Turkey Sourcing: Part of a Global Sourcing Strategy
Turkey Sourcing now forms part of our expanding network of offices across the global sourcing landscape.
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.
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.
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:
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
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.
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.
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.
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 firstname.lastname@example.org.