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Your Ultimate Guide to a Smart and Sustainable Supply Chain in the Post-2020 Era

By February 5, 2021 Blog
February 5, 2021

couple of guys working in factoryGuiding You to Gembah (the place where value is created)

Supply chain strategy is about connecting the places where value is created into a chain that leads from the source all the way to your end customers. Gembah is your “guide” that will walk beside you to illuminate your optimal sourcing locations and strategic suppliers where value can be maximized.

This guide is for you! Whether you have years of product development experience or this is your first foray into developing your dream product, the international supply chain outlook for 2021 and beyond is rapidly changing and what worked well five years ago may not work today. In a world that is grappling with international trade conflicts and pandemic travel restrictions, you need a resilient and proactive partner who can navigate the new complexities of international supply chains and keep things simple for you. Gembah has a diverse team of international trade specialists that are up to speed on the latest changes and we have trusted relationships with 100+ global suppliers in strategic locations that are still willing to work with you today! Whether you need help overcoming cross-cultural barriers and achieving exceptional quality from the seemingly endless supply chain possibilities in China or you want to take advantage of the close proximity of Mexico and the updated USMCA trade agreement, Gembah has the relationships and expertise to simplify your journey and help you to achieve your goals.

Our trade specialists are well-versed in a wide array of commodities, ranging from high-end textiles, clothing accessories, and plushy toys to highly engineered electronics, plastic molded assemblies, and luxury stainless steel products. Gembah has the relationships and know-how to simplify your process and reduce your costs. Bring us your idea and we will realize it with you!

Climate Pledge Friendly Supply Chain

Gembah is also a proven leader in sustainable sourcing strategies. We can help you fulfill your goals to achieve Amazon’s “Climate Pledge Friendly” designation; our design team is experienced with the 19 different sustainable product certifications recognized by Amazon and we personally visit and certify our suppliers to ensure they are committed to the highest standards of social and environmental responsibility. 

Integrating sustainable, climate friendly, characteristics into your product will not only help to improve our planet, but may also give you a competitive edge over similar products and lower your product costs, thereby boosting your profit margins. Schedule a consultation with our sustainable design team today to unlock the possibilities of what climate friendly design could mean for your product!

Go Beyond Alibaba.com

Identifying the right supplier is just the beginning. When you work with Gembah, we walk with you through your entire product realization journey. This means that we have trusted people onsite at the production location where your product value is being created to make sure your order is getting the attention it deserves and to quickly resolve the multitude of issues that may arise, especially with new product launches. Our diverse team speaks the local language of your suppliers and understands the intricacies of the culture to ensure that your needs are not “lost in translation.” Gembah will open up a world of possibilities that you didn’t know you were missing in your supply chain strategy, especially if you have just been sourcing independently via Alibaba.com or similar platforms. We will not only help you negotiate price like a local, but we will empower you to achieve product customizations and find alternative materials that will yield the distinctions you desire to build the product you love. We can also negotiate flexible arrangements with your suppliers to dropship to your end customers (fulfilled by merchant) directly from the factory, even for small quantity orders. This will save you countless hours of logistics cost and will speed up the lead time for your customers. Simplify and save!

Gembah stands ready to help you develop your optimal supply chain strategy. If you are looking to reduce risk by diversifying beyond just China, we have solutions for you. Our trade specialists have relationships and expertise in China, Mexico, India, and Vietnam in addition to several other ASEAN, South American, and Eastern European specialty markets. Gembah is prepared to take you to the next level wherever you are on your product journey. 

  • Where is the best market for me to source for my product?
  • How can I avoid the extra tariff costs from the US-China Trade War?
  • Is it still possible to launch my new product given the global pandemic impact?
  • Is China still safe to work with? What are my alternatives?
  • How do I ensure that I receive consistently good quality from my overseas suppliers?
  • This is my first time launching my own product. How do I get started?

Continue reading below to answer these questions and more!

