Asian manufacturing MKIXVV?

Interesting reading from McKinsey Quarterly. Here’s an extract:

"The production of high-tech goods has moved steadily from the United States to

Asia over the last decade. The reasons are familiar: lower wages, a stable global

economy, and rapidly growing local markets. These factors combined to make

nations such as China and Malaysia favored manufacturing locations. In the last

two years, however, the favorable economic winds that carried offshoring forward

have turned turbulent. The new conditions are undermining some of the factors that

made manufacturers of every stripe, including those in high tech, move production


For executives managing global supply networks, the question now is whether or

not conditions are moving toward a tipping point. Is this the moment to consider

sharply scaling back offshore production plans and bringing manufacturing back

or close to the United States? Is there a more measured response that better suits the

new circumstances? Before executives change their strategies, however, they must

determine the total landed cost of each product produced offshore and better

understand the shifting trade-offs between cost savings from offshoring (such as

lower wages) and rising logistics charges.

Oil prices, and consequently the cost of shipping, have risen to heights few foresaw

even just several years ago. Since 2003, crude oil has soared from $28 to more than

$100 a barrel. The economics research institution CIBC World Markets estimates

that in 2000, when oil prices were near $20 a barrel, the costs embedded in shipping

were equivalent to a 3 percent tariff on imports. Today, that figure is 11

percent—meaning that the cost of shipping a standard 40-foot container has tripled

since 2000."

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Hope it’s of interest.