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Sourcing chronicles: ET2C – 19 years and counting!

Industry Insights / / , ,

Sourcing Chronicles

Sourcing has evolved significantly over the past 20 years. As more members acceded to the WTO around the turn of the Millenium, borders were liberalised and outsource manufacturing on a mass scale followed. Lately, there has been increased protectionism and international trade has been impacted over these last 3 years.

As a celebration of 19 years of business, we thought to explore these years through the eyes of our CEO, Richard Archer-Perkins. He told us how the business was started and how he has managed to continue operating in Asia for such a long period. No easy feat!

The Beginning

Back in 2000, I was asked to come to China to help a friend establish his own oxygen mask manufacturer. He had already been making these products at a facility in Taipei and wanted to leverage the Chinese manufacturing market and labour pool. Initially, with family in the UK, this was to be a nine-month stint. Who could have imagined that twenty years later I would still be here!

ET2C’s History

It all started at the Javits Center in January 2001, when I visited New York at the Pure Exhibition. Having seen the emergence of a mass manufacturing base in China, I walked the show going to every booth asking whether there was anyone interested in working with China. There was a lot of interest, but there was only one company that came to the table; a body jewellery company called Silver Moon Concepts who operated in Florida, USA – not that I knew anything about Body Jewellery! I managed to find a supplier (who traditionally worked with watches), who had the machinery and material to make surgical grade stainless steel (316L) and importantly create the necessary shapes. Then I went about finding staff to create a mini-production line to put the product together and pack them. I opened the office on the 8 May 2001.

ET2C office

The evolution of the business

From then, I managed to onboard additional clients in 2002 and 2003. We were saving our clients considerable cost on goods at a time when China had just begun to open up. On the back of this, I managed to get some large retailers as well as other wholesalers and Brands. Today, we’re proud of having in excess of 100 regular clients. Moreover, we are constantly looking to give them sourcing solutions that drive their bottom-line growth. We now have operations in multiple sourcing markets and are looking at further expansion this year. In addition, we have a food distribution business and are also planning to add more product lines to sell into China in 2020.

ET2C video
Watch our Company Video to know more!

 

Sourcing in Uncertain Times

There is no doubt that the World is in turmoil. COVID-19, trade wars, international sanctions and so on. International trade will continue being an important driver for the global economy as it has over the course of history. There are questions over whether China will continue to be the factory to the world – or rather retain its dominance – and perhaps some countries will look to be more self-reliant. Regardless, ET2C will continue to strive to identify more opportunities for our clients from better suppliers, new markets and in a more sustainable way. Inevitably, technology will also play an increasingly important role in this journey across all facets of our business but also in terms of how we all engage together.

Medical Supplies

We are nimble, which enables us to pivot when required. Consequentially, in what was an incredibly complex regulatory and environment, we managed to help our clients get some PPE products. Importantly, we did not lose one dollar of our clients’ money in an environment that was very high risk. It was important to follow our usual processes to ensure we were dealing with the right suppliers. The South China Morning Post referred to it as the “Wild West”. I am also proud to have supplied to the NHS as they ramped up their PPE stocks.

Top Industries

We work across multiple categories, but primarily these can be defined into two divisions, Consumer goods (Garden, Fashion, Pet, Toys, Furniture, Homewares and Health & Beauty) and Industrial goods. We currently source from India, China and Vietnam. Also, we are looking to add additional jurisdictions as part of our 2020 strategy. Countries being assessed at present include Mexico, Thailand, Malaysia and Taiwan.

Buying Office

Our Buying Office solution has always been the backbone of the company and helped the business to grow. I still believe that this is conceptually correct as there is no doubt that (particularly in these Asian markets) in order to control your supply chain it is important to have people on the ground at the source. Controlling suppliers, quality, on time delivery and compliance from a distance is very difficult. Our model is the most cost effective, transparent and simplest available and second to none.

office sourcing

Challenges and Opportunities

Always be prepared to take risks! One never knows which one will yield opportunities and ultimate success! Who would have thought that dealing in body Jewellery would create the business we have today. It has been an amazing journey full of good and challenging experiences – albeit not always pleasant – but that is life and looking back I really look forward to the next exciting episodes! I look forward to celebrating with everyone at next year’s 20 year celebrations!

et2c team

With almost 20 years of experience, ET2C is well positioned to help you with all your sourcing needs, whatever they may be. We look forward to designing new solutions to make your business more successful. Please contact us at contact@et2cint.com.

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Buyers meet Suppliers. 5 key metrics to find the perfect match

Industry Insights / / , ,

Buyers Suppliers partnership sourcing Asia ET2C

Buyers are primarily responsible for planning, selecting and buying products for companies to either use in their everyday operations or resell to customers.
They research markets, analyze competitors, negotiate prices. Furthermore, they evaluate, test and eventually buy products and monitor purchase orders. Above all, they are the deal-makers.

Buyers and Suppliers

To succeed in these tasks, buyers also need to build up strong and trusting relationships with suppliers.
Good collaboration between buyers and suppliers is essential to efficiently delivering goods on a commercially sustainable basis.

If this cooperation fails, then the supply chain can begin to break down. This can cause disruption that results in intermittent supply, price fluctuations and quality problems.

