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2008 Global Trade and Supply Chain Predictions
Supply chain greening, environmental compliance, shift in sourcing from Asia top list for JPMorgan Chase Global Trade Services prognosticator
When considering the global trade environment in 2008 there are a number potential issues looming that could disrupt global supply chains, sourcing strategies and the flow of working capital. If not properly addressed, importers and exporters may face significant unexpected costs and increased disruptions to their supply chain. But the news for 2008 isn't all bad. A number of promising opportunities exist as well.
"Green" Continues to Grow: Public health and environmental concerns will remain a major issue. Continued attention on global warming, lead-based paints and the contamination of goods will drive businesses toward environmentally friendly packaging, recyclable products and the enforcement of trade regulations pertaining to the use of toxic electrical and electronic components. The concept of having a green supply chain will move from being a public relations strategy to a necessary means of deriving real economic value and improving compliance. As companies focus on supply chain and product lifecycle management initiatives in this environmental light, concepts that will be embraced include the designing of products derived from recycled materials; striving for "zero waste" from a product at end-of-life; and employing sourcing and fulfillment strategies based on less fuel consumption and the environmental practices of supply chain partners.
Manufacturers Lag in Environmental Compliance: Though a number of environmental regulations have been implemented globally over the past year, a majority of manufacturers are lagging in terms of demonstrating and maintaining compliance with new trade laws, such as the Restriction of Hazardous Substances (RoHS) regulations in effect in China, Japan and the European Union. Non-compliance with these directives can result in stalled supply chains, lost revenue, fines and damage to corporate reputation. While many companies claim to have met certification requirements, others may not be up to par and will need to make further adjustments to their manufacturing processes. Make sure that an internal team or outside trade specialist is actively managing compliance with these regulations as laws may evolve. Validate that your supply chain partners are shipping RoHS-compliant products and that you maintain an audit trail to track and capture data pertaining to compliance measures you have taken.
Sourcing Shifts from Asia to the Americas: Coinciding with the 2008 Summer Olympics in Beijing, media attention will focus on China as the world's next potential "bubble" and cause many manufacturers to shift sourcing strategies from Asia to the Americas. The falling U.S. dollar, limited free trade agreements, high energy costs and rising production costs in Asia will all contribute to companies reevaluating extended supply chains and moving sources closer to their home markets. In addition, shareholders and board members could question their company's reliance on China and the Asia region should any further negative headlines arise regarding quality issues or if China receives bad press on the handling of protestors and dissidents prior to the Olympics. While opportunities still exist in Asia, Mexico will become an increasingly popular source for manufactured goods as companies compete on time-to-market strategies, seek financial advantages found in Mexico's multiple free trade agreements and capitalize on Mexico's investment incentives, streamlined customs processes and abundant English-speaking workforce.
"Green" Continues to Grow: Public health and environmental concerns will remain a major issue. Continued attention on global warming, lead-based paints and the contamination of goods will drive businesses toward environmentally friendly packaging, recyclable products and the enforcement of trade regulations pertaining to the use of toxic electrical and electronic components. The concept of having a green supply chain will move from being a public relations strategy to a necessary means of deriving real economic value and improving compliance. As companies focus on supply chain and product lifecycle management initiatives in this environmental light, concepts that will be embraced include the designing of products derived from recycled materials; striving for "zero waste" from a product at end-of-life; and employing sourcing and fulfillment strategies based on less fuel consumption and the environmental practices of supply chain partners.
Manufacturers Lag in Environmental Compliance: Though a number of environmental regulations have been implemented globally over the past year, a majority of manufacturers are lagging in terms of demonstrating and maintaining compliance with new trade laws, such as the Restriction of Hazardous Substances (RoHS) regulations in effect in China, Japan and the European Union. Non-compliance with these directives can result in stalled supply chains, lost revenue, fines and damage to corporate reputation. While many companies claim to have met certification requirements, others may not be up to par and will need to make further adjustments to their manufacturing processes. Make sure that an internal team or outside trade specialist is actively managing compliance with these regulations as laws may evolve. Validate that your supply chain partners are shipping RoHS-compliant products and that you maintain an audit trail to track and capture data pertaining to compliance measures you have taken.
Sourcing Shifts from Asia to the Americas: Coinciding with the 2008 Summer Olympics in Beijing, media attention will focus on China as the world's next potential "bubble" and cause many manufacturers to shift sourcing strategies from Asia to the Americas. The falling U.S. dollar, limited free trade agreements, high energy costs and rising production costs in Asia will all contribute to companies reevaluating extended supply chains and moving sources closer to their home markets. In addition, shareholders and board members could question their company's reliance on China and the Asia region should any further negative headlines arise regarding quality issues or if China receives bad press on the handling of protestors and dissidents prior to the Olympics. While opportunities still exist in Asia, Mexico will become an increasingly popular source for manufactured goods as companies compete on time-to-market strategies, seek financial advantages found in Mexico's multiple free trade agreements and capitalize on Mexico's investment incentives, streamlined customs processes and abundant English-speaking workforce.
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