In an analysis by PWC the initial reasons that made manufacturing in places like China so attractive are no longer dominant reasons. In fact the report shows that the cost of transportation alone between the US and China has shifted. In 2006 the costs equalled about 3.2% of revenues. Today that cost has risen to 8.1% of revenues. These numbers are for the steel industry rather than across the board, but remember that when the massive move to Chinese supply started, it was steel that lead the way.
Last modified on Wednesday, 05 November 2014
Labor is still much less expensive in China. For example 2012 wages compared at $33.70 in the US to $2.49 in China. But Chinese wages are projected to rise six-fold over the period from 2004 to 2016 while wages in the US will show a 21% increase for the same period. The gap is still significant but with labor and cultural freedom issues factored in as consumers weigh their choices, the soft costs may be tilting in the US direction.
Other issues including Walmart's manufacturing commitment to buy an additional $50 billion in US products over the next 10 years are adding reasons for US based companies to either start or restart manufacturing facilities on US shores. A revived economy may do even more to stimulate local investment in plants and facilities.
As companies look for more efficiencies in their supply chains their choices in technological solutions will certainly factor in. Understanding where their products are at any given time has proven to be important in managing deliveries. And shorter distances between supplier and customer make for simpler tracking. The importance of supply chain visibility continues to pop to the surface as an overriding decision point for supply chain decision makers.