Strategic Sourcing Opportunities The Kingdom of Thailand is known as a tourist destination but also has a flourishing exporting business sector and strong economy ranked 9^th in Asia. What can it bring to your Sourcing or Procurement strategy.

Thailand is situated in the Indochinese Peninsula and shares borders with Myanmar (Burma) to the west, Laos to the northeast, Cambodia to the southeast, and Malaysia to the south. It has coastlines along the Gulf of Thailand and the Andaman Sea. A population of over 70 million people, has one of the lowest unemployment rates and is recognised by the World Bank as a “one of the great development success stories” in social and development indicators.

Thailand’s economy is expected to grow by 3.6% this year, up from 2.6% last year, supported by stronger private consumption, a recovery in the tourism sector and strong pent-up demand following China’s reopening, the World Bank said on Friday 21^st March 2023

Thailand’s development success has been built on a range of factors, Governmental, Geographic and Environmental to create an increasingly strong economic performance. Making it a country that has can offer many companies and brands strong strategic sourcing options, as part of a China+1 or Global Sourcing strategy.

1. Competitive Manufacturing Sector: Thailand has a well-developed manufacturing sector with a strong focus on electronics, automotive, textiles, and food processing industries. The country offers a skilled workforce, advanced infrastructure, and a supportive business environment, making it an attractive sourcing destination.
2. Strategic Location: Thailand’s strategic location in Southeast Asia is 2,800 Nm closer to Europe than Shanghai. It has well-connected transportation networks, including modern ports and airports.
3. Diverse Product Range: Thailand offers a diverse range of products suitable for sourcing. Textiles, Food products, and Agricultural commodities like rice and rubber are all part of Thailand’s strong agricultural heritage
4. Cost-Competitiveness: Thailand offers competitive production costs compared to many Western countries. Whilst it has the 9^thlargest Labour force in Asia, it is also has an ageing population. Governmental response to this is to invest in Educational participation for all age groups to build human capital.
5. Quality and Standards: Thailand has made significant efforts to improve the quality and standards of its products. The country has established a robust legal framework and regulatory systems to ensure product quality and compliance with international standards.
6. Trade Agreements: Thailand is a party to various regional and bilateral trade agreements, including the ASEAN Free Trade Area (AFTA), which provides preferential market access to member countries. It also has free trade agreements with several countries, such as Japan, China, Australia, and New Zealand, which further facilitate trade and reduce tariffs. It has relaunched trade talks with the EU with the ambition to deliver an ambitious, modern and balanced free trade agreement. EU Free Trade Negotiations
7. Cultural Factors: Thailand’s rich cultural heritage, skilled craftsmanship, and traditional industries like textiles and handicrafts make it an appealing sourcing destination for unique and artisanal products.
8. Business Environment: Thailand offers a relatively stable political and economic environment, attracting foreign investment and fostering business opportunities. The Thai government has implemented various initiatives to support entrepreneurship, innovation, and foreign investment, making it conducive for sourcing activities. The World Bank ease of doing business index has Thailand at 21 out of 190 economies.

Strategic Sourcing Opportunities Summary

Thailand offers great opportunities for companies Sourcing Strategies. However, it’s important to note that sourcing from Thailand also comes with challenges. Language barriers, cultural differences, intellectual property protection, and ensuring supply chain transparency are factors that require careful consideration and management.Conducting thorough due diligence, establishing clear communication channels, and working with reputable suppliers are crucial steps to ensure a successful sourcing experience in Thailand.

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. 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 Thailand or to discuss your future supply chain challenges. Please contact@et2cint.com

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

Strategic Sourcing from India, the high growth economy that should be in your Global Strategic Sourcing plan

With a population of over 1.2 billion, India is the World’s largest democracy, the second most populated country on the planet. It now boosts the World’s 5th Largest Economy WEF

Over the past decade, India’s integration into the Global Economy has been accompanied by similar levels of economic growth. Leading India to emerge as a Global Economic player and a country capable of playing a significant role in any product Sourcing Strategy.

“We believe India is set to surpass Japan and Germany to become the world’s third-largest economy by 2027 and will have the third-largest stock market by the end of this decade,” says Ridham Desai, Morgan Stanley’s Chief Equity

Building on their unique set of competitive advantages provided by:

1. Skilled workforce
2. Lower cost of labour
3. Cultural alignment and compatibility
4. Favourable regulatory environment
5. Improving infrastructure
6. Near-shoring and Re-shoring initiatives to move away from China benefitting India

The Regulatory environment has fuelled the delivery of six mega trends

1.Supply chain diversification

Fuelled by the global turmoil and moves by many companies to find alternative or additional sourcing partners to supplement China. India has benefitted from many companies in USA and Japan relocating supply chain partners to build future shock resilience.

