DHL Global Forwarding has noted the growing importance of multi-shoring strategies that go beyond the classic "China Plus 1" philosophy and focus on diversifying production and supplier locations in several countries.
In its recently published white paper on the topic "China Plus X: The New Global Supply Chain," the ocean and air freight division of DHL Group said the aim is to enable companies to safeguard their supply chains against global disruptions and to strengthen their operational flexibility.
It noted that in recent years, geopolitical tensions, trade barriers and events such as the COVID-19 pandemic have highlighted how fragile supply chains can be.
The white paper discusses various countries in South East Asia, Southern and Eastern Europe as well as Middle East and South America as strategic alternatives to China, as they offer both infrastructural investment and increasingly trade-friendly regulatory environments.
"The future of global supply chains lies in a flexible, sustainable and diversified structure designed for resilience. DHL Global Forwarding supports companies with a unique global network and local expertise to successfully shape this transformation," said Niki Frank, CEO of DHL Global Forwarding Asia Pacific.
"With our extensive portfolio of logistics and transportation solutions, we provide customers with the tools they need to realize their Plus X strategy and to focus on long-term stability," he added.
The white paper outlined five essential criteria which play a crucial role in the selection of suitable production and supply chain locations. This includes robust transportation infrastructure, cost structure, digital and physical infrastructure, skilled workforce and regulatory environment.
DHL Global Forwarding noted that a robust transportation infrastructure is paramount, as it encompasses the capacity, quality, and transit times essential for efficient logistics. Countries like Vietnam and Mexico are making significant investments in their transportation networks, which serve as the backbone of their supply chains.
Alongside this, a comprehensive analysis of the cost structure is vital; this includes evaluating logistics expenses, labour costs, and the overall return on investment (ROI) associated with relocating production to a specific country.
Additionally, the quality of a country's infrastructure – both digital and physical – plays a crucial role in this assessment.
DHL Global Forwarding noted that this includes broadband capacity, transportation facilities, and anticipated developments such as new airports and rail lines that will support alternative sourcing strategies.
The availability of a skilled workforce is another significant consideration, particularly as countries like India invest in education to prepare their labour force for emerging industries, such as semiconductors.
Finally, the report said understanding the regulatory environment is essential. This encompasses taxes, customs, tariffs, and participation in trade agreements, which can significantly impact operational efficiencies and costs.
"Emerging Plus X countries are actively seeking to establish favourable trade agreements and offer with that increasingly trade-friendly environments to attract foreign investment," DHL said.
It added that in this context, a long-term commitment to these locations is crucial, as establishing a diversified production base often requires substantial upfront investments.
