Key Takeaways from the Q1 2023 Retail Sourcing Report and What they Mean For Your Business
TradeBeyond’s Retail Sourcing Report for Q1 2023 is out now, and as always, it’s packed with valuable research, insights, and analysis to help inform the strategic buying decisions of supply chain professionals. In addition to a new section on ESG trends, this quarter’s report documents the widespread impact of mounting recessionary fears on the supply chain as well as the global consequences of China’s economic slowdown.
Here are four key takeaways from the report, which you can download here, along with the implications for brands and retailers.
China’s Growth Stalls
China’s decades-long period of phenomenal growth finally stalled through 2022, illustrated by further contraction in China’s manufacturing sector, curbing demand for commodities and throwing a wrench in global manufacturing. While China eased pandemic restrictions late in Q4, it’s still uncertain whether this will be enough to boost its economy in 2023.
What It Means For Your Business: As volume for domestic consumption reduces, factories will become less profitable. That could mean some factories close and others could increase prices for U.S. retailers. With more volatility in the pricing of your Chinese suppliers, you need the agility to shift to other suppliers rapidly and without disrupting your operations.
Global Manufacturing Declines
Global manufacturing declined sharply through Q4, with a notable decline in new orders and purchasing activity. As a result, companies relied on inventory stocks to fill orders as opposed to spending on raw materials and new production. Only a handful of countries saw expansion in their manufacturing activity, among them Russia, India, and Mexico.
What It Means For Your Business: With consumption declining, businesses need to be able to adjust their order forecasts and ensure they don’t overstock inventory levels, especially for slow moving items. TradeBeyond’s collaborative multi-enterprise platform provides you and your suppliers the full transparency and visibility to allow you to work together to optimize the sourcing of critical raw materials and refine production runs to maintain the lowest possible costs.
Shipping Prices Stabilize
In contrast to 2021 and the first half of 2022, where carriers experience record profitability, shipping lines are looking at overcapacity in 2023 and are reacting by lowering prices, with dramatic capacity cuts expected. 2023 contract rates are expected to be lower than pre-pandemic rates, especially since carriers still have excess capacity.
What It Means For Your Business: The stability of shipping prices, coupled with lower volume, could provide flexibility for businesses and new opportunities to lower total logistics costs. TradeBeyond can help businesses maximize those potential savings by compiling all their logistics information in one place while extending shipping visibility across your entire organization.
Commodity Prices Likely to Stay Low
The Russian invasion of Ukraine along with COVID-19 caused a major shift in the global supply of commodities. Sanctions on Russian exports and caps on Russian crude oil prices by G7 have led to major increases of purchasing from Russia by China and other allies. The prospect of a global recession in 2023 will keep commodity prices down for the near term.
What It Means For Your Business: Low commodity prices will keep a ceiling on COGS for commodity-rich products. Coupled with stabilizing shipping costs, this could help solve the supply chain bottlenecks experienced over the last two years and lower product prices, which could slow down inflation. As overall COGS stabilize, companies will be looking at other areas to optimize their supply chain efficiency.
TradeBeyond optimizes all critical sourcing processes, shortening lead times and cutting costs out of the supply chain. Contact us today to learn how our platform’s agile solutions can help your company navigate this challenging 2023 forecast.
Contact us today to learn how TradeBeyond can help your company reach its ESG targets.