sourcing Archives - Page 4 of 8 - ET2C International

Turkey Sourcing: Part of a Global Sourcing Strategy

Industry Insights / admin / Office, sourcing, Turkey

Turkey Sourcing ET2C Int.

Turkey Sourcing now forms part of our expanding network of offices across the global sourcing landscape.

ET2C Turkey

Set amongst rolling hills on the Western Aegean coast of Turkey, sits the ancient city of Izmir. Its history stretches back to around 3,000 BC with the founding of the city of Yesilova Mound by the Trojans. However, it took the name Smyrna from the Greeks for most of antiquity. With its natural harbour, the city has always been strategically well placed for trade. Moreover, to this day it is an important Turkish Port. A growing and dynamic hub, Izmir is now the third-largest city in Turkey. It is easily accessible (unlike Istanbul) and also benefits from a broad range of manufacturers located in the surrounding region. It, therefore, is the perfect location for ET2C to open our latest office. In fact, we are pleased to announce we have commenced trading as of the 17th December.

Izmir Turkey

The Global Sourcing Landscape

Over the past year, lockdowns and disruptions have resulted in many companies questioning their incumbent supply chains and sourcing markets. The need to build in supply chain resilience has become increasingly important particularly as the severity and frequency of these supply chain shocks is trending upwards. Part of this robustness is around spreading the risk across multiple sourcing markets to the point where we believe that companies will be looking to remove dependance on any one market. Of course, this is not going to be feasible when it comes to markets such as China, given its scale and export experience, but it will at least set the tone for sourcing strategies into 2021.

Turkey Sourcing

For these reasons, we have targeted Turkey as our next market to invest in and establish a company. The country has a broad and established manufacturing base which sits on the edge of Europe. This is important from a ‘near-sourcing’ perspective and provides an alternative option for UK/EU businesses to compliment existing Asian supply-chains. The ability to offset shipment times and any capacity constraints will provide strategic opportunities for some companies.

We see the main benefits of Turkey sourcing are:

1. Location

Bridging Asia and Europe, Turkey is situated on the edge of one of the largest trading blocs in the world. It means shipping into Europe and the UK takes days rather than close to a month in most cases out of Asia. It fits into any ‘’Near Sourcing” strategy for European companies. In addition, it has the ability to ship across the Atlantic to the Americas as well. There is a free trade deal with the EU and the UK is also in the initial stages of discussing a separate trade deal on similar terms post the 31st December Brexit deadline. Also, Turkey provides access to neighbouring Eastern European markets

Turkey Sourcing ET2C Int. Office Izmir — The building in Izmir where the new ET2C office is located

2. Broad Manufacturing Base

The Turkish manufacturing base covers a wide range of products including textiles, white goods, furniture, bikes, industrial, plastics, general consumer goods, and the automobile accessories sector. It benefits from its own raw material resources that allow it to manufacture products without complete reliance on importing the raw materials.

3. Cost Advantages

Of course, cost is always going to be important. And it is true that the FOB costs from Turkey are competitive given the cost of labour, raw material availability, and the well-developed infrastructure throughout the country. However, the landed cost, particularly for the EU, will be the determining price to assess given the low shipping costs and tariff benefits. Like China, there are clusters of manufacturing across the country that benefit from the scale of each sector.

4. ‘’Flex”

Simply because of the proximity to the EU, there is greater ‘flex’ in supply chains whether it relates to product development cycles or production. This means that companies do not need to plan so far ahead. In this way, they can leverage the additional time available for quick turnarounds and late adds. This certainly gave the Turkish garment sector an advantage in the context of fast fashion.

Turkey ET2C Office Izmir — ET2C office in Izmir

5. People

In the past, low-cost countries have always relied on cheap factory worker labour compared with more developed economies. In 2020, it is no longer solely about the cost of labour, albeit it is still important. The factory workers need to be skilled and efficient in what they do. This certainly applies to Turkey, which has a skilled worker-pool that is competitively priced benefiting the manufacturing sector and exports more broadly.

Summary

Although it has been a challenging year, we are delighted to have commenced operations in Izmir, Turkey. It will provide our clients with access to a range of Turkish manufacturers in a market that greatly benefits from a ‘boots on the ground’ approach. We plan to quickly expand our supplier network within the market and work with our clients, both across trading and buying offices, to seamlessly deliver our range of services.
At ET2C, we are well placed to help manage your sourcing needs across multiple markets with teams on the ground. For more information on how we can help you with your Turkey sourcing or for other markets, please contact us at contact@et2cint.com.

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Freight Rates in the Spotlight

Industry Insights / admin / freight, Industry, sourcing

Freight Rates in the Spotlight ET2C International sourcing
Freight rates have soared towards the end of 2020, in a year when you would anticipate low demand and low rates.

Freight rates form an integral component of any sourcing decision. They are part of the ‘landed cost’ which can determine the cost-effectiveness of where your products are being purchased from. This combined with minimum order quantities, lead times, shipping duration and any import tariffs (or anti-dumping duties – something which we have seen a fair bit of throughout the Trump Presidency) will determine additional costs on top of FOB prices.

cargo containers sourcing procurement agent ET2C Int. port sea goods

It was back in 1956, when the maiden voyage of Mclean’s Ideal X ship signaled the beginnings of an era of globalisation. Trucker, Malcolm Mclean, had become frustrated with the slow and inefficient loading times. His vessel, the Ideal X, had a fitting system that improved the security and loading times. This led to the invention of the simple shipping container – which is now commonplace across the world’s ports (and sometimes the seas). Certainly, it changed the global economy and transformed global supply chains. In fact, it provides an easy and cheap way to transport goods around the world. By 1973, container ships were carrying approximately 4 million TEUs (Twenty ft Equivalent Units) annually. By 2013, nearly 90% of global trade was seabourne with 700 million TEUs shipping each year. That number has continued to grow with the expansion of consumerism to today.