Buyers Suppliers. partnership collaboration ET2C

5 key metrics to create the perfect match.

Certainly, relationships matter – even more so with the current travel restrictions in place. Moreover, if you are planning to outsource manufacturing to low-cost countries, you might need additional assistance. True partnerships and the benefits that they can deliver over the medium term will be increasingly important going forward. In this article, we will be providing you with the 5 key-metrics to find the perfect match with your suppliers.

1. Location

Selecting the right supplier requires you to understand why this company’s location is best suited to your needs. There may well be a variety of locations that suit your needs and understanding a range of factors will allow you to make the most informed choice.

sourcing location map Asia ET2C Int.
To find the best suited to manufacture your products, be sure to consider general key factors such as manufacturing capability, market experience, size of the business, financial health and IP as some examples. Also, it is paramount to consider those elements that relate to a specific location. These include access to certain raw materials, ability to export, exchange rate fluctuations, to name just a few.

2. Communication

At the outset, be clear as to the expectations. Set up a critical path with key milestones and agree with your suppliers what you expect from them as part of the management of the information flow. For example, make sure that there is a clear specification sheet that provides product details, colourways, packaging requirements, etc. This eliminates the risk of timing issues or mistakes executing the product quality. Remember: transparency is key to go far together.

Buyers Suppliers communication idea pitch speech

3. Quality Control

Never underestimate the importance of quality assurance and control as an integral part of a production process. Identifying the risks of a production within a critical path should be discussed internally and with the factory from a product perspective and then a quality program implemented to address any of these. Problem-solving is great but problem prevention is even better!

4. Delivery

Any production will always have issues and being able to address these in a timely manner is what is key to hitting delivery deadlines. A key component of this comes down to the supplier relationship and the communication channels. We always say a problem is not a problem if it is identified early and can be addressed.

5. Culture

When selecting a supplier, be sure to consider a wide range of factors, such as quality assurance, certifications, product innovation, terms, MOQs, capacity, stock holding, to name a few. But this will not be enough. You should ultimately be sure that your interests are shared, or at least aligned.
Look at your suppliers as an extension of your own enterprise. Make certain that your supplier’s company culture matches with the culture of your company. For example, this could involve ethical and management standards to ensure a safe working environment for local workers or sustainable production choices.

company culture ET2C Int.

Need help to find the right match?

One option is partnering with a product sourcing company which has a presence on the ground in the local market, product knowledge and can add value when it comes to managing the supplier from development through to shipment.
In the main, having some kind of local presence will only help enhance these relationships whether it be your own office, a sourcing company or some other third party presence.
At ET2C, we provide our clients with the transparency needed to best manage their suppliers across Asia and help with any risk mitigation strategy. For more information on how we can help you, please contact us at contact@et2cint.com.

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The Sourcing Quiz!

Company News / / ,

Sourcing Quiz ET2C

The past couple of months have been nothing less than extraordinary. With half the world on lockdown – to differing degrees – people have had to adapt to a new way of existing. Retail has generally been ‘on pause’, restaurants and bars have been shuttered to abide by social distancing requirements and sporting events have all but disappeared from screens, newsreels and social chatter. The newsrooms have been churning out feeds that endlessly cover statistics such as fatality rate, confirmed cases, ‘R’ and the latest subject of many news outlets, personal protective equipment (“PPE”). Economies are hurt, stock markets are down and earnings reports during Q2 do not look particularly promising.

Sourcing covid19 covid virus coronavirus

It is all rather bleak…So, to cheer everyone up, we thought we would provide you with something a little different and do a quiz to provide a little bit of respite from the ‘Corona’ news cycle. This will be split into four sections covering Geography, Sourcing, ET2C International and General Knowledge. For the top scores, we will be picking three lucky winners, who will receive a prize to help during these lockdowns. All you need to do is 1) like the article, 2) share it and then 3) email your answers to the following email; sourcingquiz@et2cint.com. We will let you know the answers by return. Good luck!

Geography

1) Tokyo is the largest city in Asia by Population, but which city takes the number two spot in the rankings?
a. Shanghai
b. Delhi
c. Ho Chi Minh City

2) Shanghai is also known as:
a. City of Lights
b. Pearl of the Orient
c. Fragrant Harbour

3) China’s coastline stretches from the Russian Border in the North, to the Gulf of Tonkin in the South, but how long is it in Kms?
a. 10,000 Kms
b. 12,500 Kms
c. 14,500 Kms

4) Excluding Hong Kong island itself, there are how many islands of over 500 m2 that make up the territory (to the nearest 50)?
a. 50
b. 150
c. 250

5) The ‘Silk Road’ was the first main trade route between continents and stretched from Xian through central Asia into Europe between the 2nd Century BC to the first century AD. How long was it?
a. 5,000 Kms
b. 7,000 Kms
c. 9,000 Kms

6) ET2C’s Shanghai Office is located at 175 East Yan An Road. Which landmark is the closest from this location:
a. The Bund
b. The Oriental Pearl TV Tower
c. Yu Garden

Sourcing Shanghai ET2C

Sourcing

1) ‘AQL’ as part of the internationally recognised inspection methodology stands for?
a. Acceptable Quality Level
b. Adverse Quality Level
c. Advertised Quality Level

