China, several high-income economies and new challengers from developing countries are driving global supply chain shifts – and ‘supply cluster & category choices’ are dynamically adjusting. Axis Group International offers key insights for effective global procurement & supply.
Key Highlights
- China remains the world’s top global exporter and continues to export a wide spectrum of both high and low-value products competitively. A very prominent global player, dominant in many categories
- The US, Germany and Japan remain high on the global export rankings; also countries like France, the UK, Italy, the Netherlands and Canada. Their exports remain in high-value, high-cost, and technologically advanced products
- Challengers from Asia include India, Vietnam, Malaysia, Thailand & Indonesia; while contenders from the rest of world include Mexico, Poland & Czechia
- Dynamic new challengers have increased their exports of high-value products, incorporating new technologies, while still competing in lower-cost categories – but many offer real, viable, high-end options
- The upshot: a world of opportunities is unfolding for perceptive, analytical, and proactive global procurement managers – now is a time to look beyond the comfortable historical choices
- Imperative: balancing cost & risk is possible even if it requires a new approach to global vs local – and procurement and supply executives have more value to add during these times of uncertainty
The continued efforts by countries globally to compete and open their economies in a post-pandemic environment has highlighted the potential of some dynamic new markets that matter. Global trade was severely impacted early in the pandemic, and recovery was slow for many of the traditional global export leaders. However, markets in Asia and other developing parts of the world experienced a faster recovery, with some even seeing growth in their year-on-year exports. It is imperative that global sourcing managers observe the opportunity that these dynamic markets present as they continue to increase their capacity and exports of increasingly high-value products.
Shift in Global Export Rankings – New Winners, Losers and some Holding Ground
Since 1990, the global top 30 exporter rankings have changed significantly. Economic growth within emerging markets, with special impetus given to export growth, have led to their rise in manufacturing and export rankings. In addition, there has been a strong link between deepening global interconnectivity, the rise of free trade agreements and an increase in trade by new countries on the world stage. However, the closure of borders as well as the stockpiling of goods for domestic consumption, due to the Covid-19 pandemic in 2020, led to an abrupt decline in trade and commerce. What will the new landscape look like?
Trends: China, USA, Germany, and Japan have consistently been among the top 4 global exporters since 2005. However, there has been dynamic and constant readjustment below the top 4 rankings.
- USA, Germany, Japan, the Netherlands, France, Italy, and the UK remained in the top 10 throughout the period 1990-2019
- From 2010, Canada, Belgium, and Switzerland do not appear again in the top 10, however remain in the top 10-20
- China, South Korea, and Hong Kong SAR appear in the top 10 together from 2015 onwards while Mexico has risen to #11 (from #20 in 1990)
- From 2005, the UAE, India, Vietnam, Poland, Czechia, and Turkey entered as new top 30 challengers – and along with Mexico, peaked in 2019
- Between 1990 and 2010, South Africa and various EU countries (Portugal, Denmark, Finland, Ireland, Norway, and Sweden) fell out of the top 30 to make room for the new challengers
- Indonesia fell out of the top 30 after 2015
- China became a WTO member in 2001, resulting in rapidly rising exports. Its gradual shift from producing and exporting low-end goods to high-quality, high-end manufacturing enabled it to remain at the top of the rankings since 2010, with an almost 14% share of global exports by 2019
- China’s share of global exports further increased in 2020 as it grew exports by 3.6%, while global exports contracted by close to 10%, likely bringing its share of global exports to over 15% by the end of 2020
- Mexico’s rise from #20 to #11 make it a key market – and one to watch going forward
- Vietnam entered the top 30 only after 2010 but already reached #22 by 2019 – a stellar rise compared to other countries. Sustained efforts aimed at increasing its manufacturing capacity and reducing its trade deficit has led it to not only benefit from a trade surplus in recent years but also improve its global ranking in exports by a compound annual growth rate (CAGR) of above 15% from 2010 to 2019. In 2020, Vietnam was the country with the fastest export growth in the world with over 6% growth
- India, Poland, Czechia, and Turkey will likely be key markets to watch and countries such as Spain, Switzerland, Australia, Malaysia, and Thailand would need to defend their rankings
- Despite the pandemic, exports from Vietnam, China, Taiwan, China, and Hong Kong SAR in 2020 rose as their recovery efforts surpassed that of other countries, returning them to pre-pandemic levels of manufacturing and economic activity, and contrasting sharply with the rest of the world
- In the second half of 2020, Mexico, Poland, Czechia, and Turkey also showed an earlier recovery
