The sourcing boss at sports footwear and apparel company New Balance has said he expects supply disruption to last into 2024.
Duncan Scott, senior vice president of strategic sourcing and quality at New Balance, said global logistics had been hit by a “whiplash effect” from the Covid pandemic as demand initially died away before coming roaring back online.
“This whiplash effect has created a set of bottlenecks… and we think that’s going to take us all the way through 2024 at least,” he said.
“It can take two to four weeks to book a space on a ship after our products are completed, where it used to take just a few days.
“It adds between 20 and 45 days in transit time between the key source countries in Asia and the key markets in Europe and and North America.”
Scott, speaking on a webinar organised by Cornell University, said shipping costs had rocketed from around $1,700 to ship a container from Asia to the US west coast to $22,000.
The webinar was told 80% of global apparel production took place in 10 countries, seven of which are located in Asia.
Scott said New Balance had responded by:
• Adjusting calendars and reducing product development time;
• Scaling up production in factories closer to market, such as the US and UK, and;
• Distributing production across multiple factories and locations, especially in countries with fewer pandemic restrictions, such as Indonesia.
Scott said: “A diversified portfolio of suppliers, which includes diversifying over multiple countries, is really important.
“Now that we’re looking at the logistics challenges, the obvious question is, ‘Are we going to have reshoring or onshoring? Is it going to get more spread out?’ And the answer is, in my view, that there isn’t any kind of natural reason for that to happen on a large scale.
“Size really matters, so this concentration of industries and support industries in Asia, it’s going to be hard to shift that in any meaningful way quickly, it would take years if not decades for that infrastructure to grow. The nearshoring and onshoring does have value – for the more fashion-oriented product in particular, you will see some onshoring. But the only way that’s really going to work is if you have unique products.”
Concerning the impact of inflation, Scott said: “Certainly we see material prices going up. And we cannot pass all of those costs on to our consumers. So that puts a squeeze on profits. But the whole nature of the work that we do especially in sourcing and operations, is trying to find ways to mitigate ever rising cost.
“On the factory floor, there’s a lot of running room for increasing efficiency to offset rising material costs.”
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