to another Asian country could get a shock when it comes time to negotiate a business deal. “I’ve visited 80-plus executive teams and owners, and they’ll say, ‘I don’t understand why this is dif cult and why these terms aren’t what I want,” says McGaffey. Chinese suppliers can rely on their government to nance production, but their counterparts in other countries look to their buyers for that money, he adds. Brigham agrees that buyers will need to get used to different purchasing terms. “If you’ve been getting net 90 days out of China for 20 years and then you move to Thailand, don’t be surprised if they want 30/70 FOB [30% deposit/70% due upon transfer of the bill of lading],” Brigham says. “They want skin in the game. Even if they don’t need the money, to them it’s an important part of building trust.” STEPS FOR SUCCESS If you’re looking for alternatives to China, one important early step is to establish which criteria you’ll use to choose the new country and new suppliers. “The criteria is a little different for everybody,” Scalzo says. “The basics are available labor, access to raw materials and components, and infrastructure.” Along with what’s available now, keep in mind how the infrastructure is likely to improve in the coming years. Take Mexico, for example. “The infrastructure for trans-border Mexico to U.S. support is not nearly what it needs to be,” says Scalzo. But we’re likely to see new investment, particularly in rail facilities, to support more cross-border trade, he says. For companies trying to decide whether to reshore to the United States, the key might lie in how much labor their processes involve. “If the process involves sewing, high labor content, and high-touch labor, then look for a low-cost country if you’re going to move out of China,” Coates advises. “If you are highly automated, or plan to be, the economics shift signi cantly.” Then it’s possible to make
TOMORROW'S REGIONAL TRADE GROWTH LEADERS WORLD REGIONS 20212026: PREDICTED EXPORT VOLUME GROWTH RATES
R Rank
1 ASEAN
5.6%
+1
2 South & Central Asia
5.0%
+1
3 Sub-Saharan Africa
4.4%
+6
4 Rest of East Asia & Pacific
3.8%
0
5 South & Central America, Caribbean
3.8%
+1
6 Middle East & North Africa
3.5%
+2
North America
3.4%
0
8 China
3.4%
-7
9 Europe
3.3%
-4
Data Source: IMF World Economic Outlook, April 2022
Trade growth is spread across a wider variety of countries, according to DHL's Trade Growth Atlas 2022. China accounted for 25% of trade growth in recent years and is predicted to continue to have the largest growth, but its share is likely to fall by half, to 13%. Vietnam, India, and the Philippines stand out in terms of both speed and scale of projected trade growth through 2026. All three have potential to benefit from eorts to diversify China-centric strategies. While emerging economies increased their shares of world trade from 24% to 40% between 2000 and 2012, with half the increase driven by China alone, these shares have barely changed over the past decade. Emerging economies continue to race forward on measures of connectivity, innovation, and leading companies. They are becoming more important exporters of sophisticated manufactured products, and increasingly compete not only on low costs, but also on innovation and quality.
with a prototype or small order rst, test the relationship, work out the kinks,” says Mahdi. Meet in person. Before Wees started leading sourcing trips to Mexico, she once asked a supplier there to give her a quote for a product she wanted for her own e-commerce business. “Their quote
the case for domestic production. Some further advice from the experts on sourcing from a country other than China: Do the homework. “Go through the same steps you would when vetting any new supplier: Get quotes from a few different people, ask for samples, start
March 2023 • Inbound Logistics 43
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