2022 Mid-Year SE Asia Supply Chain Update Part 2: Where Are We Now?

In February 2022 we shared numerous critical supply chain strategies for 2022. Last month we updated our thoughts on several issues of note, including inventory, freight costs, supply chain diversity, the importance of quality checks and Taiwan.

In Part 2 of 2 we’ll talk about service lead times, tariffs, the Baltic Dry Index, logistics cost movement, and the ongoing impact of droughts, outages and lockdowns.


Inspections and audits still need lead time.

CMD has not been immune to the pandemic’s impact in the region. From time to time, our field staff’s movements have been restricted and quarantines imposed due to personal contact or travel through covid-affected areas. Uncertainty around outbreaks and travel restrictions are causing some suppliers to restrict unfamiliar outsiders – such as auditors – from their facilities if it might put their workers at risk. Even so, our local teams are aware of precautions and guidelines that keep them – and others – as safe as possible and expedite their ability to do their jobs.

ACTION:  Longer lead times for professional services are still the norm and should be baked into your timeline. Having local resources known and trusted by facility managers eases some of the concern and opens more doors.


Some tariffs remain for now, but still a “known-unknown.”

A recent Bloomberg article noted that US President Biden’s administration will allow his predecessor’s tariffs on hundreds of billions of dollars of Chinese merchandise imports to continue while it reviews the need for the duties. This means manufacturers still need to plan for unexpected costs, policy-initiated delays and the whims of political uncertainty.

ACTION.  Tariffs will likely become one of several tools used to manage US inflation and China-US relations. It may be prudent to check for and renew exemptions as they expire or become available to ensure you take advantage of opportunities as they arise.


Improvement in logistics costs.

Regional logistics and commodities costs are dropping and the US dollar is strengthening, providing an opportunity to reach out to Asia-based suppliers more frequently for updated quotes. For some routes, we have seen sea freight costs reduced by half.

ACTION.  It is a crucial time to remain flexible and in touch. Take advantage of cost reductions. Refresh quotes more frequently.


Baltic Dry Index.

A leading indicator of directional changes in the economy is the Baltic Exchange Dry Index which measures the cost of shipping raw materials and goods (as opposed to containers) worldwide. A drop in the Index indicates less demand, and vice versa.

ACTION.  The Index had been dropping (in line with 2018 pricing). Checking in with that index has been a crystal ball which future prices fluctuations can be viewed.


Lockdowns and droughts and outages.

In the short-term, droughts and power outages are less of an issue than they will be in the coming Summer(s).  Regional infrastructure (e.g., power generation) planning is underway but how quickly and to what extent it can forestall the effects of unprecedented biologic and climate-related issues remains to be seen.

However, unexpected lockdowns continue to test the patience of everyone. We are taking the recent relaxation of policies in HK as a sign of things to come for a broader audience.

ACTION.  Keep an eye on quarantine rules.


We’ll keep you informed.

As manufacturing leadership continues the exodus from China we understand how daunting the increasingly complex challenges can seem. Our geographically relevant teams are addressing the pitfalls and opportunities in SE Asia. Re-fresh your information more frequently and stay on top of how situations are trending. We are here to help.

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