The tit-for-tat trade dispute that has taken place between the US and China in June this year demonstrates an economic instability. This is why companies should always ensure they can adapt quickly to changes in global supply chains.
The feud between the world’s two largest economies has affected billions of dollars of Chinese steel and aluminium and US food exports. Given the scale of the tariffs, between 15%-25%, we can expect companies to start monitoring the cost implications and reviewing alternative sources of supply.
Such levels of taxation will inevitably lead to a shift in demand. Take, for example, the current situation in the UK. While still in the process of negotiation to withdraw from the EU, and with no formal tariff agreements yet reached, 11% of EU companies took the early decision to move some of their workforce out of the UK. According to a survey of more than 2,000 supply chain managers, a further 23% said they are planning to reduce their workforce to offset Brexit costs.
Coping with external global variants is nothing new for supply chain managers. But as customer expectations have grown in our ‘everything now’ digital era, organisations need to be as agile as possible if they want to react quickly and protect profitability.
If the procurement of products and materials needs to come from a new region, it’s also vital to ensure that this new supply chain can cope with the demands placed upon it. In doing so, you want to evaluate five key areas:
You’ll quickly need to establish how goods will physically be moved from A to B. Is it best moving via road, rail, air or sea? What are the risks involved? How reliable is this new line of supply?
2. Urgency vs cost
Depending on the priority, urgency or cost, goods can be transported via an airfreight express service or in part loads. Load management can be a crucial way to meet your obligations and keep costs to a minimum. Either way, there is a growing demand from customers to track progress at every stage of the journey via consignment tracking.
3. Supply chain network
How could the new source of products impact delivery and ensure timely supply to end users or customers? Is it time to re-evaluate the location of your global storage and distribution centres to ensure the most efficient flow of goods throughout the chain?
4. Negotiating customs
Are you going to have goods moving in and out of a new country with different import duties, regulations and processes? These can vary widely between countries and can have a significant impact on transportation times. How are you going to manage customs clearance?
5. Overall costs
Once you’ve factored in the new costs of transportation, storage, distribution and import tariffs, it’s time to reassess the new costs to your supply chain. You’ll want to determine that there is an overall saving for the organisation and evaluate what the new level of profitability will be.
Shifting supply from one region to another can often be a sensible decision. Making that change quickly, however, can throw up several challenges. Given the growing volatility across global trade, supply chain managers need to ensure they have the capability to react to external variants at speed.
Having the appropriate solutions and supply chain partnerships in place is the first step to negotiating all obstacles successfully. Professional logistics service providers help their customers to manage supply chain complexity by offering a broad range of innovative services. These can help companies to reassess their supply chain model, while also providing transport, storage and distribution solutions that allow organisations to overcome their challenges quickly and smoothly.