The market is now largely commoditized against a backdrop of complex international supply chains demanding frequent quick and efficient movement of goods. Freight rates are currently surging towards the end of 2020. There appears to be little respite going into the new year, with rates expected to continue on this trajectory. Given 2020 has largely been a year of lockdowns and economies being put on hold, what is driving this market rise?

Freight Rates during the Pandemic

The Freightos Baltic Global Container Index (FBX), which is a weighted average of 12 major global container has risen to $2,635 per forty-foot equivalent (FEU) container as at the 4th December (the highest on record).

If you look at the indices for specific routes though, you can see that China/East Asia to the US is over $3,800 per FEU and China/East Asia to Europe is just under $3,000 per FEU. Of course, these are only spot rates and when you add on surcharges and other costs, the actual cost to the US on a ‘off contract’ rate is over $5,000. This trend will continue into Q1 of next year (there are whispers of $10,000 per FEU come CNY for China to Europe for off contract rates!) and perhaps only start to ameliorate towards Spring/Summer 2021, although some of the carriers are cautious given the unpredictability of the global demand during this Pandemic.

Freight Graph ET2C Sourcing — The Freightos Baltic Global Container Index (FBX) 4th December 2020

So, what is happening here? Back in February/March, when China went into lockdown, the ocean carriers successfully mitigated the impact of the supply chain disruption by implementing a ‘blanking strategy’ which withdrew approximately 30% of sailings from Asia to the US and Europe. As the virus spread into a Pandemic, and demand dropped away, the carriers continued to hold back capacity. Demand out of Asia is now back (China’s exports are up 11.4% year on year) and with the capacity lag, it is driving up freight rates due to simple supply/demand economics. This demand is driven in part by PPE, but also certain product sectors have recovered (furniture, homewares, etc).

Although there is an element of the carriers – in their alliances – now controlling prices to their advantage, the main issue is the time it takes to bring back capacity. And this is not just related to the actual ships. The equipment required to move containers from factories through to the ports. This is currently more of an issue for forty-foot containers, which is causing high surcharges and ‘pinch points’ and delays with bookings.

Freight Rate Tips

Although we are not a freight forwarding company, we do have our own logistics team. This department works with our clients on bookings, shipments, and anything in between. Here are some of our current tips:

1. Book Early

Where possible, order early and book the space early. As much as possible building in ‘flex’ into your supply chain will always present better, likely more cost-effective, options.

2. 20Ft over 40Ft

We are seeing better capacity on the 20 ft boxes. Also, we are advising our clients where possible to split shipments to get the capacity. In some cases, it is actually cheaper once the surcharges are taken into account.

3. Trains, Planes & Automobiles

Always make sure that your freight forwarder is giving you the best and full range of options. Trains out of Chengdu, China, take 12 days to get back to the UK. This may be a viable alternative given some of the other rates currently in the market.

4. Annual rates

For companies doing volumes out of Asia, contract rates will assure fixed prices for the duration of the year. Lock these in where possible.

5. ‘Near Sourcing’

It may be that there are options to adopt a near sourcing strategy as part of your overall sourcing strategy. This means leveraging suppliers closer to your market to counter the increase in freight costs, and ultimately landed cost.

Summary

It has been an extraordinary year in so many ways. Among other things, it has taught us that agility is an important characteristic of any company. Planning and being able to make decisions early, will always help. Freight rates may be rising, but with some planning and foresight, it will be possible to address the next challenge 2020 throws at us.

At ET2C, we are well placed to help manage your Asia Sourcing across multiple markets with teams on the ground as well as work with our clients on their shipping needs. For more information, please contact us at contact@et2cint.com.

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Trump Vs Biden: impact of the US election on Asia Sourcing

Industry Insights / admin / sourcing, Trump, US Election

Trump VS Biden US election sourcing strategy ET2C Int.

Trump has focused on his domestic agenda to the detriment of foreign policy and global trade has suffered as a result.

Uncertainty is never a good thing for business. But it is even worse when it becomes a pervasive feature of our daily lives (like the past 18 months). The Pandemic has wreaked havoc on global business and economies as Governments have lurched from one lockdown to another. But, perhaps just as difficult for business, has been the global Politic and the rise of protectionism that has led to global trade becoming more disjointed, disparate, and more frequently caught in the cross-hairs of world leaders’ political agendas.
Now we have the US election that has gone down to the wire. At the time of writing, we are still waiting on the final votes from four states to determine the winner.

Trump Vs Biden impact of the US election on Asia Sourcing ET2C Int.

The outcome is important because it will likely have an impact on global trade. There is an expectation that, under a Biden administration, relations will likely be less fractious. Probably, there will at least be a pathway for alliances across the world stage to be restored. President Trump has focused on his domestic agenda to the detriment of the US’ foreign policy. This election should lay the foundations for greater clarity of policy and to that extent enable US business to make more informed decisions.

US election day trump biden

The Sourcing Landscape

It is a complex picture. For the past 2 years, US businesses that leverage the benefits of outsourcing manufacturing in Asia have had a sword of Damocles hanging heavy over their heads when manufacturing in Asia. Of course, the main thrust of President Trump’s focus has been the US’ relationship with China. Also, other markets have at different times been pointed to (India and Vietnam for example). Tariffs only reinforced the need for US companies to reassess their sourcing strategies to understand how to diversify their risk or move assets out of China.

What’s next?

