The geopolitical tensions in West Asia, particularly the Iran conflict and the blockade of the Strait of Hormuz, have significantly disrupted global supply chains. Consumer goods companies such as Dabur, Britannia Industries, Tata Consumer Products, and Emami are now charting new courses for manufacturing and sourcing to ensure business continuity and supply chain resilience.
Strategic Shifts in Manufacturing
Dabur has moved part of its production from Ras Al Khaimah in the UAE to India, Egypt, and Turkey. This shift, despite higher costs, is aimed at establishing new export routes and reducing dependency on the Strait of Hormuz.
Britannia has also rerouted its manufacturing for West Asia and North American markets from Oman to its facility in Mundra, Gujarat. "We have taken measures to ensure the supply channels that we have now are not dependent on the Hormuz Strait," said Rakshit Hargave, CEO of Britannia.
Quantified Impact
The disruptions have led to increased costs and extended lead times for these companies. For instance, Emami reported a 5% year-on-year decline in international business during the March quarter due to these disruptions.
| Company | Previous Location | New Location(s) | Impact on Costs |
|---|---|---|---|
| Dabur | UAE | India, Egypt, Turkey | Higher |
| Britannia | Oman | Mundra, Gujarat | Moderate |
| Emami | UAE | Europe, India | Decline in sales |
Industry Response
In response to these challenges, companies are diversifying their supply sources and exploring nearshoring options. Tata Consumer Products has diversified its sourcing strategy for plastic closures and PET materials, previously imported from West Asia.
"We have been able to reset with 2% growth in Asia," noted an Emami executive, highlighting the resilience strategies being adopted.
Forward Outlook
As the situation in West Asia evolves, companies will need to continuously adapt their strategies. Monitoring geopolitical developments and maintaining flexible supply chain strategies will be crucial.
What this means for your procurement team:
- Evaluate current supplier dependencies and explore diversification options.
- Consider nearshoring or reshoring to mitigate geopolitical risks.
- Implement supply chain technologies like WMS and TMS to enhance visibility and agility.
