set out to achieve, Governments need to be investing in the technology for clean energy alongside incentives for private investment in renewables that make commercial sense for the future. There needs to be a genuine ‘Green Economy’ that works for all nations.

So, what can we do together to make this happen? Even though these may be small initiatives, the more companies that adopt them, the greater the impact and the more the landscape shifts in the right direction.

1. Product

Where possible, identify products that have a lower carbon footprint in terms of their use and the materials that they are made with.

2. Manufacturing

Think about your suppliers’ own carbon footprint and understand what that carbon output may be so that you can contribute to carbon offset schemes (tree planting etc.).

3. Green Shipping

Look to consolidate containers where you can maximize the space available. Also, engage with your carriers around their plans for ‘clean cargo technology.’ Hydrogen will power container ships of the future, which will have zero carbon output.

ship container cargo logistics sourcing

4. Go Electric

Where possible use electric vehicles within your supply chain, whether that is a provider or your own fleet.

5. Cut Travel

Covid has already halted widespread corporate travel, but as we emerge from this Pandemic it will be important to only travel when necessary. Look at alternative ways of managing overseas suppliers, whether via technology or local partners on the ground.

Summary

The UN general secretary has issued a red alert for Humanity. The need for action is now, and we all have a part to play. As the President of COP26 said in his closing remarks:

“We can now say with credibility that we have kept 1.5 degrees alive. But, its pulse is weak and it will only survive if we keep our promises and translate commitments into rapid action…
From here, we must now move forward together and deliver on the expectations set out in the Glasgow Climate Pact, and close the vast gap which remains. Because as Prime Minister Mia Mottley told us at the start of this conference, for Barbados and other small island states, ‘two degrees is a death sentence.’
It is up to all of us to sustain our lodestar of keeping 1.5 degrees within reach and to continue our efforts to get finance flowing and boost adaptation. After the collective dedication which has delivered the Glasgow Climate Pact, our work here cannot be wasted.” COP26 President, Alok Sharma.

At ET2C, we are looking at how we can reduce our own carbon footprint and are working with customers on a range of solutions. For more information, please contact us at contact@et2cint.com.

COP26: a Focus on Decarbonization & Supply Chains Read More »

Consumer Trends: Consumerism on Trial

Consumer Trends ET2C sourcing procurement

Consumer Trends are always in a state of evolution and no more so during the course of the Pandemic, which has forced through significant behavioural needs.

Evolving consumer trends

Consumer trends continue to evolve but what is the new normal? It has been two years since we have been surfing the waters of the pandemic, so what is now shaping consumer trends? All players have been tested equally and forced to adapt with both losers and winners emerging across different industries. The consumer products industry has largely been amongst the winners. Its growth has been nothing short of exhilarating: evolving, adapting and meeting an ever-growing array of human needs and desires.

product trends sourcing procurement supplier buyers ET2C Int.

How has this happened? Largely due to globalization of supply chains, aggressively developed, across every part of the value chain. Typically, this comes at a cost, increased margins and weighting of portfolios toward fast-growing categories and now, faced also, with the shocks on freight rates within the shipping sector which shakes the very foundation of globalization.

Consumer Trends – Product Sectors

Specifically, consumer product companies are looking to maximize profits in what is an interconnected, extremely competitive environment. Challenges for these organizations include meeting the high demands of customers, manoeuvring through a consolidating market and executing strategies to grow profitably.
Now more than ever, the past serves as no guide to the future. The landscape appears to have permanently shifted and there is no coming back to those pre-pandemic times. This is a period where ‘West meets East’, when Asia is becoming the main consumer market (by 2030, Asia as a consumer market is estimated to be larger than Europe and the US combined!).

The demands on value and innovation are in keen focus, the use of online channels (although we can see a comeback on in-store shopping) and volatility across supply chains have all led to the penetration of social media that has a major influence on consumers’ behaviour.

consumer trends image 1

The consumer products sector is leveraging technologies and in terms of trends it has been majorly led by it, mainly due to shifting demographics. Not only has it helped companies to enhance their service levels but they have completely revamped the customer experience. With a rapidly evolving technology, Consumer Packaged Goods (“CPGs”) have had no option but to ‘hop-in’ to stay afloat and survive. What has this meant for consumers?

Their purchasing behaviour is heavily impacted by it. Users take advantage of the information available to research products and to get inspiration from user-generated content as recommendations based on preferences.

Category Growth

The Pandemic has caused shifts in category demand over the past two years in relation to the impact of Covid-19 on a particular market. For example, the Health & Wellness category had a strong performance during the Pandemic, but has dropped towards the end of the year as people overall feel safer in line with vaccination programs and borders slowly opening. However, trends show that there is more to be done on Health and Wellness and consumers will continue to care about it deeply. Moreover, as economies emerge from their Covid hibernations, an uptick in experiences & entertainment, as well as clothing and fashion, can be expected towards this Holiday season and upcoming 2022.

That said, here top categories for consumer trends are:

1. Electronics and Technologies

Products that effortlessly facilitate day-to-day routines and help people connect will continue to be in demand. As a means to enhance customer experience:
a. Digital reality, enabling interaction and the power to explore, customize and access to details
b. Artificial intelligence allowing innovation and for the consumer to benefit from personalized products, recommendations and service.
c. Connection through ‘the cloud’ across all platforms, smoothly, is all about costumer engagement.
d. Blockchain as source for transparency across all purchasing process.

2. Health and Wellness

This category includes:
a. Here to stay, the COVID-19 products: masks and medical and non-medical items.
b. The “newly” awaken the consciousness of the consumer – where sustainability and environmental consciousness-related items are a ‘must’. In short, a green supply chain all around and a low-to-none carbon footprint.
c. Products that promote a cosy environment and enhance personal wellbeing.

