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FMM Urges Strategic Resilience As Malaysian Manufacturers Navigate Red Sea Shipping Crisis

FMM In The News: BUSINESS TODAY, January 15, 2024 - In the wake of the escalating security crisis in the Red Sea, the Federation of Malaysian Manufacturers (FMM) has issued a clarion call to Malaysian shippers, urging them to brace for prolonged disruptions and refine their business strategies. FMM President, Tan Sri Soh Thian advocated for a proactive approach to safeguard supply chains and mitigate the impact of the unfolding situation.

The security crisis has forced shipping firms to reroute vessels, leading to extended transit times and fluctuating freight rates. To address this, FMM recommended that shippers prepare container bookings and shipping schedules at least one month in advance for affected markets. For less time-sensitive goods, waiting until the first weeks of February, during the Chinese New Year holiday, is advised as freight costs are expected to decrease.

President Soh emphasised transparent communication between shipping companies and Malaysian shippers. He urges shipping companies to honor pre-booked freight rates without sudden adjustments. Any proposed increases or surcharges should be communicated transparently and negotiated directly with shippers, allowing exporters to plan effectively.

As a strategic response, FMM suggests that manufacturers explore nearshoring and sourcing within the ASEAN region. This not only offered potential cost savings but enhances supply-chain security amid geopolitical uncertainties. Soh highlighted the complementation between ASEAN member countries, citing varying levels of economic development and industry specialization.

The FMM also advocated for leveraging regional trade agreements, such as the Regional Comprehensive Partnership Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, to foster deeper integration of trade and investment. To optimise shipping routes, manufacturers are advised to consider combining different modes of transportation, including sea, air, rail, and road.

President Soh underscored the potential compounding effects of shipping disruptions, suggesting that threats such as extreme weather events or geopolitical tensions could further strain global supply chains in 2024. FMM called on the government to closely monitor the situation, ensuring that the impact does not escalate and burden businesses and the economy.

As Malaysian manufacturers navigate the challenges posed by the Red Sea crisis, strategic planning, transparent communication, and regional collaboration emerge as crucial elements in maintaining resilient and efficient supply chains.

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