Hiccups in the global supply chain have a wide reaching effect on the promotional products industry. Both domestic and direct import programs who source overseas will have to navigate a new series of challenges.
The global recession has also greatly affected our manufacturing partners in Asia. Asia is responsible for the manufacture of approximately 95% of ad specialty products. The net effect impacts price and deliverability. What are the issues and how do we proactively manage them?
Inventory Shortages – In order to survive the recession, suppliers took a leaner inventory position. Subsequently, Asian manufacturers also took a leaner position in raw materials. Take cotton for example. There is now a worldwide shortage. The difficulty in obtaining yarns is causing production delays and increased material costs.
Fewer Factories – The global recession and subsequent lack of demand has resulted in a winnowing of production facilities. This may not have been obvious within the recent climate of curtailed need, but it is becoming increasingly evident as levels return to normal that there are fewer options out there.
Increased Cost of Labor – Manufacturing in Asia is simply becoming more expensive. Human rights issues have put pressure on governments to ensure better working conditions. Workers are beginning to organize and demand better wages and benefits. Populations are aging and younger workers are looking for higher status positions creating a labor shortage.
Lack of Container Space – The recession also hit shippers hard. With vessels still in dry-dock, it will take time for them to ramp back up. Upwards of 120 days on the water (if you can get your product on a vessel) is the new norm. The industry was previously at about 70-80 days.
Chinese New Year – It happens every year. The double whammy effect of Chinese New Year shuts down and causes major headaches for suppliers and Chinese manufacturing facilities alike. The subsequent game of production catch up can be equally daunting. We have listed the schedule below for your review. The best way to avoid issues: plan ahead.
Plan Ahead! – Your best protection against these issues is to give your supplier as much time as possible to position an order for success. End to end production will take longer. Allow enough time, particularly on the shipping side, to make in hands dates. A good vendor will tell you the reality of the situation not what you want to hear.
Expect Price Increases – There is a tremendous amount of pressure on price today. Between increases in raw material, labor, and shipping costs, product cost will rise. Some of this will inevitably be passed on. A good vendor will be solution focused and help you look for options or alternatives.
Lots of Communication on Both Sides – It is very important to stay abreast of fluctuations in the process. Make sure you are receiving good communication from your vendor regarding the status of your order. With good upfront planning, quality production art the factory can work with, and the luxury of additional time, vendors and clients can navigate current industry realities.