Although China disruption may be overstated, now is still the time for supply chain diversification, says Forto CCO
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China's recent relaxations of strict covid rules have seen cases explode in the country, prompting fears of yet more supply chain disruption. However, according to Jochen Freese, the CCO of digital logistics and freight forwarding company Forto, there are signs the disruption may not turn out as bad as some think. On the other hand, despite this, Freese still stresses that “now is the time for companies to diversify their supply chain".
Commenting on how the huge wave of covid running through the country could impact shipments, Freese said that the quiet start of the year for Asia-Europe trade means that orders will likely still be fulfilled:
“While it is undeniable that the supply chain will be affected if Covid rates continue to grow in China, it is important to remember that the current period – between Christmas and the Chinese New Year – is a quiet time for Asia-Europe trade. Covid is hitting China at a time of low demand which means that even if companies lack workers, they can still fulfill orders,” said the Forto CEO.
Freese was also hopeful that the disruption may not be as bad as predicted:
“I also believe that it might not turn out as bad as everyone is predicting. Despite the high incidence rate in China and the seasonal factors mentioned, Forto has moved more volumes from Asia to Europe in December 2022 and January 2023 than we did for the same period a year before. We moved 17% more volume from China and 50% more from Vietnam.”
Interestingly, irrespective of this fact, Freese added that there is no doubt that companies should diversify their supply chain:
“However, there is no doubt that now is the time for companies to diversify their supply chain. They can do so by adding production sites within or outside of China, as Apple has done, or try out different trade lanes or transport modes so as to avoid the negative effect of possible port closures. We have had customers, for example, adding rail to their usual sea freight and realizing the advantages of fast, reliable and reasonably priced transport,” concluded Freese.