India, Vietnam has potential for sourcing: The Freight Buyers’ Club

Countries in South Asia, Southeast Asia and Latin America stand to benefit most from a shift away from China, says Paul Page, Editor, WSJ Logistics Report during the inaugural episode of the new podcast The Freight Buyers’ Club hosted by Mike King.

“I see a lot of changes with Apple and semiconductor manufacturing that I think are going to have a profound impact on India,” he said. “Not necessarily this year, but over time.”

Speaking during the launch episode of the podcast, produced with the support of Dimerco Express Group, Jon Gold, Vice President, Supply Chain and Customs Policy, National Retail Federation told King that companies were looking to diversify “not just because of the tensions in the U.S.-China trade relationship, which I think are going continue, but also because of what has happened over the past couple of years with all the supply chain challenges. They realised that they need a more diversified, more resilient supply chain.”

Page believes the growth of supply chains not focussed on China will inevitably add complexity to procurement and logistics planning. “In some cases, I think you could say there are two supply chains forming,” he said. “A traditional China-based supply chain and a non-China supply chain and I think those are playing out in different ways for different products.”

He said that more fractured, diverse supply chains could render the largest 24,000 TEU vessels plying direct routes from Asian hubs to Europe “less significant”. He added: “You have to wonder what that means for capacity decisions by carriers. Are the economies of scale still there? Do they matter as much? Do they make that difference? Are there other things that matter?”

Can’t write off China
Another beneficiary will be Vietnam which has already seen large increases in container shipping volumes and has been investing heavily in its infrastructure, says Bjorn Vang Jensen, Executive Director, International Transport, Cummins and formerly Global Head of Logistics at Electrolux and Vice President, Advisory Services, Sea-Intelligence during the second episode. “Countries like Thailand, Vietnam and others have stepped into the vacuum that China left and I don't know that China can completely pull back from that."

Jensen says it would be foolhardy to write off China. “They have changed their [zero-Covid] policies,” he said. “They understand now, I believe, that this was detrimental to China's reputation as the factory of the world. So, whilst I do now agree that some near-shoring, friend-shoring and reshoring is taking place, I do not believe that this will pull the rug from under China, and China's place in the world economy.”