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Supply Chains Diversity Sourcing Turning to Vietnam, India, Turkey

Supply Chains Turn to Vietnam, India and Turkey for More Diverse Sourcing

May 6, 2021
New report finds that 43% of U.S.-based respondents cited Vietnam among their top three buying geographies as of early 2021, doubled from 2019.

A major lesson learned from the pandemic was the need to have a very diversified supply chain. According to a Q1 2021 report from QIMA, a provider of supply chain compliance solutions, as businesses hope to leave the “crisis mode” of the pandemic behind them, China sourcing is bouncing back strongly. However, it has not yet returned to pre-COVID-19 levels, while alternative sourcing regions such as Vietnam, India and Turkey are experiencing sustained levels of growth.

This barometer report, informed by internal QIMA data and the findings of a survey of 700+ businesses with international supply chains, looks at the supply chain highlights of Q1 2021 and the emerging trends that may influence the global sourcing landscape in the months to come.

Vietnam enjoys sustained popularity, dominating among China’s regional competition in 2020 and 2021

A traditional first choice for buyers diversifying away from China, Vietnam saw its popularity among Western buyers grow by leaps and bounds over the past few years – a trend that has remained in effect so far in 2021. The data shows a 16%  year-over-year (YOY) increase in demand for inspections and audits in Vietnam in Q1 2021, which represents a third consecutive quarter of growth that had initially begun as a post-lockdown rebound in mid-2020.

It is worth noting that this growth is more than just a return to pre-pandemic levels, as Q1 2021 inspection demand has, on average, doubled compared to Q1 2019.

The inspection surge in Vietnam is in line with the findings of the global sourcing survey, where 43% of U.S.-based respondents cited Vietnam among their TOP3 buying geographies as of early 2021 (twice the percentage observed in 2019).

Furthermore, the appetite for Vietnam sourcing is far from satisfied and is poised to redefine the sourcing landscape in 2021: around one-third of buyers globally and 38% of U.S.-based buyers name it among countries from where they plan to buy more in 2021.

That said, Vietnam is not the only country in the region to benefit from expanded business volumes, as data on inspection and audits demand in Southeast Asia shows double-digit growth across the board, fueled by the renewed interest from American and European brands alike.

India, now poised for a comeback, is being eyed by multiple sectors for sourcing

Following a year battered by pandemic-related lockdowns and massive order cancellations due to collapsed demand in the West, India has returned to the forefront as a sourcing destination of choice for many buyers. Among the respondents of the survey, 26% named India among their top 3 sourcing geographies. Notably, despite being traditionally viewed as a Textile hub, India as a buying market was regarded just as highly for Promotional Products, Footwear, and Eyewear, Jewelry and Accessories (ranked as a  tops 3 sourcing choice by over one-third of respondents in all those sectors).

Internal QIMA data on audit and inspection demand confirm the increased interest in India sourcing in Q1 when demand for inspections and audits spiked +72% YoY compared to 2020 where India faced a complete manufacturing shutdown (+94% compared to Q1 2019). This growth far outpaces the Q1 YoY growth rate of the South Asia region as a whole (+28% YoY in Q1 2021) driven, among other things, by an influx of US-based buyers: inspection demand from them has been on the rise for a consecutive six months.

However, this rebound for the moment appears dependent on how effectively India manages its ongoing battle against COVID-19 as case numbers dramatically rise in April and renewed pandemic-control measures are put in place.

China’s rebound remains strong but struggles to reach pre-pandemic levels

Even though China continues to emerge strongly in the post-pandemic period, the long-term diversification trends in the global supply chain are continuing to chip away at its dominance – and while the surge in first-quarter China sourcing volumes compared to the previous year is undeniable (inspection demand +55% YoY in Q1 2021 vs. Q1 2020), it does not always translate into growth compared to the pre-pandemic period.

The Textile and Apparel sector is a vivid example of this trend: while textiles inspection demand in China rose +8.3% YoY in Q1 2021, it still represented a -20% drop compared to Q1 2019. By contrast, China’s competitors in textiles and apparel, such as Vietnam, India and Bangladesh, recorded double-digit growth in demand for inspections compared to Q1 2020 as well as Q1 2019, indicating sustained expansion over pre-pandemic levels rather than a simple rebound.

Turkey a favorite for near-shoring as European brands keen to resume buying close to home

Near-shoring suffered a notable setback during 2020 when the pandemic crisis delivered the one-two punch of local lockdowns and collapsing buyer demand to the near-shoring regions of American and European buyers (South and Latin America, and North Africa and the Middle East, respectively). However, as global supply chains are emerging from crisis mode, buying closer to home is coming back onto brands’ and retailers’ agenda.

EU brands, in particular, are eager to revisit from the familiar buying markets in the Mediterranean, with Turkey, a clear favorite, being named as a priority sourcing choice by almost one-third of EU-based respondents of the QIMA survey. Internal QIMA data for Q1 2021 suggests that European buyers are already putting into motion their plans to revitalize Turkey sourcing, as demand for inspections and audits in Turkey has increased +89% YoY in Q1 2021.