Upshot: Since 1990, the top 30 exporters have faced varying levels of disruption due to a 30-year process of dynamic adjustment. For each interval – by 2000, 2010 and 2020 – the landscape had shifted significantly due to global competition with 3 broad categories emerging – new winners, losers, and those that are holding their ground. The pandemic saw these shifts exacerbated with both developed and developing economies suffering a reduction in demand, production, and exports. With recovery efforts underway globally towards the end of 2020, we anticipate:
- The rollout of vaccines in 2021 will enable the focus to gradually shift from efforts to curb the spread of the virus to economic recovery measures; therefore, stimulus and efforts to return to pre-pandemic levels of industrial activity will ensue – but the playing field will not be equal or smooth
- Expect variability and volatility in different countries’ recovery speeds with many false starts and setbacks for at least several countries in terms of GDP growth rebound, export demand, industrial production and actual exports
- Raw materials’ availability, capacity issues, container availability, logistics challenges, supply shortages, and price shocks may be some of the challenges to manage
- East Asian economies are relatively stable and hence may pull ahead sooner than most, acting as an engine of global economic growth
Imperatives: The past 3 decades have seen opportunities and threats arising from globalization and more integrated supply chains. Variability in economic acceleration and slowdowns, political instability, natural disasters, as well as health crises impacted the flow of trade for many countries. However, the impact of the Covid-19 pandemic on global exports and competitiveness has led to an unprecedented entry into a new world of change and risk for international procurement and supply. As such, a few priorities stand out for Global Procurement & Supply professionals:
- Fully appreciate the tectonic shifts that are occurring in global export competitiveness over the short, medium, and long term; and monitor the new unfolding spectrum of countries and ‘best fit’ supply markets – and their ability to produce across different tiers of value-add, product complexity and cost
- Continuously map incumbent suppliers in this evolving overall picture to understand the array of supply options in their current supply markets, countries that are slipping and new markets that matter
- Ensure good spend analytics and insight (internal orientation) and strategic supply market intelligence (outward orientation) to support decision-making
- Revisit operating model and step through strategic decisions such as ‘buy vs make’, vertical integration options, and insourcing vs outsourcing choices
- Assess and position appropriately across the different strategic options such as sourcing locally vs globally across critical spend categories – and calibrate the potential mix of offshoring, reshoring, nearshoring, and onshoring activities
- Avoid single-source thinking, over-dependence on too few supply markets (risk) and under-exposure to viable supply markets (opportunity)
- Get the mix right – China continues to be a dominant or at least prominent player in global supply chains; but several challengers are emerging as alternatives and must be pursued
- Entrench and develop high performance teams with the skills and capacity to manage a complex portfolio of suppliers across a potentially diverse selection of ‘best-fit’ global supply markets in the new context
Global Supply Clusters & Category Choices Must Dynamically Adjust
While traditional leaders such as the US, Japan, and Germany remain high on export rankings, markets such as India, Vietnam, Poland, and Mexico have increased their potential to become challengers for these spots. But what are they exporting? Which categories and product choices can be targeted in these new markets? A quick fly-over suggests that there are a few surprises in store in terms choices around ‘where and what’ to source. Many countries have, in fact, come up the ladder and have more mature capabilities; they often simply no longer live up to (unfair) stereotypes. Herein lies the opportunity for perceptive, proactive, and analytical procurement and supply teams. Agile teams are already working on balancing the new options that exist in balancing risk and cost – and will be rewarded for it. But many organisations and procurement teams are clearly trapped in ‘comfortable’ and are clearly far behind in recognizing and tapping the new potential. They will be penalized in the marketplace.
China is the largest global exporter, with products on both the high and low end of the value chain. Other developing markets in Asia and the rest of the world have increased their capacity to supply higher value-added products; and with increased importance placed on supplier diversification, these markets should be watched. Below we take a snapshot of selected dynamic markets and their focus industries / categories / products.
Selected Global Exporters – Snapshot of Export Size, Rank, Share, Concentration and Composition
Below, we present more detail on the top 100 products exported for a selection of dynamic markets – along with the composition and concentration for these products across industries and sector.
