A world of opportunities is unfolding for perceptive, analytical, and proactive global procurement managers – now is the time to look beyond the comfortable historical choices. The continued efforts by countries globally to compete and open their economies in a post-pandemic environment has highlighted the potential of some new dynamic markets that matter. Global trade was severely impacted early in the pandemic, and recovery has been slow for many of the traditional global export leaders. However, many of the markets in Asia and other developing parts of the world experienced a more robust recovery, with some even seeing growth in their year-on-year exports. These dynamic markets continue to push up the value-added curve and invest in manufacturing capability allowing them to compete in the export of high-value products. We encourage global sourcing managers to explore beyond the traditional export markets and take advantage of these new challenger markets.
Global procurement priorities now
- Re-balance risk & cost – the world of ‘risk & cost’ has shifted
- Re-calibrate the supply market portfolio – the mix between China, new challenger markets and ‘local’
- Identify over-exposure early – act fast to develop alternative supply
- Manage increased complexity and global logistics challenges – an integrated end-to-end supply chain
- Exemplary spend analytics and insight (internal orientation) and strategic supply market intelligence (outward orientation) must support decision-making
- ESG must remain central, especially now – i.e., ethics, the environment and modern slavery must be at the top of mind
- Leadership and team strength are differentiators – the pressure is on to lead, upskill and develop procurement teams and organizational capabilities amid new realities
Our analysis highlights China’s continued dominance, with the emergence of several challenger markets
China remains the world’s top global exporter and continues to export a wide spectrum of both high and low-value products competitively. The US, Germany, and Japan remain high on the global export rankings, with their exports remaining concentrated in high-value, high-cost, and technologically advanced products. To a lesser extent, countries like France, the UK, Italy, the Netherlands, and Canada are also in this category.
Notably on this list of top global exporters are the challengers from Asia: India, Vietnam, Malaysia, Thailand, and Indonesia, and contenders from the rest of world: Mexico, Poland, Turkey, and Czechia. These dynamic new challengers and contenders from Asia, Eastern Europe, and Latin America (Latam) have increased their exports of high-value products, while still competing in low-end, low-cost categories – several offer real, viable, high-end options. However, trade recovery in 2021 has impacted all the top global exporters in their capacity to return to pre-pandemic levels of trade growth.
What this means for Global Sourcing Managers?
Since 1990, the top 30 exporters have faced varying levels of disruption due to a 30-year process of dynamic adjustment. For each interval – by 2000, 2010 and 2020 – the landscape has shifted significantly due to global competition with three broad categories emerging – new winners, losers, and those that are holding their ground. The pandemic saw these shifts exacerbated with both developed and developing economies suffering a reduction in demand, production, and exports. With global recovery efforts towards the end of 2020, and then 2021 bringing forth a new normal, we anticipate:
- The rollout of vaccines in 2021 have enabled the focus to gradually shift from efforts to curb the spread of the virus to economic recovery measures; therefore, stimulus and efforts to return to pre-pandemic levels of industrial activity have ensued – but the playing field and progress have not been equal or smooth
- Expected variability and volatility in different countries’ recovery speeds with many false starts and setbacks for at least several countries in terms of GDP growth rebound, export demand, industrial production, and actual exports – this has had significant implications for managing risk and cost in the supply chain
- Raw materials’ availability, capacity issues, container availability, logistics constraints, supply shortages, and price shocks will remain challenges to manage
- East Asian economies are relatively stable and hence may pull ahead in terms of full recovery compared to other global markets, acting as an engine of global economic growth
Global Supply Clusters & Category Choices Must Dynamically Adjust
As global efforts to restore economic stability and trade continue, global sourcing managers should continue to monitor the shifts in top export markets. While traditional leaders such as the US, Japan, and Germany remain high on export rankings, markets such as India, Vietnam, and Mexico have increased their potential to become challengers for global recognition. But what are they exporting? Which categories and product choices can be targeted in these new markets? A quick fly-over suggests that there are a few surprises in terms of choices around ‘where and what’ to source. Many countries have, in fact, rapidly climbed the ladder and have more mature capabilities; they are beginning to shake off unfair stereotypes. Herein lies the opportunity for perceptive, proactive, and analytical global sourcing teams. Astute teams are already working on the new options that exist in balancing risk and cost – and will be rewarded for it. But many organisations and global sourcing teams are clearly trapped in ‘comfort zones’ and are far behind in recognizing and tapping the new global procurement potential. They will be penalized in the marketplace.