However, a lot of US companies with a China-centric supplier base found themselves facing a range of challenges. These point to the latent complexity in a global supply chain that is often neglected as well as the current market conditions (both domestically and overseas). It is worth running through some of these to better understand the path for US Sourcing strategies moving into 2021.

Challenges of Diversification

For many sectors, President Trump forced Asian-US supply chains to look at diversification away from China (pre-Phase 1 tariffs). Some of the issues that currently need to be addressed include:

1. Entering a New Market.

Just as with moving to a new supplier, there is a cost of moving to an alternate market in terms of set-up (molds), learning curve but also potentially understanding a new way of doing business, standards, raw material supply, lead times and cost base. That is not to say that that there are not opportunities, but all these factors need to be considered and managed properly.

2. Alternate Sourcing Strategies.

President Trump has consistently talked about reinstating manufacturing across the US rust belt as part of a ‘reshoring strategy’. He may have been partly successful for large corporations, but from an outsource OEM basis, it is probably a fair assessment to say that most manufacturing sectors have not ‘reshored’ and leveraged the US manufacturing base. Similarly, although there are clear ‘Near Sourcing’ opportunities (Mexico for example), the breadth and capacity of the Asian manufacturing base exceeds any near sourcing opportunity.

Sourcing Strategy Diversification

3. China’s Supply Base.

Regardless of Tariffs, China is well set up for export with the investment in infrastructure, raw material availability and labour pool. It still, therefore, remains competitive (a lot of the tariff cost was passed back up the supply chain when initially introduced) and with China’s investment in ‘Made in China 2025’ may continue to be relevant for US businesses for the foreseeable future. Of note, the majority of US shoes are still manufactured in China even with the tariffs in force.

4. The Pandemic.

Company survival is the main focus at present with the US economy hindered by the impact of Covid. The appetite for moving to a new market at this time, with the potential costs of moving suppliers/markets, has diminished.

5. Locked Out.

Travel restrictions only compound the difficulty in making significant changes to one’s supply chain at this time. Without the ability to identify new suppliers through trips to Asia, there is a heightened risk of moving suppliers. Again, particularly where the appetite for change now may be diminished.

So what does this all mean?

Of course, US companies should be looking to diversify their supply chains out of any one market. It is more a question of how this is done in this current business environment. An obvious answer is to make sure that you are working with a partner who has reached across Asia and is able to do the ‘on the ground’ work required to access new markets during this period. It is another way of managing the risk and lack of visibility born out of a lack of market access whilst giving you the ability to source and manage suppliers.

US election strategy Biden Trump sourcing

That is not to say that China will not still be an important component of any supply chain, and US companies should not adopt a ‘move at all costs’ approach. Chinese manufacturing will broadly still provide opportunities for US companies as well as help embed some resilience in supply chains.

Summary

Whether a Biden administration will change the US stance against China remains to be seen. There is hope that we may at least find ourselves in a business environment that is less uncertain. And that can only be a step in the right direction.
At ET2C, as your sourcing partner, we are constantly looking to provide tangible solutions to our clients. We are already helping our US clients with their sourcing strategies during this period of disruption. Please contact us at contact@et2cint.com for more information how we can help you.

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Industrial Manufacturing, how to build your Asian Supplier Base

Industry Insights / admin / Industrial, Industrial Manufacturing, sourcing

ndustrial Manufacturing Asia ET2C

Industrial manufacturing can significantly benefit from creating a solid supplier base and outsourcing in Asia.

Outsource manufacturing has broadly always been reliant on raw material availability, a supply of labour and a low-cost base. It creates greater flexibility by negating the need to set up manufacturing plants that can require extensive capital expenditure and monthly overheads, not to mention the cost of maintaining safety and health standards. The same applies to industrial manufacturing, which requires significant investment in machinery and tooling and can be labour extensive.

The “New Now”

Asia already has a good supply base for industrial production across casting, forging, machining, metal fabrication, stamping and plastic injection manufacturing processes. But importantly, now at a time when companies have to cope with disruption to their client and the drop off in sales, there is a focus on stabilising their bottom line or reduce overheads where possible. This has resulted in many companies looking to activate Outsource Manufacturing programmes and move to an offshore production strategy. That said, with markets currently closed, looking to manufacture high-quality complex engineered components requires attention to detail and local resource in order to achieve the best outcome. Finding the right partner is absolutely critical to the success of such a move to maintain on-time shipments and more importantly consistent quality but by getting this right there will be significant cost benefits.

Industrial Components ET2C International

The benefits of outsourcing industrial components

In addition, most businesses only look at component level for industrial manufacturing when looking at offshore destinations. With lower labour costs it is important to focus on sub-assemblies or fully-finished assemblies to reduce the touchpoints at destination. This leverages the low-cost advantages by removing local labour directly impacting total cost ownership, which creates a significant competitive edge.

Industrial Manufacturing in Asia

Although there are significant benefits of offshoring your industrial production, there are still challenges that lie ahead given the different markets, culture and business environments. Understanding how these are overcome will be important to the success of implementing this particular strategy. From our perspective, looking to develop relationships over the medium term (and beyond) is a central factor to delivering the product you need.
Here are some key points to consider in working with Asian industrial manufacturers:

1. Define your requirements clearly

The variation of language always poses a challenge when it comes to understanding the project and its parameters, particularly when interpreting technical drawings. However, with clear and defined technical specifications and the right partner it should be possible to get accurate costings at the outset.

2. Quality Assurance

Given the variation in industrial manufacturing processes, it is important to conduct the necessary quality assurance which should cover a technical assessment of machining capability, safety procedures in place and ethical standards. There are a range certifications that should be available for different manufacturing processes such as ISO 9001, ISO 45001 and SA 8000. Make sure that these are also independently verified.

