It’s Wednesday —check in again with Legacy Ledger and I have got something interesting for foreign trade-dependent companies.
*** The New Trade Order
The world got a bit of relief last week after the meeting between the two big powers – China and USA. The two leaders reached a truce and agreed to reduce trade barriers and export controls following the continued introduction of increased trade tariffs by the US government. This has changed global trade order with heightened volatility.
This geopolitical headwind, characterized by increasing trade tariffs, is shifting economic dynamics, disrupting supply chains, and affecting most industries, especially Fast-Moving Consumer Goods companies that are heavy importers.
***How can industries brace up for these shocks?
1. Focus on diversification and supply risk reduction by directing your sourcing to countries less impacted by the current pressures. Some companies have shifted direction to India and Singapore. Others have changed production facilities to countries like Egypt.
2. The agelong stockholding strategy is a haven at this time. This will allow adequate inventory planning and fewer reactionary tactics when there are new regulations.
3. In our new world, where GOOD data is now king, having the right data for effective scenario planning, creating forecasting models for efficient procurement and production, all aimed at cost reduction and mitigating risk is essential. A simple TARA framework, which relates the magnitude of risk with the frequency to determine a Transfer, Accept, Reduce or Avoid strategy comes in handy for your risk management.
Till next Wednesday, keep the flows and keep the growth!
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