India, Vietnam are Hot Supply Chain Options
A recent survey shows that close to two-thirds of the respondents believe India and Vietnam can function as alternatives to a China-plus-one strategy
A global report on supply chain management and the shipping industry says India and Vietnam could emerge as attractive alternatives for the world, which has been deliberating a China plus one strategy ever since the pandemic broke out in Wuhan province late in 2019. Informatively, Apple was among the early birds to follow this strategy, now described as “friendshoring”.
Germany’s Container xChange says in the report highlighting global trends in both supply chain management and shipping that 67% of all respondents believed India and China to be good options and that both would take prominence as containing shipping hubs in 2023, thus changing the layout of this global industry.
Of course, it is another matter that the United States has a now-hot, now-cold relationship with China and Russia which is what prompted them to seek other options. Readers would recall that many top tech companies struggled to up production as the Chinese supply chain broke post the pandemic and is yet to get back to full normalcy till date.
Apple set the early trend
Among the early movers was Apple which began diverting its iPhone production out of China to India. In fact, the company emerged as the best example of how to utilize a government’s productivity linked scheme to expand its contract manufacturing activities and develop an export hub for its products in a very short time.
iPhone contract manufacturer Foxconn expanded production facilities in Vietnam as well as India during the period though it might still take several months to move capacity out of China. Of course, it is another matter that the US continues to rely on China on imports of goods that include textiles, chemicals and electronic products.
Inflation and recession are real fears
The Container xChange report says 88% of all respondents pointed to inflation and fears of an impending recession as the major challenges impeding business during 2023. While 57% felt distressed by the Russia-Ukraine war, 53% felt nervous about the impact of another Covid wave in China followed by 23% who feared affirmative action by workers in the form of strikes.
In a statement, Christian Roeloffs, co-founder and CEO of Container xChange says, “the overall outlook for the year 2023 for the supply chain industry remains challenging. Europe is hit hard with all-time high inflation; China struggles to cope with the virus and the US continues to witness hinterland transportation challenges and labour unrest. Most of these challenges will stay in 2023. Consumer confidence will pick up, but it really depends on whether we witness more disruptions in the coming times.”
Most of the respondents to the survey believe that inflation and recession pressures would post a greater threat this year and could be the major driver of disruptions across the world. The general feeling is that labor unrest could also contribute significantly to uncertainty in markets around Europe, the UK and North America.
The report also highlights the growing possibilities of a consolidation around the third-party logistics market in 2023, with total volumes projected to touch $1,790 billion by 2027. Another factor brought out by the survey relates to digital transformation of the industry that will incorporate vessel schedules, intuitive booking interfaces, instant slot booking and capacity confirmations.