2) Over half the world’s shoes are currently manufactured in:
a. China
b. Vietnam
c. Indonesia

3) How many cubic metres are there in a 20 Ft container, to the nearest cubic metres?
a. 28
b. 30
c. 32

4) If your sales are 100 and your costs are 80, what is your mark-up?
a. 15%
b. 20%
c. 25%

5) Manufacturing wage gains are often fastest in low-cost countries. Which country had the highest manufacturing wage gains in 2018/2019:
a. China
b. Indonesia
c. Cambodia

6) The value of orders cancelled or put on hold for Bangladesh suppliers (approx. 80% of their manufacturing industry) due to Covid-19 lockdowns across the West and US is estimated at:
a. $500 Million
b. $1.5 Billion
c. $3 Billion

ET2C International

1) When was our Vietnam office first opened?
a. 2006
b. 2008
c. 2010

2) The company’s original name was?
a. E-Trade
b. ET phone home
c. E-trade2china

3) Which category of product does ET2C not supply?
a. Shoes
b. PPE
c. Space Rockets

4) ET2C’s first client was a:
a. A metal working company
b. A supermarket chain
c. A body jewellery company

5) ET2C has a broad range of solutions, which was the first solution the company offered back in early 2001?
a. Quality Services
b. Buying Office solution
c. Sourcing

6) Which country did ET2C predict would win the now postponed Euro 2020 Championship this coming summer:
a. Italy
b. England
c. Germany

General Knowledge

1) A collective noun for a group of Owls is:
a. Flock
b. Parliament
c. Hoot

2) How many players are there in a volleyball team?
a. 6
b. 8
c. 10

3) The national flower of France is:
a. Rose
b. Lily
c. Iris

French Girl flowers

4) The British Monarch owns every one of these across the United Kingdom
a. Oak Tree
b. Swan
c. Beach

5) What constellation can be seen on the Australian flag?
a. The big dipper
b. The Southern Cross
c. None – just a collection of stars

6) Usain Bolt ran the 100 metres in 9.85 seconds to set a new world record. How many seconds would a cheetah be able to knock off that record at full speed?
a. 2 seconds
b. 3 seconds
c. 4 seconds

Did you have fun?

We hope that you enjoyed our quiz and it gave you some respite from all the doom and gloom. Please do remember to like and share our article and send your answers to sourcingquiz@et2cint.com for your chance to win a prize in our draw (or perhaps to challenge one of the answers!). We will be making the draw on the 10th May 2020.

At ET2C International, we are well placed to help manage your Asia Sourcing across multiple markets. We can help you through this difficult period at a time of heightened risk. Should have any queries on Asia sourcing, or more specifically China sourcing, Vietnam sourcing and India sourcing, please contact us at contact@et2cint.com.

The Sourcing Quiz! Read More »

Asia Sourcing in the “Corona-Age”

Industry Insights / / , ,

Asia Sourcing Coronavirus surgical masks

 

Asia Sourcing in unprecedented times

Half the world is on lock-down. Countries and economies are on ‘pause’. Cities, towns and villages are all empty as people remain indoors. These truly are unprecedented times.

Clearly the impact on Consumerism is, and will continue to be, significant and for how much longer? The past two decades have seen the emergence of an increasingly voracious ‘consumer’ riding largely on the growth of the Asian outsource manufacturing sector. Retailers and brands have leveraged this low cost manufacturing model and given consumers more choice, more flexibility and more channels to buy through than ever before. Now these consumers are having to re-think their past behaviour and in fact the very fabrics of their daily lives. It is very likely that this global shock will change how people see their existence and what they value.

Impact on the Export Manufacturing Sector

There will be ‘Winners’ and ‘Losers’ on the other side of this pandemic. We want to look at this in the context of Asian sourcing and what this means for the export-manufacturing sector.

The Economics

China has already had its ‘Covid-19’ moment and is already talking of a V-shaped recovery after the shutdown of its economy over Chinese New Year – to the point that the Canton Fair has only just been ‘postponed’ in the past week. Factories were all mothballed as workers had to remain at home rather than begin their migration back to work (notably there are still some 300 million migrant workers in China). Well, they have now returned to find the outbreak that started in the back streets of Wuhan has created an economic tsunami that is fast making it’s way back across the oceans and seas from Western shores.

Having already suffered over the period, these suppliers now face a global demand shock. The impact of this, albeit hopefully only over a short period, could be significant for certain suppliers. Notably, there has not been anywhere near the magnitude of Government support (at the time of writing).

The Response

One sector that is particularly at risk is the fashion industry and more specifically garment manufacturers. This is one manufacturing sector that is truly widespread across not only Asia due to the low barriers to entry and the reliance on cheap labour. The global fashion retail sector (apparel only) has a retail value of $1.4 trillion. This is the equivalent to each person spending just over $200 each for the year. The UK’s fashion retail sector has annual sales of £53.8 billion as part of this.

Asia Sourcing Coronavirus fashion catwalk

In any crisis of such magnitude, the initial reaction is to look after yourself. The same applies to companies and looking after and protecting the business for the future. Tough decisions are inevitable, particularly when sales take double-digit hits. They will ultimately set the tone for future relationships in what is possibly going to be a different business landscape. These decisions will define certain brands for years to come.