2. Key Export Market for India

Industrial components

Textiles

Electronics and EV technology

Manufacturing competitiveness in India has benefitted hugely from skilled work force and lower labour costs allowing highly competitive pricing position v other markets. India steel manufacturing also fuels the competitiveness of the manufacturing sector. The textiles & Apparel markets in addition to the cost and quality of labour India has easy access to high quality raw materials.

EV manufacturing and innovation and India’s ambition to be a Global Hub for EV industry and Technology. India will launch 40 models of EV car models from a range of Car brands. Support for the industry has been further supported by the recently announced the opening of the worlds largest EV hub supporting the manufacture of both vehicles and advanced cells.

3.Government initiatives

The Indian Government continues to strive to create the rights conditions for Export business to flourish. Foreign and domestic investment in manufacturing has increased supporting further output growth.

4.Capex

As many factories reach high levels of utilisation, benefitting from the strong growth in the Indian economy. Investment levels are rising rapidly both from Government and Private enterprise.

5.M&A

Manufacturing companies are using M&A as a way of building scale and adding capabilities to their portfolios and export capability. Deals were $108b in India in 2021 of which 16% were in the Manufacturing sector.

6.PE/VC funding

In the last few year significant investment has flown in India industrial and export sectors. Fuelling growth in the start up Eco System and building transformative growth. The Manufacturing sector benefitted from over 16% of this investment.

Summary Indian Export growth

Indian continues to build its position as a global export powerhouse. Strong infrastructure in pace, continued investment and Government commitment to creating to export growth helps to make India an easy country to do business in.

It has the second largest railway network in the world and a vast coastline with established seaports.

Strategically located nearly 10,000 KM closer to Europe and the USA.

For companies wrestling with the need to evolve their Sourcing Strategies. Starting to look at Off Shoring options or as part of a wider China +1 strategy India should be top of your list of countries to investigate.

Key export areas of

Industrial Components.

Textiles

Electronics particularly EV Technology

Can provide exceptionally high value and innovative products whilst retaining a lower-cost base.

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. 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 India or to discuss your future supply chain challenges.

Please contact us at contact@et2cint.com

Global Sourcing and Procurement functions are taking on a new enhanced mission within business.

The immediate impact of which is to dramatically broaden their focus and accountabilities.This fast rate of adaption and development of new responsibilities and challenges creates a need for New Skillsets, Data and Inputs.

For many teams who sit outside Global organisations this requires the rapid building of a New Eco System of partners to support the rapid delivery of new responsibilities. Building both the structure and systems to manage data but also the insight and decision-making skills required for analysis and action planning.

What some of the pressing agenda points for Chief Procurement Officers and Global Sourcing teams? How can they keep on top of these big challenges as they rapidly evolve?

1. Supplier Risk Management: Organizations are becoming increasingly concerned about supplier risk, especially in the wake of supply chain disruptions caused by the COVID-19 pandemic. As a result, many companies are investing in supplier risk management tools and strategies to mitigate risk and ensure business continuity.

2. Near-Shoring: The disruption caused by the COVID-19 pandemic has prompted many organizations to rethink their global supply chain strategies and consider localizing their supply chains. This trend to Near-Shoring is likely to continue as companies look to reduce supply chain risk and improve their shock resilience.

3. Sustainability and Ethical Sourcing: Sustainability and ethical sourcing are becoming increasingly important to consumers, and as a result, organisations are placing a greater emphasis on sustainable and ethical sourcing practices. This includes

• Sourcing from suppliers that are environmentally and socially responsible.
• Measuring and managing the Carbon emissions in their wider Supply chains.
• Mapping wider Corporate Risks from within the entire Supply Chain.

4. Digital Transformation: Digital transformation is driving significant changes in the global sourcing landscape, with organizations adopting new technologies such as artificial intelligence, machine learning, and robotic process automation to streamline processes, reduce costs, and improve efficiency.

5. Supplier Diversity: Many organizations are recognizing the importance of supplier diversity, both from a social responsibility standpoint and to mitigate supplier risk. As a result, there is a growing emphasis on sourcing from diverse suppliers and supporting small and minority-owned businesses.

