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June 13, 2024

Red Sea Crisis – To “Near Shore” or Not?

The effects of the situation in the Red Sea are widening and continuing to cause industry-wide disruptions. The knock-on effects of the situation have included bottlenecks and vessel bunching, as well as delays and equipment and capacity shortages. Big shipping lines estimate an industry-wide capacity loss of 15-20% on the Far-East to North Europe and Mediterranean market during Q2.

Most pundits do not see this as a long-term problem and believe the situation should be resolved sooner rather than later. Whilst it’s important not to overreact to short-term problems with longer-term changes, the current situation has certainly had us all relooking our “near-shore” tactics and strategies.

At IPL, our roots have been in Asian procurement for almost 25 years. Seeing first-hand the changes in attitudes and needs, however, we opened our Bulgarian office in 2018. The purpose of this office was, and still remains, to establish robust supply options out of the wider Eastern European area.

See below some examples of the different products we have manufactured and delivered out of Eastern Europe 👇

In light of the new focus the current Red Seas Crisis is throwing on shipping lead times from Asia, we thought it might be interesting, especially to those still heavily invested in Asian production, to obtain a sense of what the last 6 years of Eastern Europe experience has shown us:

  • There is a wide variety of manufacturing available in Eastern Europe. Certain countries and regions are stronger in some aspects than others and vice versa. One needs to shop around extensively and not limit oneself to one particular country
  • Within Eastern Europe price ranges and qualities can vary significantly. There is often a trade-off in price, with the more established Eastern European countries being more expensive.
  • On automated processes, very efficient supplies are available at competitive pricing.
  • For items with more labour components, Asia remains mostly still cheaper, particularly so for large-volume orders. However, within certain volumes, Eastern Europe can certainly be a viable option, particularly considering the cheaper freight options.
  • For particularly complex boxes with a high degree of labour, Asia is still the best and, in some cases, the only option.
  • For very small runs of high-end boxes, there are craftsmen in Eastern Europe who can produce certain types of specialised goods and components and are very proficient at this.
  • There continues to be a high level of capital investment being made in Eastern Europe and we expect production facilities to continue improving, especially where this relates to automated processes.
  • The language barriers and cultural differences in business have become easier – but it has helped to have multilingual and multicultural staff in our Bulgarian office.
  • We have still preferred to use 3rd party quality inspectors as a second layer check, even though our audited factories demonstrate a high degree of quality inspection of their own.
  • Having offices in both Asia and Eastern Europe has advantages in terms of allowing us a diversified supply base – and advantages in being able to supply certain more complex components from Asia for the Eastern Europe factories to use in production.
  • We have found prototyping concepts to be quicker and easier in Asia. Tooling costs are generally cheaper in Asia
  • We have also found Eastern Europe factories to be most suitable for EU and UK supply and not necessarily for the USA. However, in some instances, the US Trump Tariffs have allowed for competitive US pricing vs China production.
  • Eastern European suppliers are very cognisant of upcoming sustainability legislation and looking to modify their production accordingly. Our Asian suppliers rely on us more to drive these requirements but also happily comply with sustainability initiatives when so directed.

In conclusion, developing supply options across multiple locations is crucial. It’s not a ‘one size fits all’ scenario. For the foreseeable future, we believe our key customers will continue to source from those places that offer the best commercial outcomes, with quality and reliability remaining non-negotiable.

Some Eastern Europe examples delivered:

Solid Wooden Coin Display Boxes – Royal Dutch Mint

Rigid Board Boxes – Royal Dutch Mint

Rigid Board Gift Boxes – House of Creed

Sesame Street 45th Commemorative Pack – Royal Dutch Mint


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