Industrial quality control ET2C sourcing — Photo provided by Tool Inc.

3. Build commitment

You need to commit to forming and cultivating a healthy long-term working relationship. It is important to treat the manufacturer as a partner and to give your full attention to the partnership. Particularly, where there are moulds and upfront charges required.

4. Close contact and communications

Asian factories prefer those who spend more time working closely with them. They expect their partner to get involved in sample making, order placement, quality control, production planning, and shipping. Therefore, it is best to have a team (on the ground) to work with the factory on a daily basis.

5. Business culture

It is still important for foreigners to understand and appreciate Asian business culture. Accommodating these cultural differences is a key component in developing long term relationships. More than ever, have a reliable ‘partner’ within your supply chain will add value and drive benefits.

Overview

There are significant benefits of moving industrial manufacturing overseas but you need to make sure you have the resource and capability to execute this offshore strategy. At ET2C, we have 20 years’ experience in industrial manufacturing out of Asia. We are therefore well placed to help you migrate some of your production into the Asian manufacturing sector. Our team on the ground will walk you through the process and help manage the suppliers and quality upstream. For more information contact us at contact@et2cint.com

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Sourcing Furniture and Outdoor Trends 2021

Industry Insights / admin / Furniture, Outdoor, sourcing, Trends

Sourcing Furniture and Outdoor Trends ET2C

Sourcing Furniture and Outdoor Trends in the ‘New Normal’
A year ago, our lives were about to change abruptly. The spread of the Covid-19 virus, which has culminated in a global pandemic, has turned everything as we knew it upside-down. The subsequent constraints due to social distancing have impacted our perception of space (both indoor and outdoor).
People have generally been kept in their homes for months and we sought outdoor spaces to feel somehow relieved.

Balcony garden flowers ET2C

The lucky ones who had access to balconies, patios or gardens found the outdoors as their personal saviour. Certainly, with the adoption of new habits, our use of spaces in the home has changed with them. Private outdoor spaces are a precious commodity more now than ever before. They represent new kinds of freedom, allowing us to accept social isolation without feeling trapped, and also to enjoy fresh air without worrying about breathing in the virus.

New needs in this New Reality

People are now designing their living space in line with the adoption of these new habits and ultimately a greater reliance on time spent in their homes. Without a doubt, ‘Staying in’ is the new ‘going out’. The 2021 trends will push the outdoor spaces to create the experiences that we crave in a stylish, thoughtfully designed atmosphere.

So what are the new trends expected for Spring/Summer 21?

1. Indoor ↔ Outdoor

New trends will reflect the reimagined importance of the outdoors as a place where one’s private life can open up to our well-being such as fresh air, natural light and social interaction. The garden, always considered an “outside space”, is now a part of the home, dedicated to specific activities, such as working, exercising, meditating and yoga.

The feeling of intimacy outside is a big part of this outdoor trend. To create a flow from your inside space to the outside area your backyard, porch or patio should support everyday life not just supplement it. As an extension of your internal living space, furniture and accessories such as rugs, lights, mirrors, plaids and will become more commonplace outdoors reflecting this shift in how we interact with this type of space.

Indoor outdoor lighting

Obviously, where design can imitate the living room furniture, the function needs to also factor in external influences such as the weather. Now that you have bridged the divide between them, both your interior and exterior design will work in harmony.

2. Tiny Balconies: Urban Gardens and Permaculture

For sure, the combination of comfort and functionality gives new value to the outside space.
Even those that do not have access to a garden, but just to a tiny balcony, want to get the most out of what they have. For this reason, for Spring-Summer 21, also small spaces outside will be designed like gardens. The style and design will be all about making space look bigger. Such solutions will include using vertical space, laying borders, having clear pathways, and creating specific zones or outdoor ‘rooms’.

What furniture should you choose? Think round to save space. Curves soften and open up space rather than harsh lines and enclosing angles. Choose round tables and stools, for example.

Furniture outdoor sourcing orund table

More than a Balcony: An Urban Garden

Not only will the balcony be designed like an additional room of an apartment, but it will be designed like a smart urban garden. In 2021, planting small raised beds and smart vertical gardens on the balcony will be a clear trend. The holistic principles of permaculture will influence these tiny gardens to show they can be both productive as well as ornamental.

3. Eye-catching Outdoor Lighting

A good lighting system is paramount to the enjoyment of outdoor spaces in the evenings. It is important to add the right kind of light to make the outside space visible and safe. While before the white lights were the most common choice, colored filters are now an option to add extra warmth or create cool tones.

Lanterns are a classic that will stay but will be also revisited with new designs and materials.
Spring/Summer 21 will see also small lights, hidden in plantings and walkways, become more popular. Their strategic use will complement plants, accentuate lawn décor and stylize particular areas.

Outdoor lighting Furniture light system

Environmentally Friendly Lighting

Even when it comes to outdoor lights, sustainability matters. Bright LED lights will continue to give a sustainable twist to the outside space. Supporting eco-friendly living styles, these lights are energy-efficient and have incredibly long lives (up to 100,000 hours!). In addition, solar-powered lights are becoming increasingly popular with homeowners who wish to take advantage of natural resources as well as saving on electricity bills.

4. Bright Colours

In terms of colour options, the next season will see the juxtaposition of warm comforting hues and bright color pops. Soft neutral shades of white and grey will be the natural base for the outside décor while bright colored details will complete the space balance with striking accents.

So besides the classic white, grey and the new entry “Shabby Chic”, keep an eye on the recent Pantone Fashion Color Trend Report for Spring/Summer 2021. Marigold, Rust, Illuminating, and French blue will definitely stand out in your gardens, patios, and balconies.

