Three-fifths (60%) of Japanese manufacturing firms overseas plan to review their supply chains, according to a report.
A survey involving 7,173 Japanese companies by the Japan External Trade Organization (JETRO), a government-related organisation, said localisation of procurement in overseas Japanese firms was growing.
The report’s data covered 2022 but was made public this week. It found that 41.5% of all businesses surveyed had revised their supply chains before the survey took place in the second half of 2022.
Half (50.2%) of respondents in all sectors intended to revise their supply chains in the future. In the manufacturing sector this rose to 60% of enterprises.
Respondents “planned to raise selling prices in response to rising manufacturing costs and rising transportation costs, as well as reviewing suppliers in anticipation of supply constraints and disruption risks,” said the report.
The report said 57.5% of manufacturers were currently reviewing suppliers, with 40% planning to “review raw materials/parts, and inventories”.
Localised procurement was accelerating due to soaring raw material and transportation costs and growing supply disruption risks, said the report.
Almost four in 10 (37.2%) manufacturing respondents said they planned to increase cooperation with suppliers.
The top three reasons for reviewing procurement were “soaring raw material costs” (55.3%), risk of supply chain disruptions due to logistical disruptions (49.9%), and disruption due to shutdown of suppliers (49.7%).
The report found that Japanese companies were planning to expand business in countries such as India and Vietnam.
This was coming at the expense not only of China, as might have been expected, but also countries such as the US and Germany.
Almost three-quarters (72.5%) said they planned to expand their business in India in the next 1-2 years, while 60% said the same about Vietnam.
Businesses were most likely to reduce operations in Hong Kong, China, US, Germany and Thailand. The reason for cutting back operations in the first three areas was primarily high costs, while low growth potential was cited in the case of Germany and Thailand.
More than double the number of respondents said they were engaging in green procurement compared to the previous year’s survey.
Last year Japanese prime minister Fumio Kishida announced plans to invest 5tn yen ($42bn) in the next five years in India.
Japanese companies announcing expansion plans in India included Mitsubishi Electric Corporation, which aims to set up a new factory in Maharashtra, and NEC Corporation India.
Suzuki Motors plans to build a new factory for production of electric vehicles battery in India by 2025. Meanwhile Japanese medical companies like Lion Corp have announced plans to expand in Southeast Asia by buying a 36% stake in Vietnamese company Merap.
Japanese casual clothing manufacturer and retailer Uniqlo has opened its eleventh shop in Vietnam, while retail conglomerate Aeon said it plans to treble the number of shopping malls in the country in the near future.
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