Industry Insight

Back in the 1970s, retailers began shifting production to the Far East, leveraging the low costs to expand volumes. Now there are many examples of retailers and brands of simply pushing their issues back up the supply chains. The tragedy is that these Asian suppliers have in the main not had any Government support. They have committed their own resources into raw material and labour and are now ‘left holding the baby’. As reported by The Times, in Bangladesh, where clothing makes up 84% of the country’s $40.5 billion exports, some 954 factories have seen order for 823 million garments ($2.7billion) cancelled according to the Bangladesh Garment Manufacturers & Exporters Association (BGMEA). Consequentially, the Government are stepping in to cover one month’s wages for 4.1 million workers. However, this is little consolation for an industry and a country that has allowed large Retailers and online stores to generate significant wealth for their shareholders.

Asia Sourcing Coronavirus

The importance of Partnerships

For a number of companies who preach ‘business ethics’, ‘ethical sourcing’ and ‘sustainability’ and have simply cancelled orders, shame on you! The same applies to retailers who have used the opportunity to negotiate significant discounts as suppliers cower on their knees. It is likely that such retailers and brands find scant support to restock or develop new ranges once the world has recovered from this Pandemic.

Of course, a lot of Retailers and Brands have looked to find commercial routes through this crisis, but we have been encouraged by the commitment, transparency and fairness by the actions of a number of companies. Their mindset has been much holistic and looked at the importance of partnerships across their supply chains, even to the point of appreciating the impact the financial consequences will have at a worker level. It will be these companies that will (and should) prosper in the future. Hopefully, from an Asian sourcing perspective, the scars of this virus will stand as a reminder to how suppliers have been treated.

The key points to remember during this period are therefore:

  • Partnerships

Developing relationships has always been an important part of sourcing from Asia. They take time to build and it is possible to get significant benefit from suppliers that are treated as true partners over the medium to long term.

  • Ethics

If you preach ethics to your consumer, investors and wider stakeholders, then you need to be practicing it. This is an area that is becoming increasingly important at shareholder level as well. We are not suggesting that tough decisions are not to be made, but rather than need to be fair and take into account a broader range of interests.

  • Sustainability

Inevitably, during this pandemic, people have had more time to think. More time with family. More time to themselves. One possible outcome may be for the ‘consumer’ to reassess the way that they have spent money in the past. Perhaps look to spend more sustainably in the future whether it be on sustainable businesses, sustainable products or just in their broader behaviour.

Asia Sourcing Coronavirus Partnership

Summary

We are in unprecedented times, and certainly there will be change on the back of this global crisis. Think through the broader impact of the business decisions that you make. Focus not just on the short-term (appreciate that will likely be the focus) but on the medium to long term. There will be ‘winners’ and ‘losers’. An important part of this will be the suppliers (“partners”) willing to work with you in the future.

At ET2C, we are well placed to help manage your Asia Sourcing across multiple markets. We can help you through this difficult period at a time of heightened risk. Should have any queries on Asia sourcing, or more specifically China sourcing, Vietnam sourcing and India sourcing, please contact us at contact@et2cint.com.

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Entering New Asian Sourcing Markets

Industry Insights / / , , ,

New Asian Sourcing Markets ET2C

 

While upsetting the start of 2020, the coronavirus has highlighted the importance of having a diversified sourcing strategy. It is true that many companies were already casting their net outside of China to identify suitable suppliers as part of a broader strategy to ‘de-risk their supply chains’. Most recently, US businesses have found themselves looking for other sourcing jurisdictions as a means of mitigating the penal tariffs imposed by the Trump administration in 2019. Although these have now abated as part of the ‘Phase One’ deal, certain categories are still subject to additional tariffs and where this is not the case, US companies have taken the hint to look beyond China for some of the product ranges. Asian sourcing is now integral to buying from this part of the world.

Asian Sourcing Markets.

China, with its scale, will remain an important part of any sourcing strategy but it is likely that a ‘China plus’ (China plus one other jurisdiction) or ‘China plus plus’ (China plus more than one other sourcing jurisdiction).will be the strategy of choice for companies leveraging the benefits from the Asian sourcing sector for the foreseeable future. Over the past decade, alongside China, Asian nations with an abundance of low-cost labour have looked to export manufacturing as a means of growing their economies and creating wealth for their workers. Vietnam, Bangladesh, India, Indonesia, Cambodia, Laos and to a less extent Thailand can all be added to this list.

We have therefore been speaking to our teams based around Asia, to gather some insight into what considerations companies should review when entering new markets and engaging with new suppliers. It is certainly true that the Chinese manufacturing base has, over the last 15 years, developed an understanding of what it means to export goods to certain markets and have been able to tailor their services to align, in some cases seamlessly to their clients’ needs.

Insight

Our perspective comes mainly from a Vietnam/India sourcing context but does take into account other markets across the region. We have also looked to identify points that are common to most Asian markets rather than list market specific issues. These are as follows:

1.Do not underestimate culture & language.

Dealing with a Chinese supplier is wholly different from dealing with an Indian or a Vietnamese supplier. Whether it is an interpretation of an email, timelines, quality-assurance standards etc., make sure you are clear in communication and be rigorous in validating any information provided.

india culture

 

2.Cost should not be King.

