Global supply chain delays are pushing US retailers and manufacturers to look toward US-based suppliers rather than relying on overseas partners in China, according to Associated Press.
Retailers and manufacturers are grappling with rising prices, overwhelmed ports, and a shortage of shipping containers in what Paul Wiseman of AP called “a perfect storm of supply trouble” that is expected to linger into 2022.
The cost-effective appeal of sourcing product and raw materials from China is being overshadowed by the financial and logistical headaches of shipping bottlenecks, exorbitant shipping costs, and stock shortages.
Worsening the strain between US retailers and their Chinese suppliers is a growing trade war. It started when former President Donald Trump imposed taxes on $360 billion worth of Chinese imports to protest Beijing’s efforts to eclipse America’s technological dominance.
Current President Joe Biden has made no effort to lessen tensions as the relationship between these two economic powerhouses hangs in the balance.
Across the pond in Germany, Adidas CEO Kasper Rorsted is dealing with factory closures in Vietnam that have cost the company an estimated 500 million euros in sales.
A sharp rise in COVID-19 cases significantly cut production and limited product coming in from Adidas’ Vietnamese suppliers, according to a recent article from Charged Retail.
The company is now struggling to meet consumer demand, which surged shortly after worldwide lockdowns lifted.
As production stalls and demand rises, analysts report Adidas may miss out on 2 percent of the company’s sales forecast for 2021.
“We expect the situation in Vietnam to start improving later this month, leading to a largely operational sourcing network at the end of the third quarter,” Rorsted said.
Adidas is in the process of diversifying its supplier network to include other countries, but Rorsted said current interruptions will ultimately have a negative impact on business in the second half of 2021 as demand continues to rise steadily.
“The long lasting pandemic…has led to a significant capacity reduction in both vessels and containers,” said Rorsted.
Supplier diversification is top of mind for all retailers sourcing product overseas for a variety of reasons: in addition to factory closures in Vietnam, global trade disruption incited by the pandemic, and the burgeoning trade war, manufacturing growth is generally beginning to slow in China.
McKinsey lists rising factory costs, rising consumer sophistication, increasing value chain complexity, and heightened volatility as contributing factors culminating in an overall undesirable picture for US retailers relying on China for raw materials and manufactured goods.
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