Hottest Markets for Your Post-2020 Supply Chain

China

With a 2+ year trade conflict, emergence of a global pandemic, and a myriad of other front-page headlines, it has been impossible to ignore China – and we recommend that you don’t ignore China. Since China began opening up to foreign trade and free-market reforms in 1979, the Middle Kingdom has averaged a 9.5% GDP growth through 2018 leading it to become the world’s largest manufacturer and largest import trade partner with the USA, leading Mexico and Canada by more than 50%. With the introduction of Section 301 Tariffs on the majority of Chinese imports to the USA in 2018, some US-based companies have sought to reduce risk by finding alternatives to manufacturing in China, with Vietnam and Mexico taking a majority share of this shift. Still, China’s embedded dominance as a global manufacturing powerhouse will not unravel overnight. In fact, US imports from China actually increased in 2020 as the pandemic unfolded and Chinese businesses were some of the quickest to get back to business as “normal” to serve their US customers. While travel into China remains highly restricted as we begin 2021, most Chinese companies are humming along to the tune of “business as usual” and are ready to work with you.

Putting the recent tariffs aside, the benefits of importing from China remain numerous. China’s robust internal supply chain network is unparalleled and quite mature with nearly any product category having a presence. 

map of chinaTraditional manufacturing hubs like Shenzhen and Guangzhou on the southern coast are your hot spots for inexpensive electronics and toy products, while you might consider Shaoxing in Zhejiang Province (just outside of Shanghai) for customized textiles and clothing accessories. Hebei Province (outside of Beijing) and Shanghai have thriving steel manufacturers with exceptional capabilities. Gembah has close “guanxi” (relationships) with a multitude of suppliers throughout China that are eager for more work and you may find 2021 to be an excellent year to get extra attention from these manufacturers.

Given the increased risks and tariff costs of importing from China to the US, we recommend that companies seeking to source new products should review their options for alternative markets such as Mexico, India, and Vietnam to diversify risk. When you engage with Gembah, we will complete a thorough review of your product sourcing options and guide you on the optimal path.

China still may be your best option in 2021 and beyond, especially if you are looking for complex product assemblies requiring electronics and multiple other commodity types or if you are ordering low volumes. However, if you have plans to scale your volume or your product requires more labor-intensive manufacturing processes, you should consider alternative emerging markets with better cross-border trade incentives and more competitive labor rates.

Mexico and South America

¡Viva México! As the US’s next-door neighbor, 2nd largest import trading partner, and gateway to South American manufacturers, Mexico deserves your attention as a top strategic sourcing location for your new product launch. In terms of trade stability, while the US has lobbed heavy import tariffs on companies sourcing from China and lately has been threatening similar measures for Vietnam imports, Mexico has ratified the USMCA trade agreement with the USA and Canada, giving it a more stable and predictable trading environment.

For products involving electrical equipment, mid to high end footwear, textiles, medical equipment, or furniture, Mexico has become a hotspot alternative to China (post-tariffs) and many US companies have already realized the benefits of making this shift. Mexico’s manufacturers heavily cater to US-based customers and shared time-zones make working with suppliers easier than Asian or European alternatives. Additionally, Mexico’s average manufacturing labor rate in 2020 is around 25% lower than China’s making it a competitive location for more labor intensive processes.

Mexico’s close proximity to the US significantly reduces turnaround times for prototypes, samples, and production orders, especially compared to trans-pacific sea shipments that risk being delayed during high-volume seasons when seaports get backlogged. Same day round-trip travel is feasible from the US to Mexico, making supplier engagement much easier. In fact, while Covid-19 has restricted the movement of Americans to many parts of the world, Mexico remains open to US business travel and is not requiring special testing or quarantines. With that said, we recommend caution when traveling during a pandemic and adhering to public health guidelines.

map of mexico with flagThe eastern regions of Mexico, such as Coahuila, Nuevo León, Querétaro, and Tamaulipas, specialize in lower cost electronic assemblies for consumer goods and home appliances, whereas the western regions, such as Baja California, Sonora, Chihuahua, and Jalisco, specialize in higher value electronics for IT or hi-tech applications. You can find high quality furniture and appliance manufacturers in Guadalajara, Querétaro, Tecate, or Saltillo. 