3. Experiences & Entertainment

This category is focused on CPGs that sit within the travel sector, whether holidays or more day to day travelling. They need to focus on convenience, tourism, outdoor and leisure activities. All areas that have suffered most during the Pandemic, and perhaps those that have most to gain should Covid be consigned to the past.

4. Clothing & Accessories

Naturally seasonal, but likely to be up towards the end of the year as markets open up and people are not in lockdowns. Discretionary spending will move more to the Fashion sector as a means of expression that has for the past 20 months largely been unnecessary.

consumer trends image 2

Summary

At ET2C, we are constantly monitoring consumer trends to understand which products are relevant to your business, and how these align with multiple sourcing markets. Whether it be China, Vietnam, India or Turkey, we are on the ground to provide you with the best product offers for your organization. For more on how we can help you, please contact us at contact@et2cint.com.

Consumer Trends: Consumerism on Trial Read More »

Commodities Boom Fuels Prices at the Factory Gates

Commodities Boom Fuels Prices at the Factory Gates ET2C Int.

Commodities have recently surged on the back of the devastation the Pandemic has left in its wake. Supply and demand distortions, combined with replenishment of inventories as economies emerge from their Covid ‘hibernations’, have led to an increase in commodity prices.

Overview

Commodities have pushed the Chinese Producer Price Index (PPI) to a 13 year high in August (the PPI is a measure of the average change in the price of goods sold by manufacturers) rising 9.5% from a year earlier, the National Bureau of Statistics (NBS) recently reported. This is the fastest rate of increase since August 2008. It reflects the impact that raw material prices have at the factory gates, and in a sourcing context, the cost implications for overseas buyers. Even with the current freight rates and their impact on ‘landed cost’, this is a further hammer blow to retailers or wholesalers, who are already struggling to get stock for the Christmas season both physically in-store and at the price points needed.

Commodities & China Sourcing

From Metals, coal to plastics and rubbers, there have been price rises across a broad range of commodities over the past 6 months. In some instances, this has forced factories to restrict price validity when providing quotations. Although, not to the same extent as with PPE back in March/April 2020 when there was hyper-inflation due to the extreme demand.

As we all know, factories generally tend to be very quick to point to the ‘ticker’ or graph showing a commodity price trending upwards when negotiating price points. We probably know even more so that the same is not true when commodities start to drop in value, when the factory will point to stock in the warehouse they need to use first.

ET2C Int. Graph 1 commodities
Aluminium Bar (China) Price Trend

 

The fact is that China still counts for over half of the international demand for commodities. It is a behemoth when it comes to consumption and its role in the global commodity market is simply too large and significant to be overlooked. Although the export sector is only one relatively small part of this demand (for example other parts include domestic manufacturing, the construction sector etc.) it gives manufacturers an availability of raw material across a broad spectrum of different products. It is one aspect of the country’s manufacturing DNA that is often overlooked but it is significant relative to other sourcing markets (even with China’s recent Environmental targets impacting certain material production).

One just has to look at South East Asian manufacturing markets, like Vietnam, and certain raw materials will need to be imported from Chinese suppliers. Simply put, it adds cost, lead time and layers of complexity, which plays to the Chinese manufacturing base.

What goes up, must (eventually) come down

It does appear though that there is some softening in the price of metals with the prospect of China’s construction boom slowing and more broadly economic growth decelerating, which will in turn limit demand for these materials. The price of copper and iron order has already started to fall. This may be goods news for some product categories that have already had to absorb some price rises.

Pricing Strategies

When commodities are on the rise, making purchasing decisions is not easy. The basis upon which you make a purchasing decision (the price) can change as quickly as you cut the PO. This is particularly true of the more commoditized products for which the relative percentage cost of the raw material is above 30%. In any business, certainty is beneficial. In such markets, the following ideas should be considered:

1. Raw Material

Make sure you are aware of the raw material fluctuations, not only a global spot price, but also the price in the market you are buying products from. It is important to validate what the factory is saying, and what is driving their prices.

industrial metal sheets ET2C Int. sourcing

2. Origin

Where is your factory buying its raw materials from? For some smaller markets, it is important to know this so that you can see where potential issues may arrive in the future particularly if they are shipping it in from other countries.

3. Partnerships

We have always pointed to developing true partnerships with suppliers/factories. This will engender much greater visibility of costs and raw material pricing. Also, looking over a medium-term to long term horizon will mean that fluctuations in commodities generally even themselves out. Short-termism and transactional purchases will unlikely provide any benefits.

4. Index the Commodities

When you have longer-term relationships, and you have set out your annual spend, the best way to manage commodity fluctuations is to agree on a base price of the most significant raw material, and then index movements. So, for example, agree on a price of Aluminium and then based on movements both up and down, agree on total FOB pricing that reflects these movements. That way, you have greater certainty, and can make sure that you have sustainable supply going forward. It is the most equitable way of dealing with such price variables.

technology

Summary

We continue to operate in an uncertain market and at the busiest time of the year. Inflation across the supply chain is already driving price increases (see our petition for the UK Government to counter these inflationary pressures). Commodities have been on the increase, but with some challenging headwinds, there may be some let-up and softening of price points into Q4 of 2021.
At ET2C, our solutions are centred around visibility. If you need to know more about raw material price points, and other market data, we are well-positioned to provide our clients with all the relevant information. We are well placed, as your Sourcing Partner, to help you during these difficult times. For more information, please contact us at contact@et2cint.com.

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