Sourcing furniture bright colours

5. Natural materials

For the next Spring-Summer season, expect to see a boost of natural materials. Eco-friendly garden furniture is always in fashion thanks to the aesthetic appearance and the ambience of comfort.
Wicker furniture made of twigs makes it possible to achieve convenient streamlined shapes that add an element of style. Also, rattan Items are robust and generally resist rain or sunlight and are great for outdoor use.

Outdoor garden rattan furniture ET2C

Wooden furniture can also be safely operated in outdoor conditions if its surfaces are treated with a water-repellent coating and varnished. Certainly, woven materials add texture, and you can easily dress them up with bright decorative pillows to create a contrast. Natural options will distinguish not only furniture but also décor elements. You will see more sustainable solutions in gardens. The plastic pots will be increasingly replaced with natural alternatives such as coco-liners.

Garden Products from Vietnam sourcing cocoliner sustainability green

Sourcing Furniture and Outdoor, we can help!

We have developed our own range of Garden products out of China, Vietnam and India. Taking the best of each market, we have pulled together some great products that are perfect for outdoors, whether it is furniture, coco-liners, hanging baskets or lighting. Moreover, we have attained FSC certification to ensure that our suppliers ethically source their wood raw material. For all your needs, please contact us at contact@et2cint.com

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5 Famous Shoes Made in Vietnam

Industry Insights / admin / Footwear, sourcing, Vietnam

Shoes made in Vietnam are a trend, making the country the third-largest producer of footwear in the world.

Why Shoes Made in Vietnam are a trend

Vietnam is currently the third-largest footwear manufacturing country in the world, after China and India. Producing around 920M pairs annually and exporting more than 800M pairs to more than 50 markets globally. This is evidence of how important this industry is to the growing economy of this South East Asian country.

With strong competition from its neighbour, China, the Vietnamese Manufacturing base needs to continue investing in infrastructure as well as local raw material availability and accessory suppliers. Domestic footwear enterprises must strive for self-improvement, change their production models, invest in equipment and technology innovation whilst actively integrating themselves to join the global supply chain.

5 Famous Shoes Made in Vietnam

1. Nike

Vice President of Nike Group (USA) – Mr. Chris Helzer said that by 2020, Nike will celebrate the 25th anniversary of its establishment in Vietnam. Certainly, this is its most important market for production. In fact, Nike realizes up to 50% of its products in Vietnam. Nike also values the quality of Vietnam’s labour force that contributes to the success of this global sportswear brand.

nike shoes made in vietnam footwear

2. Adidas

Adidas has halved the amount of footwear it makes in China having moved a large proportion of its shoe production to Vietnam. It is a significant shift. In fact, in 2008 roughly 30% of Adidas shoes were made in Vietnam and about 45% in China. By 2018 Vietnam had switched places with China now producing 45% of worldwide production compared with China’s 20%.

3. Puma

The PUMA village complex was inaugurated in 2009 in the South of Vietnam. It is a convergence of manufacturing, research and development all ‘under one roof‘. Currently, about 35% of Puma’s sportswear is being produced in Vietnam and Puma is increasing its production output every year.

4. Converse

Canvas shoes with rubber soles are an identity specific to Converse as a popular footwear for the young generations. By using a domestic natural rubber supplier for sole components, worldwide production of Converse shoes equates to 40% ex Vietnam.

5. Skechers

Skechers introduced a layer of memory foam to the sole of its shoes. This system provides extra cushioning, increasing the level of comfortability. This innovative process originated in Vietnam and has led to 35% of total production out of Vietnam.

Footwear in Vietnam – High quality and Convenience

Footwear is the second largest segment within the Vietnamese manufacturing sector, just behind Electrical machinery. It comprises all types of shoes with the current trend seeing a strong growth potential for sneakers. Large footwear brands have moved their production to Vietnam over the past 10 years as they have gradually shifted production out of China.

footwear shoes et2c international

Definitely, the manufacturing sector in Asia is shifting. Vietnam currently manufactures two times more Adidas footwear than China does and Nike is increasing volumes year on year as it reduces its commitment to China. Obviously, there is the Chinese domestic market that will still mean that China manufacturing from some of these global brands retains importance.

Not only Sportswear

As well as sneakers, Vietnam produces also casual footwear and, whether cemented or vulcanised soles, there is a breadth of manufacturing capability. In addition, women’s fashion shoes are being produced in Vietnam with brands such as M&S, Asos, Aldo and Next all buying from local manufacturers.

Footwear shoes vietnam

The benefits of Vietnam Sourcing

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 (European Vietnam Free Trade Agreement).

Sustainability – innovating the shoe industry

Certainly, sustainability is a growing trend for consumer goods and the same applies to the shoe industry in Vietnam. In fact, footwear brands are picking up on recycled and eco-friendly materials. The use of recycling and biodegradable techniques as well as the concept of eco-consciousness are both becoming more widespread at manufacturing level. Often, more sustainable raw materials have a higher price point although the consumer is increasingly willing to pay this uplift (considering that the purchase decision is no longer solely about cost for a growing demographic). There are also factories in Vietnam focusing on reducing their impact on the environment and on working practices that are in line with the UN’s sustainable development goals.

Summary

Vietnam is well placed for OEM shoe manufacture and we are already working with our clients to make shoes in this fast growing sector of the Vietnamese manufacturing base.

In addition, we can help our clients with a wide range of products out of Vietnam, including Garden products, furniture, ceramics, homewares, candles and industrial products. Please contact us at vietnam@et2cint.com for more information.