China
- The top products exported by China in 2019 were telephone sets (USD 224bn), data processing machines (USD 148bn) and integrated circuits (USD 102bn)
- The top sectors were Machinery & Electronics (44%), Others (13%) and Textiles, Hides & Skins (12%)
- The top 50 products exported by China constitutes 54% of total exports; top 100 products exported constitutes 68% of total exports
Mexico
- The top products exported by Mexico in 2019 were motor vehicles (USD 51bn), data processing machines (USD 32bn) and vehicle parts (USD 31bn)
- The top sectors were Machinery & Electronics (35%), Transportation (28%) and Others (9%)
- The top 50 products exported by Mexico constitutes 76% of total exports; top 100 products exported constitutes 86% of total exports
India
- The top products exported by India in 2019 were refined petroleum (USD 43bn), diamonds (USD 22bn) and packaged medicaments (USD 14.6bn)
- The top sectors were Metals & Minerals (22%), Chemicals & Plastics (18%) and Fuels (14%)
- The top 50 products exported by India constitutes 62% of total exports; top 100 products exported constitutes 74% of total exports
Vietnam
- The top products exported by Vietnam in 2019 were telephone sets (USD 56bn), integrated circuits (USD 11bn) and textile footwear (USD 9bn)
- The top sectors were Machinery & Electronics (42%), Fuels (14%) and Chemicals & Plastics (12%)
- The top 50 products exported by Vietnam constitutes 71% of total exports; top 100 products exported constitutes 83% of total exports
Poland
- The top products exported by Poland in 2019 were vehicle parts (USD 14bn), cars (USD 6.8bn) and seats (USD 6.4bn)
- The top sectors were Machinery & Electronics (24%), Agriculture & Forestry (18%) and Transportation (14%)
- The top 50 products exported by Poland constitutes 49% of total exports; top 100 products exported constitutes 65% of total exports
Malaysia
- The top products exported by Malaysia in 2019 were integrated circuits (USD 44.7bn), refined petroleum (USD 14.9bn) and petroleum gas (USD 10.7bn)
- The top sectors were Machinery & Electronics (44%), Fuels (14%) and Chemicals & Plastics (12%)
- The top 50 products exported by Malaysia constitutes 71% of total exports; top 100 products exported constitutes 83% of total exports
Thailand
- The top products exported by Thailand in 2019 were data processing machines (USD 10.8bn), cars (USD 9.4bn) and vehicle parts (USD 7.4bn)
- The top sectors were Machinery & Electronics (29%), Chemicals & Plastics (18%), and Agriculture and Forestry (17%)
- The top 50 products exported by Thailand constitutes 62% of total exports; top 100 products exported constitutes 77% of total exports
Czechia
- The top products exported by Czechia in 2019 were cars (USD 22.4bn), vehicle parts (USD 15.2bn) and data processing machines (USD 13.3bn)
- The top sectors were Machinery & Electronics (38%), Transportation (21%) and Others (8%)
- The top 50 products exported by Czechia constitutes 63% of total exports; top 100 products exported constitutes 75% of total exports
Turkey
- The top products exported by Turkey in 2019 were cars (USD 12.1bn), refined petroleum (USD 7.2bn) and jewellery (USD 5.1bn)
- The top sectors were Metals & Minerals (21%), Transportation (16%) and Textiles, Hides and Skins (16%)
- The top 50 products exported by Turkey constitutes 54% of total exports; top 100 products exported constitutes 70% of total exports
Indonesia
- The top products exported by Indonesia in 2019 were coal (USD 19bn), palm oil (USD 14.6bn) and petroleum gas (USD 8.8bn)
- The top sectors were Agriculture & Forestry (26%), Fuels (21%) and Metals & Minerals (14%)
- The top 50 products exported by Indonesia constitutes 67% of total exports; top 100 products exported constitutes 81% of total exports
Final Word
The world has been a competitive marketplace for hundreds of years and this has intensified over the past 50 years in a globalized world. Events of the past 12 months has only exacerbated the dynamic adjustments that are constantly taking place – and it is clear that there are winners, losers, and those that are holding ground. Astute procurement leaders and their teams are already tapping the new world of opportunities to drive value for their organisations.
For more on Axis Group International’s Global Procurement & Supply solutions email us at solve@axisgroup-international.com
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