What Will be The New Normal of Global Sourcing?
What will be the new normal of global sourcing?
COVID-19 has shaken the world – and product sourcing has been no exception, with factories, offices and supply chains around the globe shuttered or slowed by the ongoing pandemic. So where are we now, and how will the situation look as the world emerges from lockdown?
“In the struggle for survival, a lot of long-term thinking has been put aside, so a lot of systems are not followed anymore. And that translates into variable quality and shipment delays,” said Renaud Anjoran of Sofeast Ltd, speaking at the recent Smart Sourcing Virtual Summit. “Furthermore, many factories are financially distressed because demand has plummeted.” And when that happens, corners may be cut.
“There is a risk that some of your suppliers, particularly the smaller ones, have no financial stability right now,” said Steven Selikoff of Product Development Academy. “So, make sure that you are finding your suppliers through valid methods, like Global Sources.” Trading companies may be low on inventories so they may not be able to supply orders – and the inventory that they are getting may have more defects in it than normally would have occurred.
What are some of the ways to mitigate these risks?
“Communication is number one. The more you have a relationship with suppliers, the more they’re going to share with you truthfully what’s going on,“ advises Selikoff.
It’s also important to diversify your sourcing portfolio over multiple regions and countries. Wherever you’re sourcing from, you need to have alternatives for the same or similar products.
Right now, many workers are also at risk of losing their jobs, losing some benefits, or facing pay cuts. And if you have unhappy workers, you have bad quality products. Smart buyers should plan to have an audit of their factories, not only for quality, but also for social compliance: to make sure that your supply chain is treating workers well.
How will the retail and environment change in the coming months?
“It’s different for every sector,” says Michael Bland of QIMA. “Apparel, for example, has been devastated” because people haven’t needed to buy clothes. But office products have soared – “one retailer told me that they are up in March 100 percent year-over-year because everyone in the US had to shelter at home. They all had to buy everything for a home office that they didn’t have before.”
Buyers under lockdown are still working from home. In practical terms, things will take longer, but there are still purchases being made.
Once quarantines are lifted, Selikoff predicts, people will enjoy the real-life shopping experience more, after a long time with limited social contact. Brick and mortar stores encourage shopping as a social experience.
Online, large retailers are going to invest more into their online presence so that they can shift more easily to online when something like this happens again.
Overall, e-commerce has permanently increased saturation. People who previously didn’t like to shop online have now had a chance to get used to it.
How will this all affect consumer spending, especially for Q4 2020?
Based on historical examples of post-recession habits, Selikoff predicts three things about people’s buying habits and spending, and how sourcing professionals can position themselves.
Firstly, people will be looking for less expensive products. “If you can provide a low-priced product that’s high quality, you might have a winner.”
Another thing that is common when coming out of tough times is that people look for positive emotions. “If you have a product that makes people smile and feel good, coming into Q4 when people want to give gifts, that could be very successful.”
Finally, there is more awareness that people can work from home – “how can you make that workspace more effective, warm and solve all the problems people have working from home?”