6. Trade Policy: Trade policy continues to be a hot topic in global sourcing, with organizations closely monitoring changes in tariffs, trade agreements, and other trade policies that could impact their supply chain operations

7. Reshoring: The COVID-19 pandemic has prompted some organizations to consider reshoring their manufacturing operations to reduce supply chain risk and improve agility. Whilst this trend has immediate and obvious appeal as companies look to build more resilient supply chains. It is proving extremely complex and challenging for many organisations.

These 7 topic areas are increasingly important for companies and brands of all sizes to understand and review as part of their Global Sourcing Strategy. For many already stretched teams the need for skilled Partners to support their delivery of answer to these questions is crucial. 

https://et2c.com/corporate-profile/

As many companies move rapidly towards a future defined by Global Sourcing &  Procurement Drop us a line to see how we could support you in your challenges Email us at Contact@et2cint.com. 

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

As the Canton fair opens for the 133^rd 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.

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.

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

Agility as a key part of your Sourcing Strategy

World trade continues to ebb and flow from the fall out from the Pandemic. Companies and markets are left dealing with the continuing supply chain disruption. The ongoing conflict in Ukraine, China’s ‘Dynamic Covid’ Policy, supply and demand imbalances in commodity markets and the backlog of containers at ports around the world all contribute to the inflationary pressures on consumer pricing and stock misjudgements (shortages and excess).

The future outlook for risk and disruption continues to be uncertain. As the World Economic Forum Global risk report 2022 suggests. Their view is we should expect increased volatility disruption over the next three years. Creating further global trade turmoil and supply chain disruption.

What does this mean for Global Sourcing Strategies?

Global disruption, whilst creating huge pressures, also creates opportunities for companies and brand owners who can identify opportunities and adapt swiftly to the new paradigm.

Dealing with disruption will be balanced with the need to deliver business efficiency and increasing environmental challenges such as GHG emissions reduction in wider supply chains.

Efficiency and resilience will be vitally important to compete effectively through current and future disruptions. Agility to deploy these two elements will build significant competitive advantage.

Re-shaping business process to deliver increased effectiveness.

Demand tracking                            to          future change anticipation and planning

Process silos                                     to            integrated business planning

Information hoarding                     to          rapid sharing for better decision making

The need to integrate environmental measurement and reduction whilst securing improved and more effective sourcing strategies will increase the need for tangible partnerships within supply chains. Building working relationships with strategic suppliers from within current supply chains and identifying near shoring opportunities will build in additional ‘flex’ into your sourcing strategy.

Transactional relationships           to              partnerships for growth

Keys Steps to Build Agility and Increasing Competitive Advantage:

1. Focus on efficiency through data management and lean business process

2. Build strong partnerships inside current supply chain with strategic suppliers

3. Identify new partnership opportunities for sourcing in new jurisdictions

Building strong partnerships with a focus on agile growth planning can be accelerated by utilising additional expertise to support your growth ambitions.

Whatever your needs, we are here help you source from global sourcing markets. As a leading sourcing partner with a presence on the ground in multiple markets, we can help build the agility and resilience that you need. For more information, please contact us at contact@et2cint.com

15^th March 2022

With Covid cases now on the rise in China (3,500 plus cases reported yesterday), the Chinese authorities have taken measures to contain the outbreaks in line with their Covid Zero strategy.

Over the past two years, this has been targeted to outbreaks and largely localised as a result.
Outbreaks have now been reported within large cities, including Shanghai, Shenzhen, Changchun and other key manufacturing centres.

As at last Sunday, the city of Shenzhen (17.5 million people) went into lockdown for one week so that all residents would undergo three rounds of testing. Shanghai has also locked down certain business districts as well as residential blocks to undergo targeted testing.

At this stage, there are no Port shutdowns, but inevitably there will be staff shortages or other related disruption that feeds into supply chains and the movement of goods to port both in the Southern Ports near Shenzhen and also Shanghai. Similarly, we would anticipate disruption to Manufacturers to the extent that they are within the targeted areas. It does remain the case that COVID protocols are in place in most factories, which will serve to slow the spread.

Due to these measures, ET2C’s offices both in Shanghai and Shenzhen have been temporarily closed for this week (14th to 20th March), but teams are working from home and we do not expect any impact to our service levels.
Should you have your own enquiries, please contact your relevant account manager or at our email, contact@et2cint.com

FOR IMMEDIATE RELEASE

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

Overview

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

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

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

Containers – A Traumatized Sector

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

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

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

Outlook for 2022

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

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

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

Delivering Inflation

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

Blackrock,

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

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

Summary

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

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

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