Apparel manufacturing is becoming increasingly competitive in Mexico and is expected to continue growing rapidly with an 11.4% growth rate (CAGR) from 2021 – 2025. Textile suppliers are most heavily concentrated in the central parts of the country, such as Puebla and Mexico City with others in the north-eastern regions.

Mexico has remained a dependable, accessible, and fast growing supply market through the 2020 turbulence, making it a prime 2021 choice if you desire a highly competitive and more predictable business environment. Gembah has trusted relationships with suppliers throughout Mexico and several South American markets. Schedule a consultation to explore your product development options!

India

make in india logoIndia is a fast-changing supply market with a bright future! US imports from India grew 6.3% from 2018 to 2019 and are up over 170% in the last decade. In 2020, the USA became India’s largest trading partner, surpassing China. While India’s manufacturing and supply chain ecosystems are not as robust or mature as in China, significant new investments promise a bright future and a steady growth in reliable manufacturing partners that are eager for your business. Small and medium sized enterprises are expected to grow rapidly in industries such as food production, consumables, health & wellness products, apparel, homeware, furniture and others as investment in these markets continues to grow.

If your product requires labor intensive manufacturing, India may be a good option to explore. India’s average manufacturing labor rates are around 70% lower than China, 59% lower than Mexico, and 33% lower than Vietnam. While the US does not have a free-trade agreement established with India, import tariff rates are still much lower than China post-2018. Many suppliers in India may require higher minimum order quantities (MOQ’s) to get started and lead times via sea freight can take between 4 – 8 weeks, so India could be an ideal supply market if you are ramping up your volume and seeking to save on labor costs. 

While the language barrier is not a significant issue for US companies working in India, where English is commonly spoken, cultural differences are significant. Let Gembah be your cross-cultural sourcing guide to simplify the complexity of sourcing from India! Our diverse team of trade specialists have strategic partners throughout India’s primary manufacturing regions that can identify the best opportunities for your product.

Vietnam

Vietnam has been coming in hot as a China alternative! Industries from furniture to footwear have been moving to Vietnam in droves as an ideal manufacturing location for import to the USA. Imports to the US from Vietnam surged by 36% in 2019, largely driven by US companies shifting their supply chains as a result of the US-China trade conflict. Footwear imports from Vietnam to the US grew more than 11% in 2019 making up over 26% share of the total US market!

shoes in factoryVietnam was quick to contain the impact of Covid-19 in 2020 and is the only Asian economy besides China that achieved positive growth in 2020. However, with a population of only 97M people (about 7% the size of China), it has been experiencing skilled labor shortages and struggling to keep up with the surging demand. This newly increased competition for highly skilled labor is likely to drive up labor costs in the coming years; however, Vietnam’s current manufacturing labor cost is still 54% lower than China and 38% lower than Mexico. Vietnam is still a very attractive option for labor intensive manufacturing processes.

If your product is related to knit or woven apparel, furniture, footwear, or other textiles, Vietnam will likely be an attractive supply option with suppliers readily available to meet your demand. In these product categories, many suppliers are willing to supply even very small MOQ’s, accepting orders as low as 200 units. Vietnamese textile suppliers have been ranked as having one of the world’s fastest “speed to market” rates and can often provide very quick turnaround times for samples and production orders, without sacrificing quality. In fact, quality rates from Vietnam are among the top 10% in the world. Vietnamese suppliers are also welcoming of customization requests and can provide excellent service to bring your product ideas to life!

ASEAN Emerging Markets

asean manufacturing chart

Other ASEAN countries such as Malaysia, Thailand, Indonesia, and the Philippines are ideal sources for niche imports to the USA. For example, Malaysia is a prime supplier of apparel and rubber accessories while Thailand is excellent for electronics, rubber, and plastic assemblies. Gembah’s design and supply chain experts will review your product needs and work with you to evaluate if our ASEAN supply network will be an optimal fit for your needs.

