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
offshore.
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."
You may be able to access the full article at http://www.mckinseyquarterly.com/Operations/Supply_Chain_Logistics/Time_to_rethink_offshoring_2190_abstract but you might need to sign up first.
Hope it’s of interest.