No end in sight for China power crisis as pressure grows on supply chains
China’s power crisis is expected to further disrupt supply chains bringing longer lead times and ...
The pandemic has created shorter supply chains and a trend towards sea-air cargo, according to Toll Global Forwarding.
In a new report, produced with Asialink Business, the forwarder says the pace of change in logistics over the past two years has been greater than the past two decades, with a “clear trend towards shorter, regional supply chains.”
Rajeev Sood, Toll’s SVP for ASEAN and Indian Subcontinent, said resilience was now the key factor in supply chain planning.
He told The Loadstar: “This means that, while global supply chains will remain relevant for certain industries, we believe companies, especially small businesses, will adopt shorter, regionally diversified supply chains to enhance their resilience to disruptions such as the pandemic.”
Furthermore, Mr Sood said, the need for cost control and resilience could also see the rise of new modes of transport, in addition to established air and sea links.
He explained: “For instance, while bottlenecks in sea and air freight remain prevalent, at Toll we are seeing more customers receptive to change and accepting hybrid solutions and modes that were less acceptable, pre-pandemic.
“Some businesses have turned to rail and road freight to transport goods between regions such as Asia and Europe. But for the near to medium term, we see a combination of sea and air being the best intermediate alternative product, in terms of cost-effectiveness, carbon footprint and overall availability.”
Toll is also seeing more companies shift manufacturing from an over-reliance on China, with India, Thailand, Malaysia and Vietnam the main beneficiaries of a ‘China-plus-one’ sourcing set-up.
“It’s about choices,” said Mr Sood. “As an alternative to China, Apple has started manufacturing in India and TTI, a big US company in the industrial sector, has started moving goods from Vietnam.
“As labour cost advantages start to disappear in China, and the risk of US-China trade wars remains, companies are looking for low-cost countries with access to stable supply chains.”
With the pandemic highlighting the fragility of global supply chains, Mr Sood said technology, such as the internet of things, artificial intelligence and cloud computing, still had an opportunity to empower businesses with greater visibility.
“This could include dynamic optimisation of routing based on traffic conditions, just-in-time arrival of vehicles and ships and freight contracting and vessel sharing, potentially reducing time that would otherwise be spent waiting, as well as delivering fuel and cost savings.
“With supply chain technologies proliferating across key Asian economies, driven by regional megatrends like evolving consumer preferences from the e-commerce boom, businesses will need to invest in capabilities to allow inter-operability with these digital platforms.
“Failing to keep pace could become a technical barrier to sustained business and trade.”