Eastern Europe

machine metal workingGembah works with several suppliers in Eastern Europe that have invested heavily in automation and robotic manufacturing solutions, resulting in highly efficient processes in a very stable business environment. If your product is expected to require sustained high-volume machining or sensitive hi-tech innovation, we will work with you to explore automation solutions to achieve lower costs throughout your product lifecycle. 

Responding to the Latest Global Supply Chain Trends 

In 2021, do not go to China simply for cheap labor! Throughout the 1980’s, 1990’s, and into the early 2000’s, China competed on low labor costs, a rapidly developing infrastructure, and relatively stable trade policies. In the most recent 20 years, China’s labor cost has increased nearly 1000% and this trend has only been accelerating. In 2019 alone, Chinese average wages increased by approximately 10% over 2018. China’s current wages in its largest cities like Shanghai, Beijing, and Shenzhen are on par with much of Eastern Europe. In fact, the average worker in Shanghai earns more per year than workers in Albania, Romania, Bulgaria, Slovakia, and Montenegro. However, before you run away from China completely, remember that compared with the United States or Germany, China’s factory labor rates are still highly competitive with the average factory worker in China costing roughly 5% of these counterparts. Still, with the steady rise of attractive production ecosystems in Mexico, Vietnam, India, and other ASEAN countries, US companies looking to China simply to import products using cheap labor should look elsewhere. Go to China if your product requires strong engineering talent, a robust supply network involving multiple commodity types, or if you are also interested in selling into the enormous domestic Chinese market. If you are sourcing commoditized textiles, apparels, furniture, jewelry, or simple plastic and electronic designs, especially at higher volumes, Gembah can guide you to strong China-alternatives that will provide you world-class quality and professionalism at a lower cost.

How do you find increased security in an increasingly uncertain supply chain world? Diversification. One lesson that the last few years have taught us all is that the world can change quickly and companies that create contingency plans to diversify their sourcing dependency will be the most resilient to unexpected and uncontrollable macroeconomic disruptions. Gembah can create a personalized long-term supply chain strategy for your company to achieve your product launch goals while minimizing potentially catastrophic risks. For example, you may find that working with a supplier in Mexico is perfect for your rapid prototyping and expedited sample development goals to speed up your product design schedule, but a supplier in China or Vietnam may be better suited for your low volume production order quantities. As you scale volume, you may find that a dedicated supplier in India will lower your production costs and improve your profit margins. While we value long-term relationships and do not advocate for changing suppliers frequently, Gembah’s robust network of suppliers in these strategic markets will provide options to lower your risk and find the best solution catered specifically for you.

Gembah’s Predictions for 2021 – 2025

1. Sustainable Products:

While many trends ebb and flow, sustainable product design is a trend that continues to rise in demand each year as US and global consumers become more concerned with the environmental and local community impact of their purchasing decisions. In fact, 9 out of 10 Generation Z consumers believe that companies have a responsibility to address environmental and social issues. With Gen Z and Millennials representing approximately $350 billion of spending power in the US and Gen Z alone representing 40% of the global consumer population, integrating sustainable design into your products is a trend you cannot afford to ignore.

Sustainable product design can also be a savvy business move. For example, Amazon’s “Compact by Design” certification rewards you for using more efficient packaging for your products. By removing excess packaging material, you may even lower your packaging costs and boost your profit margin. 

Additionally, 67% of all US-based consumers are willing to pay extra for sustainable products with a whopping 87% of Gen Z consumers willing to pay more. To top it off, retailers like Amazon promote products that satisfy their “Climate Pledge Friendly” certification requirements and make it easier for consumers to find your products.

Gembah’s team of sustainable design engineers are ready to take on the challenge of maximizing your products’ eco-friendly design. We have a strong sourcing network in place to find the sustainable materials and suppliers that can bring your vision to reality. Schedule a consultation today!

