Are global conditions at a tipping point? Should offshore production move back home -or at least closer to home? That’s what manufacturers need to consider, says this article in the McKinsey Quarterly. “Turbulent” economic winds are undermining some of the factors that pushed production offshore in the first place, according to McKinsey.
The article presents some interesting numbers, based on the fact that crude oil has risen from $28 a barrel in 2003 to more than $100 a barrel now: The cost of shipping a standard 40-foot container has tripled since 2000. Wage inflation and a weaker dollar aren’t helping matters. Wages in China have increased on average 19% since 2003. What’s more, Mexican workers now make just 1.15 times what Chinese workers make, compared with more than 2X in 2003, making near-sourcing more attractive.
McKinsey goes on to analyze specific products by comparing the wage savings from offshoring with the cost of logistics. Click here to see what they found out.
That said, in this article from IndustryWeek, Wal-Mart says increasing production and commodity costs will not “damage its ability to source goods from China.” The retailer has no plans to change its global sourcing anytime soon. One Wal-Mart exec says that the quality of Chinese goods would win over any price differential in other emerging markets.
Dr. Barry Lawrence of the Texas A&M University industrial distribution program spoke to MDM about some of the shifts in global sourcing in a recent issue of MDM. Read the article
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