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Pandemic Takes Toll on Companies’ Reliance on China

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Nearly one in four retail companies recently surveyed said they planned to regionalize their supply chains to reduce dependence on China. About the same ratio of industrial manufacturers were considering making similar changes, but it was far less than the 55% of healthcare companies looking for alternatives to China in the wake of pandemic-caused shortages.

A Toll Group survey of global customers found more than half sourced and manufactured their products in China, and 43% sourced only from China. The COVID-19 disruption has many of them reconsidering whether that is a good idea. “For some, we anticipate this will be a gradual process over the coming months while smaller, more nimble businesses have already begun the process of diversification,” said Thomas Knudsen, Toll Group managing director.

“Although the impact of COVID has been far-reaching, our Asian-based customers have told us that they have felt the impacts more acutely by than most,” Knudsen observed. “Country-wide lockdowns, manufacturing delays, limited international flights, international travel bans and remote working conditions have all combined to create extremely difficult operating environments for businesses small to large. With more than half of all our customers currently sourcing product or manufacturing goods in China, 38% are now considering alternate geographies including South Africa, Europe and other parts of Asia to diversify risk and meet customer demands.”

One country in particular stands to benefit most from this trend, according to Toll Group. “Vietnam should re-emerge quickly in the post-pandemic period given its effective response to the virus,” Knudsen said. “Unlike neighboring countries, its stringent lockdown measures contained COVID quickly, making it a safe place for international firms to do business. Supply chain and logistic industries that have strong operations out of Asia will reap the benefit of this trend.”

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