Cost is germane to any purchasing decision and margin is often still the main metric that buyers are judged against. Often to make Asian sourcing work and new suppliers to be onboarded, a longer-term view needs to be adopted. This may mean entering into a trial phase to understand the factory’s capability under production conditions. It may mean that the cost is similar or even higher than the price point of your incumbent supplier. Possibly, see if you can get a Bill of Materials(cost breakdown) to further understand any cost drivers and/or anomalies.

coins cost Sourcing

3.Understand the complete supply chain.

China’s manufacturing sector is vast compared with some of its Asian neighbours. There are still some 300 million migrant workers in China. You look at Vietnam as the ‘workshop’ of the World and the total population is only 97 million. The point being that with scale comes the large supplier network, infrastructure, market competition and raw material availability. Therefore, you should understand the different aspects of the supply chain. Is the raw material locally sourced or from overseas? What does the labour pool look like? What are the cost implications of this? Are there additional lead times? There may be manufacturing limitations in a particular market; for example, the cost of a PU finish on metal worked products in Vietnam is expensive. Ultimately, this will all play into the commercial opportunity. It is important to do your due diligence.

forklift asian sourcing markets quality control

4.Over-manage production & quality.

As with any new production, it is important to over-manage the production process and quality piece to ensure you are getting the visibility you need. Keep people on the ground to monitor the production and conduct the inspections as the products come off the line. That visibility is key.

5.Logistics.

Although there has been a significant uptick in investment in had infrastructure across the Asian region, make sure you understand which ports your products would be shipped to, how they get there and any possible bottlenecks. For example, certain ports may only have one shipment per week to your local market.

seaport logistics asian sourcing markets ET2C

 

6.Be patient.

Do not expect the same type of relationship and information flow compared with factories that already know how you operate. There is likely going to be a learning curve as the supplier develops an understanding of your product. In some cases, you may not get to the price points you require initially, but, as above, this needs to be looked at over a medium-term horizon to develop viable suppliers in alternative markets.

Summary

There is no doubt that a broad Asian sourcing strategy will help mitigate risk and provide opportunities across the region. Entering new markets does come with challenges but as long as this is done correctly, then there are considerable benefits to your business.

At ET2C, we are well placed to help manage your China suppliers but also help you penetrate new sourcing markets and leverage the benefits using our on the ground expertise. Should have any queries on Asia sourcing, or more specifically Vietnam sourcing and India sourcing, please contact us at contact@et2cint.com.

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Asia Sourcing in Flux – Coronavirus, Asia & Beyond

Industry Insights / / , ,

Asia Sourcing Coronavirus ET2C

 

Introduction

The eyes of the world are watching the daily updates as the virus spreads. Context has left the building (seasonal influenza appears to be more infectious and more deadly at the time of writing). Just like with SARs, there is fear and hysteria. The WHO have now been let into ‘ground zero’ to help manage the contagion and the Chinese Government are putting more resources into managing the outbreak. Talk of containment are more frequent.

However, China is largely ‘on pause’. Mass quarantining on an unprecedented scale has been implemented across the planet’s most populous nation. 760 million people are in effective lockdown, with movements to and from apartment blocks being controlled and, in some locations, each household is limited to one family member leaving every couple of days. Places where people congregate are being avoided. In major cities, offices are quiet as staff work remotely at home. Restaurants, bars, shopping malls are ghostly silent. Schools have been suspended. Travel restrictions, both internationally and domestically have left transport hubs idling. China’s central bank is even going disinfect and store used banknotes before re-circulating them. Uncertainty prevails with no known end in sight, just the constant update to the numbers; cases confirmed, deaths and recoveries.

Asia Sourcing bank of china coronavirus

Asia Sourcing

What does this mean for China sourcing? What does this mean for Asia Sourcing more broadly? The Chinese manufacturing sector had already been hit in 2019 by Trump’s tariffs and this outbreak has further deepened the impact on factories across China.

From a China sourcing perspective, the current picture is one of confusion, with local municipal authorities implementing their own preventative measures. This requires each factory to submit detailed records of where workers have been, potential quarantines and additional preventative measures on the factory floor. The net result is that although large swathes of China’s manufacturing belt have ‘officially’ been opened from the 10th February, factories have not been granted permission to open at a local level or, if they have, they are still waiting for non-local workers to either return or complete a 14 day quarantine period.

The impact on the Chinese workforce.

Other than Hubei Province – on complete lockdown – you will need to understand the individual circumstances of each factory. How many non-local workers do they have as a mix of the entire workforce? When will permission to open be granted? What will be the capacity and output when they open? Are there any bottlenecks further down the supply chain with the supplier’s suppliers?

Beyond the factories, transporting goods to warehouses and through the Ports will likewise be problematic. There will be inevitable disruption as Carriers have removed capacity, and as output picks up it will take time to adjust to bring capacity back (and potentially address a surge in outbound shipments).

shipment-goods Coronavirus et2c

Asia manufacturing will undoubtedly also be impacted. China’s size and scale has cast a shadow across its South East Asian neighbours. For example, components that are usually shipped from China to Vietnam’s factories will be delayed. Chinese managers, who are often commonplace in factories beyond China, will be stuck due to travel restrictions imposed in some countries. There is therefore no doubt that the ripples of this outbreak are not solely limited within China’s borders but will be felt across the world from the factories of Asia right through to retailers and Brands.

