Will There Really Be a “New Normal” for Supply Chains?

by | Jul 2, 2020 | Sourcing

“You must be shapeless, formless, like water. When you pour water in a cup, it becomes the cup. When you pour water in a bottle, it becomes the bottle. When you pour water in a teapot, it becomes the teapot. Water can drip and it can crash. Become like water my friend.”

― Bruce Lee

It feels as if the ground importers stand on has been constantly shifting lately. First, it was the trade war and the ongoing attempt by the US to decouple from China. Then it was the pandemic that has made drastic changes to all of our lives in 2020.

It’s hard to say what’s going to come next.

That’s what makes the immortal words of Bruce Lee so relevant today. It’s important for those managing supply chains to adopt a fluid approach to their work — to shift and change according to the circumstances.

The “new normal” is a term that has been thrown around quite a bit recently, and many have pondered what the new normal might be for supply chains once all the dust settles.

But will there ever really be a new normal?

The reality of the world we live in is that things are always evolving and that there is no final destination. It’s just that, right now, many things are changing at an accelerated rate.

So, what changes have we seen so far and what else might happen as we progress into the future?

Importers Have Shifted Their Eyes Away From China

It used to be that China was always the default assumption and the first place you would look to find a new supplier.

Today, although China is a major option, many importers are considering a wider range of choices. Southeast Asian countries such as Vietnam, Thailand, and Malaysia have received increased attention, and many companies in the United States have looked at reshoring or nearshoring their manufacturing.

How will things develop from here?

The early stage of the pandemic made a lot of supply chain managers reconsider their one-country sourcing approach. For example, taking a China +1 or China +2 approach became more attractive. In actuality, though, this trend was already in place before the trade war started — it was just happening more slowly.

The combination of a trade war and a pandemic has accelerated it.

Freight Prices Have Been Unpredictable

Earlier this year, airfreight prices skyrocketed — and they have since come down — but despite coming down, they are much higher than what they were before Chinese New Year.

This means that if you’re looking at airfreight as an option, don’t rely on historical pricing to guide you. Be prepared for changes.

Meanwhile, the price of ocean freight has been comparatively stable, but it’s important not to take that for granted either. You should always verify rates and not expect them to stay the same forever.

Travel Restrictions Can Come Up Unexpectedly

The big news right now is that the EU decided to open itself up to travel from a specific list of countries — and that the US was not included on that list.

Keep in mind, though, that aside from the restrictions that make the news in Western countries, there are also regional travel restrictions throughout the world that you might not hear about.

For example, we recently became aware of travel restrictions in the Mumbai Metropolitan Region (MMR) of India, where inter-district travel has been restricted, and non-essential travel has been limited to 2km from people’s homes.

This type of story might not hit the Western press, but for importers working with Indian manufacturers, it is relevant.

It’s important to be aware of the issues that might affect your business and adapt to them as they come.

Trade Shows, Conferences, and Live Events Have Gone Virtual

For the time being, the pandemic has made it basically impossible to put on live, in-person events and trade shows.

Many events are going virtual, and this is another area where an already existing trend has merely been accelerated. Virtual events are nothing new, and at some point, it’s likely that in-person events will return — but in what form?

No one really knows.

Perhaps the industry will trend toward single-day networking events only, with in-person, multi-day conferences becoming a thing of the past. This might allow for some human connection, without an excessive amount of it.

Technology has advanced, and with more exposure to these virtual events, they will probably improve and people might get used to them.

We have to adapt to these and other developments and do what Bruce Lee invited us to do in the early ‘70s — to become like water.

Become Like Water My Friend

As the world changes at an accelerated pace, it’s more important than ever to adopt a fluid and flexible approach to business.

When it comes to supplier management, we recommend you stay in touch with your China suppliers, regardless of whether or not you are looking at different options or won’t be placing any orders with them for the time being. Keep a pulse on what’s happening and keep the relationship fresh.

As you are comparing your options down the road, this might benefit you — for example, if they offer you more favorable terms.

Consider new product ideas that you haven’t considered before and be creative. No one really knows what the “new norm” is because the state of things is constantly changing.

Keep your options open and keep your knowledge and skills up to date.

In that vein, we recommend you read the following white paper on how to find the right balance between price and quality — a skill that’s always useful.

Price vs. Quality: What You Need to Know

When you’re making products to sell in the marketplace, you have to consider the tradeoffs between price and quality. Sometimes, producing better quality products can lead to paying a higher price for manufacturing.

Download our free white paper, Price vs. Quality, to learn how to produce great quality while keeping your costs low.

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