US-China trade-war:  multinationals rethink their supply chains

The escalating US-China trade war is acting as a catalyst for multinational clients to rethink and redesign their supply chains for the future.   Working with multinationals in retail, healthcare, electronics and automotive sectors, TradeLink have observed the focus is not merely on navigating the impact of tariffs, but equally leadership teams are taking advantage of economic and geopolitical disruptions to radically re-think their supply chain strategies.

China is by far the world’s biggest exporter of manufactured goods and once considered the factory of the world.  Most multinationals clients have a significant portion of their supply chain in China, with longstanding supplier relationships and well-established procurement processes.  However, the impact of tariffs and volatility in trade conditions is steadily eroding China’s cost advantage and prompting multinational clients to look at rebalancing their global supply chains.

Here we outline just some of strategies and tactics that multinationals are adopting:

  1. Shifting of Chinese production to other Asian countries.

Long before the US-China trade-war, multinational clients were increasingly looking to emerging markets as an alternative to China manufacturing and sourcing.  Trade tensions however have accelerated a multinational trend of shifting production and sourcing to alternative markets, with Vietnam, Malaysia, Thailand, South Korea, Taiwan, Japan, India and Pakistan being the largest beneficiaries.  While China remains an important market for our multinational clients, the diversification to other regions is one strategy clients are adopting to mitigate the impact of tariffs and minimise disruption to global supply chains.   In tandem, TradeLink International has focused on building capacity and capability in these regions.  With an extensive partner network and on the ground specialist teams, we support our clients’ logistics challenges of managing a diverse ecosystem of suppliers.  Logistics support ranges from reconfiguring multi-modal cargo routes to transporting production lines and equipment to manufacturing plants outside of China.  Client’s require highly flexible and responsive supply chains to be able to modulate production by product and market type and bring resilience to the current trade dynamic.

  1. Negotiating with Chinese companies going global

While clients have been rethinking their supply chains, equally many leading Chinese suppliers and manufacturers have pursued international growth strategies in recent years through mergers, acquisitions and joint ventures.  By having agreements in place with Suppliers that offer capacity in multiple countries, clients are leveraging those long-standing relations to create sourcing capacity in other markets such as Brazil, India and Mexico.  Such procurement flexibility is allowing clients to mitigate risk across their global supply chains.

  1. On-Demand Warehousing

TradeLink’s partnered operated warehouses enables clients to quickly scale their inventory levels and fulfilment strategies to address the uncertainty of trade tensions.  Through our network of consolidation, cross-dock and warehouse hubs in Asia, Americas & Europe, clients can strategically hold inventory and safety stocks, buffering against the risks of supply chain disruption and accelerating response times to changing end-customer demand.  Clients benefit from flexible storage capacity and can access additional storage capacity as and when required, along with services such as vendor management, consolidation and multi-modal transportation solutions.

  1. Control Tower Solutions

An inevitable feature of clients reconfiguring their production and sourcing across global markets is added supply chain complexity.  Expanding supply chain ecosystems requires the seamless coordination across suppliers, ports, carriers and distributors for supply chain effectiveness.   While the advancement of digital technology enables the real-time management of the supply chain, TradeLink’s Control Tower solutions are augmented with specialist teams to coordinate across global suppliers, manufacturing facilities, consolidation centres, transport carriers, deconsolidation centres and end-customers.   TradeLink’s Control Tower solutions facilitate our clients in their global sourcing and fulfilment strategies by driving better planning, decision-making and execution across the entire supply chain.

  1. Rebalancing supply chains with digital technology

Managing a broad range of interconnected risks in moving or rerouting supply chains, setting up new partners and establishing new processes, is not an easy task and requires a holistic supply chain management approach.   Finding the sweet spot between shifting production with the benefits of reduced inventories, cheaper logistics and shorter cycle times, demands greater control and visibility across the entire supply chain.   As multinationals scramble to cope with an unknown trade landscape, clients are turning to digital platforms to facilitate better data-driven decision making and end-to-end supply chain visibility.   Internet of Things (IoT) enabled solutions is helping clients transform business processes and operations and proving the largest area of investment.  GPS-centric and telematic applications provide tracking and data information about routes, the condition of goods in transit and location of products is enabling clients to monitor their supply chains while keeping pace with consumers eCommerce driven-demand for order satisfaction.  RFID, barcode and Bluetooth technologies are being deployed to monitor goods in the warehouse.    IoT technology is growing in its sophistication and application while advancements in API’s are making it increasingly easier to integrate with legacy ERP & SCM applications.  TradeLink delivers proactive solutions, combining data and analytics with robust supply chain planning and execution processes, providing actionable insights for client’s strategic business planning, forecasting and proactive risk management.

While the trade war between the U.S. and China has undoubtedly created short-term instability and economic uncertainty, we see multinational clients seizing on the long-term opportunity to reassess their procurement and strategic sourcing initiatives.   The consequent reassessment is allowing clients to build greater resilience into their supply chains, leading to new investments, new locations and new opportunities.  Those that have a better understanding of their supply chain are poised to reduce risks as well as cost, ultimately emerging stronger and able to withstand future disruptive shocks.

US-China trade-war:  multinationals rethink their supply chains – For more information on this topic or to discover how we can assist you, contact us.

2019-12-10T10:05:56+00:00August 13th, 2019|Global Trade, Logistics Expertise, Supply Chain Management|