Consumer Goods and Retail Supply Chains Adjust to New Realities
The pandemic not only is accelerating change on the consumer-facing side of retail, but it also is impacting consumer goods and retail (CGR) supply chains throughout the world.
Even before most of us had even heard of COVID-19, China lost 4% of its global CGR export market share in 2018-19, most likely to Southeast Asia, Europe and Latin America. Now, say law firm Baker McKenzie and Silk Road Associates, in their new report “Reimagining Supply Chains: Recovery and Renewal in Asia Pacific and Beyond,” CGR companies are focused on “managing the aftershocks” of this year’s unprecedented disruption.
“As one of the hardest-hit industries under the global pandemic, major CGR corporates are pivoting their business strategies to cope with decreased consumer behavior, closed stores and excess inventories,” commented Loke-Khoon Tan, head of Asia Pacific consumer goods and retail for Baker McKenzie. “We see companies investing in e-commerce and digitalization, while also repurposing their factories to manufacture personal protective equipment to support the fight against COVID-19. Businesses have also considered diversifying their production locations in an effort to mitigate risks and maximize recovery.”
One country in particular looks to be a winner as global CGR supply chains evolve. “Vietnam is attractive to companies given its export-friendly bonded manufacturing arrangements, its geographic proximity to China and its rich material and component supply ecosystem, as well as its expanding network of free trade agreements,” said Jon Cowley, Hong Kong-based senior international trade lawyer. (More on Vietnam’s emerging role can be found here.)
Baker McKenzie said it sees five major trends impacting all global supply chains:
- U.S.-China trade relations are the big driver of supply chain change.
- Companies will increasingly adopt supply chain diversification strategies.
- China’s large domestic market and strength in emerging markets are pivotal.
- Digitalization and sustainability will impact supply chain operations.
- Government intervention and strategic priorities will affect the future.
“With some of our CGR clients, we are seeing an increased focus on e-commerce,” noted Mattias Hedwall, chair of the Global International Commercial & Trade Group. “However, the logistics are completely different to how supply chains operate in a traditional sense. Businesses should therefore look to ensuring their supply chains and logistics systems are upgraded and ready to support the new ways of conducting business.”
The full Baker & McKenzie report — which also concerns technology, energy, healthcare and industrial sectors — can be read here.