Our Insight

Although this was certainly not part of our predictions for 2020, we have been speaking to our factories and partners across China to get some insight on what this will mean. Clearly there are still a lot of unknowns but China and its workers want to get back to work. They need to.

1. Impact on Shipments

As a broad estimate, we are seeing this adding between 2-4 weeks to shipments post CNY. You need to understand what the impact is at a factory level and when the situation can begin to ‘normalise’.

2. Stock Levels

Given the disruption, it is essential to try and ensure that you have priority when it comes to capacity. Add volume to upcoming orders, and quickly, to both confirm capacity and to replenish stock levels given the potential inbound delays. It may also help to place stand alone replenishment orders that can quickly be produced and shipped out.

shipment goods Factory coronavirus ET2C

3. Development Cycles

It may be that development cycles have been impacted and critical paths have missed certain milestones. Look at how you can fast-track these to make up time, or by using technology (for example, photos rather than waiting for couriers to ship to your home country).

4. Other Countries

Although it always takes time to onboard suppliers, it may be that there are opportunities in other markets across the Asia sourcing spectrum. India and Vietnam are good options.

5. Surge

Just like after SARs, when there was a bump in economic activity, it is likely that there will be a surge in both orders and shipments coming out of China once factories have worked through the preventative measures that are needed on site. In particular, this may impact freight rates in the short term. Make sure you are leveraging any relationships you have with your carriers in this regard to secure ship dates as well as good pricing.

Summary

The impact of this outbreak has been unprecedented, having been amplified by the timing around the CNY holidays and the movement of some 700 million people. We are constantly working with our suppliers in China to get timely and accurate updates to our clients.

At ET2C, we are always looking to find solutions for our clients. Should you have any queries on China sourcing or more broadly Asia sourcing and new opportunities, please contact us at contact@et2cint.com.

 

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The Benefits of Outsource Manufacturing

Industry Insights / / , ,

Benefits of Outsource Manufacturing ET2C

With more and more competition cropping up all the time, most businesses are looking for ways to differentiate themselves. Outsourcing your production can be the perfect way to reduce overheads and increase the flexibility of your supply chain. In this article, we will be providing you with an insider’s look into the many benefits associated with outsourced manufacturing, particularly from an Asian perspective.

Why Outsource Manufacturing?

The whole premise of outsource manufacturing was initially built upon a significant reduction in the cost of goods. Rather than having to invest in a manufacturing plant, manage large numbers of factory workers and cover large unwieldy variable monthly overheads – all that would form part of your product cost – it was possible simply to pay a unit cost for a product. When access to mass market third party manufacturing was available, particularly at a time when China became a member of the WTO back on the 11th December 2001, companies had a choice as to whether to retain their own manufacturing plants or reduce overhead and create a more flexible and dynamic supply chain.

Outsource Manufacturing ET2C

Outsourcing to Asia.

Outsourcing to Asia has generated significant margin opportunities due to the comparable, lower, operational costs in these developing Asian economies. Some of the main savings have been historically generated as a result of lower labour wages. Although manufacturing wage gains are fastest in low-cost countries, the savings that can be factored into the cost of goods are still significant.

Some examples of average monthly manufacturing wages by country and the annual wage change over the past couple of years:

  • China, approximate monthly average salary, $500/ Wage gain, 6%
  • Thailand, $450/5%
  • Indonesia, $380/9%
  • India, $280/10%
  • Vietnam, $250/8%
  • Cambodia, $200/11%
  • Myanmar, $150,12%.

This is a relatively predictable path for developing economies as growth of the manufacturing sector has a direct impact on blue-collar workers’ salaries, as part of the broader wealth creation piece. Just to reiterate the point, Poland, which is one of the largest manufacturing economies in Eastern Europe, has an average wage of $1,400 per month, and the relative increase is approximately 5%.

Cost still a Key Benefit?

Back in the early 2000s’, the cost savings were significant when production was outsourced to Asia. Is this the case still today? Are there any other benefits of outsourcing your production today?

Quality VALUE Cost

1. Cost

Cost will always be a factor behind looking to outsource production. Certainly, it has to make commercial sense, and this is the primary driver for looking at Asian manufacturing. Even with China’s cost base having increased significantly in 2019, with tariffs now in place from the US and likely to remain so for the foreseeable future, there are still manufacturing efficiencies and technology capable of helping the ‘China machine’ retain some of its relative competitiveness.

2. Raw Material Availability

With the scale of manufacturing that has risen across Asia for the past three decades, there has also been an evolution in raw material supply channels. In particular, China has developed sophisticated supply chains that lead not only to access of raw material but also sub-components and accessories.  In fact, this helps reduce costs as everything can be sourced locally (and often nearby your plant).

Raw material ET2C

3. Flexibility

Finally, outsource-manufacturing has enabled companies to better manage their working capital and reduce significant investment in their own manufacturing plants. It is one of the reasons that in this internet age, a start-up can grow so quickly given the barriers to entry have been markedly reduced, if not removed altogether.

