6 February 2024 (Lloyd's List) - NEARLY two-thirds of logistics professionals are looking to overhaul their supply chains by spreading production to multiple locations or relocating it to home markets and nearby countries, according to a new report.
A survey conducted by logistics research outfit Transport Intelligence on behalf of supply chain and warehousing specialist Agility found that 63% of 830 respondents were looking at their sourcing.
China is the main point of contention for many, with 37% saying the plan is to move production or sourcing out of China or at least reduce investment.
“Shippers and carriers are struggling to minimise supply chain risk and find new growth opportunities,” said Agility vice-chairman Tarek Sultan.
“Inflation and recession risks have eased, but the industry is still living with the aftershocks of the Covid pandemic. At the same time, businesses are worried about geopolitics — troubled trade relations between China and the US and Europe, and the thicket of sanctions against a growing number of countries.”
Half the respondents surveyed still expect a global recession in the year ahead, although this is an improvement since the last time the survey was conducted.
“There is a growing realisation within the global supply chain community that a return to ‘business as usual’ after Covid is increasingly unlikely,” said Transport Intelligence chief executive John Manners-Bell.
He said the development of a “multipolar world” in which emerging markets such as China, India, Saudi Arabia and Türkiye were jostling for position had created political tensions, often materialising in trade disputes.
Ethnic and territorial disputes, while often local, could create wider impacts, such as the proxy war in Yemen affecting Red Sea transits.
“Whatever the long term effects on the shipping industry, such developments only act to highlight the increasing risks which businesses now have to factor into their sourcing and off-shoring decisions,” Manners-Bell said.
This geopolitical landscape had to be considered in the context of economic pressures, with many countries still suffering the consequences of Covid-related fiscal stimulus packages which brought a spike in inflation.
“The resulting higher interest rates imposed by the central banks have had worldwide implications, for instance making it difficult for many exporters in the emerging world to gain access to trade finance and distorting exchange rates,” he said.
But this could also drive positive developments.
“Manufacturers supplying the US market are increasingly using suppliers located in Mexico or establishing new factories there,” Manners-Bell said.
“Shorter logistics systems are regarded as innately more resilient than those which stretch around the world or transit unstable regions.”
The move from away from China also benefitted countries such as India, Vietnam, Indonesia and Bangladesh, he said.