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Strategic Sourcing for the New Now

Industry Insights / admin / Covid19, sourcing, strategic sourcing

Strategic Sourcing has always played an understated role when it comes to business success. The fact is that companies that get this right should deliver lower product costs or higher margin propositions that directly impact EBITDA. Similarly, just as sourcing has led the way out of a crisis before, this function is well placed to do so again in the wake of the latest Pandemic. However, success will require a wholly different approach going forward.

The ‘New Now’ is a heady concoction of working from home, virtual meetings, a lack of travel and a prominent relationship with your computer screen (and those behind it!). This should ease over time (one hopes). However, the evolution of retail has been ushered forward at a quicker pace than anticipated. Consequentially, Retailers and Brands are having to think through how they adapt to meet the expectations of their customers.

working from home

However, while past economic downturns mainly focused on the financial implications (survival, cash preservation etc), the “New Now” has the added complexity of an already shifting sourcing landscape, volatile demand and the need to build robustness into the supply chain to address at the same time. How should companies therefore move forward? What are the changes they should look to make to their China Sourcing or Vietnam Sourcing strategy? We will highlight some key areas below, but one point that is pertinent is the need to act now, which could be a challenge for some companies; one obvious example being (understandable) budget constraints.

Building Supply Chain Resilience

McKinsey, the strategy consulting firm, has released a recent report on “Risk, Resilience & Rebalancing in Global Value Chains” that points to the need to build robustness within complex global value chains. It notes the increased frequency of supply chain shocks but also the increasing severity of these events, which can be a result of climate change, financial crises, trade disputes, pandemics, cyber-attacks, terrorism and supplier bankruptcy. Interestingly, the report quantifies the intervals that can be expected for different lengths of disruption:

1-2 week disruption: 2.0 years
2-4 weeks: 2.8 years
1-2 months: 3.7 years
2+ months: 4.0 years.

This certainly underlines the necessity to build in a layer of resilience to any company’s supply-chain given the potential for disruption. This “New Now” is built around this need to be more resilient but also more agile and efficient in how the Sourcing function acts.

Strategic Sourcing 3.0

The Pandemic is clearly one of these shocks and one that has lasted longer than 2 months in some cases but uniquely has had a global impact which has covered both supply and demand. There are clear lessons to learn where significant disruption has been felt. We have set out some of our thoughts on what is required for companies and their supply chains going forward.

Strategic Sourcing buying online

1. Supply Chain Resilience

An obvious starting point. Companies who have found themselves in only one market and with limited suppliers would have had issues difficult to solve. Continuity builds resilience and having contingency plans is always beneficial. To do this develop a deep understanding of your suppliers beyond Tier 1 manufacturers (ultimate transparency). Look to also multi-source across jurisdictions to eliminate any country-specific risk.

2. Partnerships

This has been a recurring theme across some of our past newsletters. True value creation will be reliant upon the relationships you have across your supplier base. This can mean co-investing in ranges, committing to a period beyond transactional cost led order cycles or paying that little bit more to enable investment at the factory level that will in turn drive future efficiencies and cost reductions. Ultimately, innovation needs to be a collaboration over a medium-term horizon. Certainly, you should also consider partnerships across the supply chain (such as digital platforms and service providers).

3. Agility

Agility within the sourcing function will be critical. This may be a challenge where more traditional roles and management structures have been historically used across most sourcing functions, and particularly more so in Asia. The ability to respond quickly to changing circumstances will be important going forward as demand remains elusive and supply challenging. For example, setting up strategic cross-functional teams for targeted opportunities.

Agility

4. Digital & Analytics

The retail sector has been talking about this for years. However, the budget has often not been made available to truly invest in digital and analytics to bring greater efficiencies and meaningful data collection. This has now changed given most companies both working remotely and at a distance from their suppliers (being ‘locked out’). Such capability covers aspects of supplier mapping, automation, risk analytics, quality control technologies right through to vendor performance management.

5. Sustainability

Consumers have had a chance to re-evaluate their behaviour and how they used to consume products. The likely trend will be a re-emergence of sustainability across factories, products and logistics to align to this demand. This will result in additional drivers ranging from quality to reliability on top of pure cost opportunities in lower-wage countries. Look for suppliers that can support your needs as well as developing regulatory frameworks as well.

The importance of Strategic Sourcing

Strategic sourcing is an important component of any business. It is more critical than ever to invest in your supply chain and make sure you are working with the right partners to drive value to your business. Those companies that adapt and push through change across their sourcing function will return to pre-pandemic levels quicker than their competitors (albeit no guarantees that your colleagues will move from the virtual to the real world in the near term!).

At ET2C, we can help manage your Asia Sourcing across multiple markets with teams on the ground as well as work with our clients on elements of the ‘New Now’. Do you want to know more about the future of sourcing? Join our Free Webinar on September 17th! Our team will share some ideas and thoughts on the road ahead.

Strategic Sourcing for the New Now Read More »

A Sourcing Company in High Definition. Welcome to the new ET2C.com!

Company News / admin / business, et2c, sourcing

Sourcing Company ET2C

The 20-year sourcing company ET2C International takes on a new online guise to better explain how we can meet your sourcing needs. Now, with a renovated interface, navigating the ET2C website has never been easier.

What’s new at ET2C.com

1. Clear Design & Structure

The updated structure and style will allow visitors to better identify the service or product they are looking for, whether it be sourcing and procurement assistance, buying office information, quality assurance, or relevant information and articles on current affairs impacting the world of sourcing.