2. US-China Trade War Tariffs:

US companies sourcing products from China have been holding their breath for a trade deal since the Section 301 cross-border import tariffs were introduced by the Trump Administration in 2018. Many of these tariffs add an extra 25% import fee on products sourced from China and the US importer is 100% responsible to pay these fees. Some US companies have passed these costs on to consumers by increasing their pricing, but if your competition is not raising their prices then you risk losing your market share. The incoming Biden Administration has already signaled that they will not be swift to abolish these tariffs and we expect they will continue to be used as a bargaining tool in the US-China trade conflict.

Our advice – stop holding your breath for a trade deal and start reviewing your China-alternative options. While we cautiously predict that these extra tariffs will be removed prior to 2025, it may take an additional one to two years for a full trade deal with China to be reached and the tariff removal process may be phased out over multiple years. Gembah’s trade specialists stand ready to guide you to your optimal supply chain solution!

3. Pandemic Impact:

The effects of Covid-19 have been felt by nearly every human on the planet in 2020. For some, this has meant isolation or devastating heartbreak. For others, it has meant economic anxiety and unemployment. The pandemic has completely changed the way that we interact with others as we social distance and attend meetings via video conference. While ecommerce has been steadily growing for many years now, the pandemic has caused a surge in online shopping with overall ecommerce sales in the US forecasted to have grown 32.4% in 2020. 

Retail giant, Amazon, was well-established to serve online customers and saw a 39.1% year-over-year growth in 2020. However, other traditional brick-and-mortar retailers like Best Buy, Target, and Kroger saw unbelievable ecommerce growth of 105%, 103%, and 79% respectively. This indicates that the ecommerce space is rapidly becoming more crowded and many companies that have been slow to improve their online retail ecosystem are now accelerating this strategy. Even after the pandemic is controlled and the world returns to “normal”, the shift in consumer online buying behavior is likely to continue as more and more retailers have invested to make this process more convenient for their customers.

What does this mean for you as you launch your new products? More consumers than ever are shopping online, which provides a great opportunity for you to market your new products. However, the competition for online retail sellers is increasing rapidly, which means it is more important than ever to have a robust product design and supply chain strategy that allows you develop differentiated products at globally competitive costs. Gembah is ready to guide you on this journey!

Let’s Get Started – Take me to Gembah!

Are you ready to get started with launching your own dream product? Are you eager to mitigate your risk from depending on Chinese suppliers alone and paying 25% import tariffs? Let’s get started together! Allow us to guide you to Gembah (the place where value is created). 

How does our sourcing process work?

1. Design Optimization and Product Spec Sheet Development:

Bring your existing product designs or ideas to Gembah and we will work with you wherever you are on your journey. Our design team is able to take your back of the napkin concepts and turn them into 3D CAD designs and 2D engineering drawings that are capable of being produced by our world-class supplier network. When your design is complete, we will work with you to detail out all of the critical product specifications that your suppliers will need to build your product and meet your expectations.

2. Supply Chain Strategy Development:

With your design and specifications completed, we will work with you to identify your ideal supply chain strategy for product launch and for full scale volume. You can leverage our vast supplier network in China, Mexico, India, Vietnam and other regions to establish a long-term relationship with one of our trusted suppliers that will give you the attention you deserve.

3. Prototype and Sample Development:

With your strategic supplier relationship established, Gembah will work closely with the manufacturer through the multiple iterations that are often required to produce your perfect prototype. After your prototype is approved, we will work hand-in-hand with the supplier to set up your production processes and you will receive your production samples for approval.

4. Production Launch:

After your samples have been approved, we are ready to move forward with your production launch. You will place your initial production volume orders and we will work alongside your supplier to ensure the highest quality standards are maintained in accordance with your product specifications. When your order is ready to ship, we will coordinate the freight and customs logistics required to import your products. Or, if you prefer that orders are drop shipped directly to your customers, we may be able to arrange this solution on your behalf.

Let’s work together to build your smart and sustainable supply chain and launch your dream product! In a rapidly changing world, Gembah will be your guide to simplify the complexity of product development and overseas sourcing. Are you ready? Schedule a consultation with Gembah today!