The global sourcing companies we talk to daily always ask the same question – what are the key trends impacting their business in the next five years? And what are the best strategies for being successful over the next decade? After speaking with dozens of leading experts across multiple industries, we came up with – 6 key global supply chain trends that will have the biggest impact on business in 2023. The good news is that these trends are easy to adapt to and will pay off big in terms of your bottom line.
China’s growth is slowing
Between 2000 and 2017, China’s GDP grew an average of 9.7% yearly. However, as China’s economy slows down to its target growth rate of 6.5%, the trend will likely be a single-digit growth rate. This can impact how global sourcing companies source their products – they will need to adjust their strategies to compensate for this new norm.
Trade Agreements are being renegotiated
One of the major impacts of the global sourcing companies‘ supply chain will be the renegotiating of trade agreements. The Office of the U.S. Trade Representative reported in December 2017 that The President has announced that he intends to renegotiate US trade agreements. Organizations are now faced with selecting new suppliers, examining existing suppliers, and deciding how these tariffs will impact their business strategy. They must choose between developing a more strategic sourcing company in the USA or accelerating global sourcing companies to maintain cost-competitiveness in their markets through improved efficiencies, pricing, and customer service.
US policies are in flux
Regardless of what policies come down the pipeline, it’s important for sourcing companies in the US to understand that the uncertainty is likely here to stay. However, understanding how these shifting policies will impact your business is more important than speculating on US trade laws and developing a contingency plan when things go awry.
Freight rates are increasing
While rates have remained relatively stable over the past few years, recent forecasts predict that rates will increase soon. The changes in the US economy have caused an uptick in freight rates, which is predicted to continue. These cost increases will take effect in 2021 and continue into 2023 and beyond.
Companies should also take note of these other trends and start planning accordingly. There has been a resurgence in manufacturing in the US due to lower energy costs and a weaker dollar, this has been stimulated by tariffs imposed on imports from China (and now Mexico). Higher domestic manufacturing levels will lead to higher demand for logistics services from global sourcing companies with American operations.
Supply chain disruptions such as natural disasters and labor strikes can also impact supply chains, so companies must build robust strategies to protect against these risks.
Trade tariffs have been introduced
Tariffs are one of the most important current supply chain trends and have an immediate impact on any sourcing company that deals with a supplier in the United States. The threat of trade tariffs was first introduced in 2018 when President Trump called them the greatest, but the first round only impacts steel and aluminum imports. The second round announced on July 10th includes goods such as clothing, technology, building materials, furniture, and handbags.
Tariffs are being introduced to counter what is seen as unfair trading practices from countries like China or Korea, where goods like televisions or electric cars can be bought for much cheaper than if sourced through American suppliers. To reduce the impact of these new tariffs, sourcing companies need to consider who their key customer base is and whether the changes will impact them.
In addition to considering how these new tariffs will impact different products, sourcing companies must consider how their supply chains may change based on their relationships with suppliers. If they rely heavily on Chinese-made products, then it might not make sense for them to source from North America because there would always be the risk of increased costs due to tariffs applied.
Brexit Impacts UK’s Global Footprint
Receiving products from outside the UK has always been part of British culture. And now, Brexit is having a genuine impact on sourcing and supply chain in the UK as trade agreements come into place, tariffs are applied, and most importantly- foreign currency becomes a more complicated issue. With recent talks between Germany and France seeing some progress, there’s hope that eventually, a unified EU may offer free movement of goods between member countries. Still, until then, companies based in the UK should look to set up sourcing companies with usa to mitigate the risk of any unfavorable changes.
Final thought
Sourcing and manufacturing have evolved tremendously in the past few decades. In 2021, sourcing companies in the USA saw the growth of exports and imports in production – with items like automobile parts being outsourced internationally at an all-time high. With increasing global supply chain trends in play and how they will impact businesses in 2023, sourcing companies must work to stay ahead of the changes by honing their current strategies and processes.