Buying Office Sourcing Company ET2C

2. How We Work

We have many different ‘touch points’ that allows us to provide tailored solutions to our clients. Certainly, ‘How we work’ is something that we have looked to address with this update to ensure visitors understand how we can add value to their supply chains. We therefore added supplementary material on each of our services that gives you a visual methodology of how we work. The Sourcing, Buying Office and Quality Assurance pages include graphic schemes of the general processes. Also, we added some useful tips for our clients in order to help us quickly align to your needs.

Sourcing Process ET2C

3. What We Do

Established in 2001, for almost 20 years ET2C has been building a strong network of suppliers while offering multi-industry services to many clients.

We wanted to therefore give the right space to our Key Industries: Industrial Components (explaining in detail our proven methodology and expertise with both Metal and Plastic components) and Consumer Goods (with a focus on our main categories: Fashion, Indoor, Outdoor and Medical).
Furthermore, we thought to provide you with concrete examples of our work. For this reason, we added some Case studies that will drive you along the multi-industry services offered over the years to medium-large retailers and wholesalers and to young growth companies as well.

Industrial Components ET2C Sourcing

4. The Team at ET2C

As a Sourcing Company, we are ultimately a people business, and for that reason we wanted to provide you with some of the faces and roles of our key staff. We have some 200 staff across all our offices and so have not been able to provide everyone that is working hard behind the scenes to make our customers lives easier! Have a look at the ‘About Us’page.

5. Contact

Contacting us has never been easier. The contact page has been improved to reflect our international presence more accurately. We have updated our contacts and the landing pages for Vietnam, and Mexico have been enhanced with detailed contact forms. You have just a quick question? Send us a message thought the chat box on the bottom right corner of any page.

Why We’re Upgrading

With this redesign, the message from our website about our market knowledge and product expertise has never been clearer. The new style aims to show what we at ET2C are all about; low-risk profitable solutions that enhance your supply chain.
Also, we have increased the content available on the website, including supplementary material on each of our services as well as our general processes and case studies.

Stay updated with our latest news

Moreover, we will frequently be updating the Resources section. We will provide you with the latest news on sourcing and procurement from our knowledgeable experts. Furthermore, you can check out our latest posts on LinkedIn, Facebook and Twitter. You will find many articles relating to global sourcing, international trends, innovative technologies, sustainability, and much more. And do not forget to subscribe to our ET2C Newsletter to receive our monthly updates for free! We are also planning a series of Webinars that cover some current topics – be sure not to miss these!

ET2C news

Next Steps

The new website plays a critical role in displaying our services as we continue to build our sourcing company to make sure we are always providing relevant and add value services. We also understand that in order to be at the forefront of sourcing, we must be able to adapt and respond to the needs of our clients. If you have any queries regarding our new website or simply a few questions relating to our services, please feel free to contact us.

A huge thanks to the team of Key Element that made this project possible and successful!

A Sourcing Company in High Definition. Welcome to the new ET2C.com! Read More »

India Sourcing Insights – We Are Garden

Industry Insights / admin / Garden, India, sourcing, WAG

India Sourcing – Strengths of the Garden Products sector

As part of our We Are Garden series, we have been looking at alternate markets outside of Vietnam where we had already identified product opportunities within the Garden & Outdoor sector. Our India Sourcing team have therefore been looking for opportunities within this sector to further complement our offer from Vietnam. Raw material, labour cost as well as investment in the manufacturing sector are all advantageous characteristics which India has in abundance.
More than ever, sourcing strategies are looking to remove dependency on any one market and spread risk around different countries. India has a growing workforce and has product expertise in certain categories that plays into the We Are Garden initiative. This is beneficial at both a product and sourcing strategy level. Certainly, companies in this sector would be well placed to look at India sourcing as part of their overall strategy.

Garden Products – Key Industries

As your Asian sourcing expert, we have identified key categories within this sector which include some of the following products:

Garden Tools (spades, forks, trowels, rakes and hoes)
Coir Products (liners, hanging baskets, fibre, ropes, chip blocks)
Jute/Cotton Products (Pot holders, seed bags)
Garden Furniture (Stool, benches, wooden couches)
Garden Accessories (bird baths, lamps, feeder, watering cans).

Hanging Basket of Flowers, cocoliner

Notably, some of these products have beneficial import duties into certain markets, particularly when compared with China.
To build on some of the insights we have provided at a factory level, we recently spent some time with a Coir supplier in the industrial area of Tuticorin.

The Coir Industry

Coir is largely produced in the coastal regions. The continuous awareness about environmental protection contributed to the increase in its demand. Sustainability and use of a natural fibres has become increasingly important to the Consumer. Being bio-degradable in nature, this has buoyed the category considerably over the past 5 years.
Currently, the Indian coir industry exports to around 70 countries worldwide and the Indian Coir Board is looking at doubling the export revenue in the upcoming years. The Government has also played a vital role in reviving this traditional industry and has set up many initiatives to support it.

Coir Supplier

We arrive at the factory after a long drive, off the main road, we come to the factory site and meet the CEO of the business. Notably, with the current Covid-19 crisis in India, the team let us wear protective clothing for the tour of the facilities.

This vendor, one of the first in this region, opened the doors for business in 1998 and now exports a wide range of coir products to USA, Middle East, Australasia, South America and EU countries.

Production is at full capacity and full use is being taken of their large warehousing unit that is currently holding approximately 30 container loads of products. At capacity, the facility can hold up to 50 container loads. Notably, the factory produces up to 1,000 tonnes of product each month.

COCO FIBRE

India Sourcing – Interview

1. Which countries within the Asian Region do you see as your main competitors?

We see Sri Lanka and Vietnam as our main competitors. Even though these countries are the biggest producers of Coir, the Indian Coir industry is much larger and competitive pricing coupled with quality and Innovation makes India a better proposition.

