With China as the starting point of most global supply chains, its importance can’t be overstated—but we all know that already. Yet what’s been a challenging few years has been made worse by the more-frequent COVID shutdowns at Chinese manufacturing plants and shipping ports over the past few months.
It’s still a crucial time for importers to be thoughtful and strategic about their supply chains and not think the worst is behind us. Many risks remain, and the issues are broad. While we learn to live with COVID, companies in the US are still dealing with the effects of the Trump-era tariffs, which have not been reversed by the Biden administration.
Creating a path forward
Dealing with the current supply chain and sourcing challenges has taught companies that diversification is vital. And part of that is looking for partners in other countries. A reaction has been for importers to shift manufacturing to other countries in Asia, or other regions such as South America as alternatives. The term ‘nearshoring’ is becoming popular with companies looking to find new suppliers, as is setting up manufacturing sites closer to home. Over 60% of companies in Europe are considering reshoring, but there are some arguments that it’s more hype than reality.
But doing so is not so simple. It is under-appreciated how hard it is to actually free most supply chains from China. Companies have found that other countries’ lack of capacity and logistics infrastructure can make it more challenging and complicated.
And very often, regardless of where a product is manufactured or assembled, there is still a good chance it’s reliant on China in some way since so many vital raw materials still come from there. Right now, whether companies are sourcing products and materials from China, SE Asia, or South America, supply chains are more complex than ever.
With many companies intent on finding alternatives to China, here are some of the challenges to consider when planning such a shift.
- Ocean rates and capacity are still tight, and finding new carrier partners in new markets can be difficult and even more expensive.
- Diversifying suppliers makes P.O. and inventory management more complicated. Lead times, transit times, and basic supplier communication need to be coordinated, which takes time and opens up the possibility for more errors.
- Companies need to model all the options and understand the cost impact of the available choices, including sourcing, assembly, inventory management, transportation and Duty rates.
- Providing company-wide track and trace, and total supply chain visibility are more important than ever to know things are happening as they need to be and keep everyone informed.
Addressing these challenges requires expert supply chain management, including the technology to execute it. There is a lot going on with every scenario; companies need the ability to secure the capacity it needs at competitive rates and have options for different routings while still meeting delivery due dates—all with complete visibility.
How to make it work?
The list above are all expectations to have of your freight forwarding partner—who should take care of moving your freight and be the hub for all your supply chain information.
This includes leaning on them for all types of P.O inventory, and shipment updates, and to be proactive finding the best and most cost-effective routing options. A forwarder who is able to connect with your suppliers is a must-have, so they have direct visibility into what’s happening with product availability and ensure you’re made aware of any problems that come up along the way.
High shipping rates and port delays, regardless of the present challenges in China are still a thing, so shippers still need to remain vigilant. And, working with a freight forwarder who gives you visibility into the important details of your supply chain needs to be the priority.
Visit www.jaguarfreight.com to learn how our CyberchainTM software can connect your supply chain—from P.O. to final delivery.