Doing business in the new year of 2024 proves to be a difficult enterprise, with challenges similar to the pandemic period. The global interdependence – were supply lines continue to be disrupted by security threats and delocalization of production affect economies, companies and the everyday activity of people – confirm once again the wise move of returning to short supply chains.
Just when Covid supply chain inflation seemed to be a thing of the past with average transit times from China to Europe stabilizing to 35 days (coming down from almost 4 months), the recent escalation of the conflict between Hamas and Israel by the attacks on cargo ships of Iran-backed Houthis from Yemen in the Red Sea, put really heavy stress on international transport times, security and prices.
As we speak, every day, around 200 big vessels, containing merchandise of hundreds of billions of dollars, are being diverted away from the Red Sea amid the risk of continuing Houthis’ attacks on water and air. This translates into longer routes that have to be followed which increase the transit time by 30%, the freight rates up to 40%, with some container prices even reaching $10,000.
The alternative, to neglect the international recommendation to not cross the famous Bab-el-Mandeb strait were almost 15% of the world’s trade is taking place and face the risk of being hijacked, pay an overvalued insurance or have your merchandise stranded somewhere on the globe is also highly challenging. The situation is not going to improve as the US prepares to redesignate Houthis as “terror” group and maintains almost daily attacks on the group military infrastructure, raising the risk of the conflict escalation in the region.
Related, China and its manufacturing power is not doing great either, as the industry shrank for a third straight month in December 2023 and weakened more than expected, sowing doubt about the outlook for the country’s economic recovery. While China’s government has in recent months introduced a series of policies to get over the post-pandemic period, the efforts are being held back by a severe property slump, local government debt risks, and despite the low consumer prices, the demand is not yet there. If in China falling prices have affected companies’ profits and consequently people’s employment and incomes, reduced overseas orders are only to add supplementary pressure on the second economy of the world that, since Covid, is still struggling to gain traction and restart its factories to their initial pace.
No later than two weeks ago, Taiwan voters dismiss, once again, China’s warnings not to elect a pro-Western, pro-American candidate as president, bringing closer the “Chinese dream” made clear by President Xi to « surely reunify China » with Taiwan by 2049, thus clearing the path for more provocation and confrontation between China and its neighboring Taiwan and fueling more economic instability.
The current global status riddled with uncertainties serves as a powerful argument in favor of companies adopting shorter supply chains. European and local logistic networks – characterized by shorter distances and fewer intermediaries – bring economic benefits to both producers and consumers. Well-put together distribution channels fights efficiently against higher prices while consumers have access to quality products, ready on demand.
BFG, a leader packaging manufacturer for the food industry, declares itself crisis-ready. BFG Packaging and its Romanian-based factory produces 100% environmentally friendly wood fiber products that are grease and cut resistant, microwaveable, freezer safe and can easily withstand temperatures of 200 degrees Celsius, ready to order and be delivered as right now. The wood fiber products produced by BFG are having the highest quality available while matching the European standards of ECO food packaging, being at the same time at least of equal or having a better functionality than the Chinese bagasse products supplied in Europe.