2. What does ‘Sustainability’ mean to your business?

Coir is a natural product and our production process follows International standards with Zero harm to the natural Environment. Certainly, we believe in creating new organic products based on client requirements. Moreover, we educate our Employees to work ethically towards Zero wastage.

3. How do you continue to develop your export market and client base?

We have both knowledgeable and experienced business development team focusing on increasing our client base. Also, we aim to feature in many Global Trade Shows and are also looking to use Social media to increase our client base. Certainly, we are looking to have long term business relationships with clients by supplying best quality products at right pricings on-time.

COCO PEAT

4. What are your biggest challenges as a business?

It is difficult to keep everyone happy but we strive to work towards zero customer complaints. Due to Covid-19, we have had some manpower issues, but we these have been addressed now.

5. What is the future for the Indian manufacturing base in your product category?

The annual growth of the coir Industry in India is estimated at 5% in terms of Annual Export Volume and Indian factories are working on manufacturing new products as well. In addition, the Indian Government has formed the Coconut Development Board to boost coir production as well. Also, most factories in India are phasing out the traditional production process in the coir industry by replacing manual labour with modern equipment so as to eliminate inefficiencies in the production process and to enhance productivity and quality.

India Sourcing Insights - We Are Garden

Summary

As an India Sourcing company and having been on the ground for over 9 years, we have identified the Garden Product and Outdoor sector as a growth manufacturing sector in India. Where necessary, we are already working with Indian manufacturers to produce high quality products.

For more information, please contact us at india@et2cint.com. We will help your business positively bloom!

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EVFTA ready to start!

Industry Insights / admin / EVFTA, sourcing, Vietnam

EVFTA ready to start Vietnam Sourcing EU Market

EVFTA will boost Vietnam Sourcing for the EU Market.

After a decade of talks and negotiations, the European Vietnam Free Trade Agreement (EVFTA) has been ratified by the Vietnamese assembly. The trade deal will likely take effect on the 1st August 2020. Vietnam has long been seen as the ‘Workshop of the World’ with its ever-growing manufacturing sector and this trade deal should only support this expansion. It will reduce tariffs on products imported into the EU market over the course of 7 years, with some commentators pointing to 44% increase in imports.

Vietnam

The Current State of Vietnam Manufacturing

Even before this Pandemic, a lot of companies (particularly US-based) were looking to spread their Asian sourcing across the region. This has ensured that they were not too dependent on one market. Certainly, Vietnam sourcing was a key component of this strategy. However, the country’s manufacturing sector was at full capacity.
To a point, there have always been limitations in terms of scale and supplier networks. For the first, you just have to look at the population when compared to China; circa 90 million as a total population against 1.6 billion people. In fact, the migrant worker population within the Chinese manufacturing sector is still estimated as 300 million strong.
Secondly, Vietnam has often relied upon other markets for raw material supplies and accessories. This added to both lead time and also price.

EVFTA & The Future

This trade deal will reduce the tariffs on imports into the EU, almost all tariffs over a 7 year period. The good news is that after the deal takes effect, under the GSP regime, the EU will eliminate approximately 85% of import tariffs on Vietnamese goods. Conversely, it reduces barriers for EU businesses to invest and operate within Vietnam. This is all at a time when trade wars, protectionism are on the rise and the Pandemic has disrupted sales markets globally. Undoubtedly, this will open up the manufacturing sector to additional investment, both domestic and international, as companies look to take advantage of the available labour, rates and manufacturing opportunities.

Product categories that will benefit include:

– Footwear
– Furniture
– Garments & Apparel
– Furniture
– Garden Products

The key role of raw materials

One point that is pertinent to the benefits of this Free Trade Agreement is centred on the rules of origin that will qualify for the Certificate of Origin being issued and the reduction in the duty on import. In the past, Vietnam has been reliant on the import of raw material coming in from overseas. Consequently, some industries are going to enhance their local supply chains to take advantage of this deal.

Requirements for the tariff reduction

‘’Originating” will be key to the tariff reduction. Products will be considered ‘’originating” under the Treaty if they meet one of the following requirements:
• Wholly obtained in Vietnam; and
• Products produced in Vietnam incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing within Vietnam.
Many goods still do contain materials and components imported from countries not party to a trade agreement. In fact, sectors like automotive and electronic are good examples where greater domestic production is needed before any advantages of the FTA will be attainable. Currently, 62% of materials for the electronics industry and 53% from the automotive sector are sourced from abroad. Therefore, greater efforts are required to improve linkages between domestic suppliers and foreign enterprises.

EVFTA logistics container Vietnam Sourcing EU Market

Vietnam Sourcing & ET2C

ET2C has been on the ground in Vietnam for the past 13 years. We have strong connections across the manufacturing sector for all our clients Vietnam sourcing requirements. In particular, we have been manufacturing and exporting a range of products across Garden Products, furniture, ceramics, soft goods, shoes and even cloth masks during this pandemic.
We have also attained FSC certification back in August 2019 so that we were able to export wooden products from Vietnam and ensure that the raw material is being sustainably managed. We have strong connections with furniture manufacturers throughout Vietnam, which now one of the world’s largest exporting countries for wood and wood exports with around 4,500 timber processing enterprises across the country.

New opportunities for European Retailers.

Vietnam will undoubtedly benefit from the EVFTA. European retailers will see more opportunities to leverage their connections with South East Asia. This coupled with the fall out from coronavirus and the rise in protectionism, will lead to an increased interest in the Vietnamese manufacturing sector. For all your Vietnam sourcing needs, please contact us at Vietnam@et2cint.com.

EVFTA ready to start! Read More »