4. Quality

With the right quality strategy, it is possible to deliver excellent quality from Asia. There are a significant number of factories which have developed an excellent understanding of quality requirements for export.

5. Expertise

Using outsource manufacturing can immediately enhance the expertise and capability from a knowledge capital perspective. And this applies to any company as long as it is possible to find the right partner to make your products. Even the simplest products have to go through a range of different manufacturing processes and essentially buying this expertise greatly reduces any potential learning curve. It has also greatly reduced any barriers to entry.

Summary

There is no doubt that outsource manufacturing is an integral part of any Brand, Retailer or Wholesalers’ supply chain strategy. One only needs to look at one of the largest brands in the world, Apple Inc, who use Foxconn as part of their iPhone manufacturing strategy. Undoubtedly, it is essential to understand the risks of manufacturing your products overseas. It does not come without risks and understanding these, creating some form of ‘upstream’ presence and ensuring you have visibility at all stages of the production, will make sure that these are effectively managed.

At ET2C, we are capable of walking you through each aspect of the manufacturing process. For more, please contact us at contact@et2cint.com.

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Sourcing Trends: Our Predictions for 2020

Industry Insights / / , ,

Sourcing Trends 2020

 

Sourcing Trends – What happened last year?

Sourcing Trends 2019. The past year has presented a range of challenges. Traditional ‘bricks and mortar’ retail models have struggled to connect with their customers in a new digital world. On an economic level, there has also been weakness in certain currencies that has impacted the cost of goods Ex-Asia for markets such as Australia. Maybe most pointedly, 2019 has also seen an increase in protectionism coming to the fore.

The headline of this protectionism has clearly been the US/China ‘Trade War’ and the impact this has had on sourcing strategies – and not just for US companies. The escalation in tariffs on Chinese products throughout the year caught many by surprise. Particularly, how quickly they were implemented without any real policy guidance but rather cajoled on by the President’s unpredictability.

At the start of 2020, we have therefore been sitting around our crystal ball to set out our predictions for the sourcing trends over the coming 12 months. What will the consumer want? What will be the impact on the outsource manufacturing sector? Which markets will be most relevant?  Any new technologies? Clearly, these are only our insights and thoughts, no one can really predict the future!

Predictions

 

1. US Tariffs

Although it is fair to say that there has been a slight de-escalation in tensions between the US and China towards the end of 2019, we expect the ‘Phase One’ deal to be more of a place-holder. The main terms of any trade deal, namely IP protection, currency manipulation and market access, have largely been brushed under the carpet at this stage to help both leaders.

Prediction: We therefore expect tariffs to remain in force largely for 2020 on Chinese goods to the US. Probably, they won’t be at the level of the phase 4 tranche that was never implemented back on December 15th. Most likely, they will remain in place until the agreement on the ‘Phase Two’. This will lead to a continued ‘de-risking’ by US companies over the medium term.

USA China Tariffs

2. US Tariffs (part 2)

Trump has already pointed the finger at other countries when it comes to what he sees as unfair trade practices. India has already retaliated against the US removal of trade privileges under GSP midway through 2019.

Prediction: Expect other Asian countries (possibly Vietnam) to be caught in the US-President’s vow to readdress any unfair trade practices.

3. RMB/USD Exchange Rate.

Given the warming (or perhaps de-frosting) of the US/China relationship, there will likely be a gradual appreciation of the RMB towards the rates earlier in 2019.

Prediction: Expect the RMB weakness, which was used as a tool to counter the impact of US tariffs to be largely rolled back as negotiations continue on a positive track to 6.7 RMB to the Greenback towards Q4 in 2020.

money China RMB CNY

4. Ex-China Sourcing

Although China will continue to be an important market, companies will continue to look outside of China for select ranges or product categories to ensure that they have market diversification. Surely, this will be a key sourcing trend for this year.

Prediction: Other Asian markets to continue to take relative market share from Chinese manufacturers. Scale and capacity to be increasingly important and therefore the main beneficiaries are likely to be India, Vietnam, and Indonesia. Certainly, their markets will be important but on a much more targeted (product/market) basis.

5. Radical Supply Chain Transparency

A key element of a sustainable supply chain and providing the consumer with complete transparency of factories, raw material origins, ethics and even carbon footprint will continue to be sourcing trends that should not be ignored. It is becoming an increasing component of any buying decision.

Prediction: Retailers (particularly in the fashion sector) will provide more visibility, also by using new technologies. For example,  they will use Blockchain platforms to provide complete traceability of the product purchased at retail.

Sourcing trends manufacturing factory

6. New Competitors/Capacity Constraints

Companies will need to be more careful about supplier selection as well as ensure all legal protections are in place at the start of any relationship. In fact, the rise of platforms like Amazon, will enable factories to develop their own ranges and compete in your markets.

Prediction: Suppliers competing in sales markets with cheaper substitute products via Amazon and other platforms, effectively cannibalizing capacity and competing for the same consumers. Also, domestic sales markets taking up capacity again.

7. Rise of Innovative Materials

For sure, companies will continue to develop and invest in sustainable and innovative materials as part of the sustainability demand.

Prediction: Part of this innovation will inlcude plastics and packaging for sure. Also, a new type of biodegradable plastic will become more available to the mass market and new packaging solutions to enter the Asian market (for example, for shoe boxes).

