Action seeks alternative for stock from China

Retail chain Action is looking for alternative sources of supply for stock from China. The corona virus outbreak centred around Wuhan could send the whole country into lockdown for the foreseeable future, so the retailer is hedging its bets by exploring opportunities for sourcing goods elsewhere. 

The outbreak of the virus can have consequences for supplies to stores and companies that trade with China, especially if the situation persists for any length of time. Action currently sources approximately half of its product range from Asia, and virtually all product categories include some items that are made in China. Although the situation is not yet acute, the retailer is already planning for various scenarios, according to Dutch newspaper Algemeen Dagblad (AD).

Bart Vos, Scientific Director of the Brightlands Institute for Supply Chain Innovation (BISCI) which is linked to Maastricht University, believes that is a wise decision by Action, because he expects the virus to have a significant impact on the global economy. “The SARS virus caused considerable financial damage back in 2003, and China has become a much bigger player in the world’s supply chains since then,” stated Vos. Likewise, economists from ING envisage problems worldwide if the country is no longer able to keep customers supplied with essential electronic components.

Rising transport rates

Many businesses and factories in China itself have been closed for some time. In the airline sector, most cargo flights are still running for now, but countless passenger flights have been cancelled. Because such flights also tend to carry a substantial amount of air freight, Dutch logistics industry association Evofenedex predicts that transport rates will rise.

“To put it bluntly, the suspension of flights and ocean shipments to and from China will lead to reductions in air cargo capacity at Amsterdam Airport Schiphol and container shipping capacity in Rotterdam, for example,” said Managing Director Machiel van der Kuijl in AD. He added that the Chinese measures are already affecting a relatively large percentage of the international transport capacity for air and ocean shipments. “That decline in capacity will influence the price of freight transport to China.”

FME helpline

FME, the Dutch association for the technological industry, has already heard from various companies that they are experiencing problems due to the corona virus outbreak. In fact, FME recently launched a special helpline for any members that are suffering due to the effects of the lockdown in the Wuhan region. “Many Chinese factories are already closed, causing a knock-on effect for supplies of products and raw materials,” stated FME.