In February 2022 we shared numerous critical supply chain strategies for 2022. Now that we’re more than halfway through the year, we’ve updated our thoughts on those supply chain topics of most interest to our clients.
In Part 1 of 2 we’ll talk about where we are with inventory, freight costs, supply chain diversity, the importance of Quality checks, and …Taiwan.
Inventory continues to fluctuate.
Exports to our clients remain strong and logistics bottlenecks are easing. Inventories are being adjusted both up and down. However, where inventories have risen, inflation and threats of a recession are prompting some retailers to offer discounts.
ACTION: We still recommend taking a sober approach and avoid overestimating demand. Don’t wind up with too much inventory requiring discounting to unload it. Need advice on how to avoid a price “knife fight?” We’re here to help.
Freight costs are trending downward.
We anticipate the general cost of freight to continue to drop. As of the end of July, the composite world container index decreased by 0.9%, the 22nd consecutive weekly decrease and a 28% drop when compared with the same time last year.
ACTION: Keep an eye on trusted indexes for freight pricing changes and obtain competitive quotes from multiple freight forwarding companies to ensure you’re getting the market rate. When in doubt, rely on experts whose job it is to know the score.
Diversify your supply chain throughout SE Asia.
If there’s one lesson the pandemic has taught manufacturers, it’s the need for supply chain diversity. Many companies are now implementing backup suppliers – on shore and throughout South East Asia – to reduce risk. Many businesses and countries throughout the region are not only “open for business”, they are also actively courting and competitively pricing their capabilities.
ACTION: Now is an excellent time to explore your options. For example, favorable trade deals and increased availability of government incentives made Vietnam a hot target for foreign investment in 2022. The United States and at least eight other countries have been cleared for inbound air travel. If needed, we’re here to help expedite your competitive search and supply chain diversity requirements.
Pre-shipment quality checks save time and money.
China’s strict “zero-covid” policy means travel will remain tightly controlled and restricted. For international travelers who can obtain a business visa, a 7-day quarantine plus 3-day in-place isolation, at a minimum, will apply. Having local resources that can monitor product quality in real time is the best defense against time delays and unsatisfactory output.
Action: If you don’t already have geographically positioned QA/QC resources, enlist a team you can trust to help you organize inspections to oversee your interests and reduce risk of quality problems.
…And then there’s Taiwan.
There’s lots of opinion circling around US Speaker Pelosi’s and the US Congressional delegation’s trips to Taiwan. For better or worse, one thing’s for sure: China will respond and the US will respond to the response, and so it goes.
ACTION. Politics aside, we are anticipating regional trade to continue without disruption and our in-country resources to continue to provide expertise for our clients. For more than 30 years, weathering the political and economic headwinds in the region is what we’ve done best.
The bottom line: We’ll keep you informed and ready.
As foreign manufacturing leadership continues their exodus from China and experienced managers become more scarce, having the right in-country resources are critical. In these uncertain times, we know how to respond to the pitfalls and opportunities that accelerate our clients’ business in SE Asia. Your best bet is to hit the information re-fresh more frequently and stay on top of how situations are trending, and we’re here to help you do just that. Need an extra pair of eyes on your supply chain? Let’s Talk.