8. England to win Euro 2020

Who knows, we won a world cup back in 1966, and it’s about time we win a European Championship!

Summary

International Trade is closely aligned to global growth and the movement of goods across borders. The ‘impending recession’ that economists pointed to back in 2019, with the arrival of the inverted yield curve, has seemingly been avoided and 2020 will hopefully bring greater certainty for retailers and manufacturers alike. Therefore, an air of predictability would be a welcome tonic and help companies manage any sourcing trends in 2020.

At ET2C, we are always looking to the future to ensure that we are providing our clients with the most relevant services and products. Please contact us at contact@et2cint.com.

HAPPY NEW YEAR of the RAT.

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We Are Garden: Vietnam Sourcing Insights

Industry Insights / / , ,

Garden Vietnam Sourcing Pottery

 

Garden Products: Key Sectors and Strengths

ET2C’s Vietnam Sourcing Team has already identified opportunities within the Garden & Outdoor sector exclusively from Vietnam due to raw material availability as well as manufacturing capability already in situ. Combined with other political, social and economic factors, Vietnam presents an opportunity on the global stage.

Although the relationship between the United States and China appears to be thawing, Vietnam continues to attract business from US buyers due to the current tariffs imposed on Chinese products, which will mean costs rising by anything up to 25% later on this year (should the US and China not come to an agreement). Clearly, companies are also looking to de-risk and look to spread their supplier base across multiple jurisdictions. The Vietnamese manufacturing sector will be an important part of any such Asian sourcing strategy with many suppliers investing in additional manufacturing capability and R&D.

As your Asian sourcing expert, we highlighted some key sectors within this broad category. In particular, Pottery, netting, garden tools, garden gloves, plant supports, arches and obelisks, hanging baskets, coco-liners and furniture. To build on our ‘We Are Garden’ initiative, we recently spent some time with a couple of suppliers to provide some greater insight into their background, the industry and the possible opportunities. As part of our next in the series, we interviewed a Pottery supplier who exports to EU, US and Australia.

Vietnam Sourcing Manufacturing

Pottery Supplier

After a two-hour drive, we turned off the main road into a vast manufacturing site located in Binh Duong Province. Noticeably, the site was very busy with three containers being loaded with different ranges as we pulled in. The company CEO, Mrs T, was waiting for us outside of her office along with some of her key staff. As we were shown around their two showrooms, full of their different ranges and finishes, and their cavernous warehouse there was a clear sense that this factory was very well setup for export (they have TQM, BSCI, C-TPAT certification). Established in 1999, they are a manufacturer of ceramics, cement-based, poly(resin) housewares. Especially, their product portfolio includes but not limited to ceramics, Terrazzo, Terracotta, Pottery, High fired, Lite stone, Poly stone to name some key styles.

Vietnam Sourcing pottery manufacturing

Interview

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

Within Asia, I see Malaysia and Thailand as our main competition. They do not have the labour cost advantage that Vietnam has and therefore mainly produce larger sizes by machine. They also do not have the range of colour options. China is always a competitor, due to its depth of manufacturing, but they are certainly volume geared.

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

Sustainability means putting an emphasis on our staff and ensuring that they are treated in an ethical and fair way. Also, looking at focusing on the environment and our processes.

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

We have put a great focus on innovation and look to develop new and unique designs for our clients. Also, the service and quality we provide to our clients is key to grow our business with them as well as identify new clients at Global trade shows. We are also looking to engage more with social media.

4. What are your biggest challenges as a business?

From both an internal and external perspective, with increasing demand, we need to properly manage our staff base and production capability. One of the biggest challenges is the Government restrictions on pottery Kilns as we need to make sure we have space to fire our ceramics.

Vietman factory pottery

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

The pottery industry in Vietnam is well established and has been exporting products for a long time now. There is innovation coming into the Homewares category and this is evident with the introduction of lightweight options. These are cement compositions (such as polyresin) and have shorter lead times, are lightweight and can be used to make lots of contemporary styles. We have our own unique features, that we have honed over our years of experience, such as unique glazes, water & frost resistance, and special surfaces.

Summary

The Vietnamese Pottery industry is underpinned by over a thousand years of artisan expertise and has developed to the mass market offering that it is today. Although labour is still an important part, there is increasing investment in machinery to make the process more efficient. Moreover, this will detemine more advantageous costs on a global stage. New alternative materials have also become more prevalent as different options for the consumer.

As a Vietnam Sourcing Company, and having been on the ground for over 10 years, we have identified the Garden Product and Outdoor sector as a growth manufacturing sector in Vietnam. Where necessary, we have developed manufacturing capability at factory level to produce high-quality products at competitive prices. There is now a unique opportunity to source a breadth of products all out of Vietnam.

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

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Choosing Between Air and Sea Shipping from China

Industry Insights / / , ,

Air Sea Shipping China

 

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

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

 

How to Measure Costs

 

Sea Shipping

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

Sea shipping container sourcing ship

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

There are three types of container for ocean freight:

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

Freight on Board

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

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

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

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

Air Shipping

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

Air China cargo shipping

Current Considerations

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

New Sulphur Regulations: IMO 2020

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

Export Import FOB sourcing

Risk Management

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

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

Summary

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

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