World Trade - September 2008 - (Page 16) SUPPLY CHAIN A Shift in Supply Chain Strategy A few years ago, there was hardly any U.S. manufacturer it seemed that wasn’t seriously thinking about China (if they hadn’t already), as part of their sourcing or manufacturing strategy. But, how quickly things change. A number of high-profile product recalls, a major slump in the U.S. economy and a falling dollar, topped off with a rocketing rise in oil prices that drove up shipping and transportation costs was enough to jolt some to their senses and temper the euphoria. It’s not that the opportunities associated with China have evaporated, because they clearly have not. Rather, it’s exposed a number of opportunities right here in the U.S. that many thought had dried up. “The advantages of China are beginning to erode,” asserts Hank Cox, spokesman for the National Association of Manufacturers (NAM). “In 2000, it would have cost about $3000 to ship a forty-foot container from Shanghai to the East Coast. Today, it’s about $8000. That’s like adding a 15 percent tariff into your landed cost.” There’s also China’s currency, which has appreciated sharply in the last couple of years, he says, while government efforts designed to improve environmental standards and workers’ rights are also making it more expensive for foreign companies to invest in China. Indeed, the Beijing Olympics really served to highlight the environmental stress that’s been put upon the country, with factories being forced to shut down and cars banned during certain hours as a crude attempt to clean up the chronic air pollution. Cox says the industry group has started to get some calls, mostly from smaller companies, about the situation in China and rising manufacturing costs. However, most executives are still in the “let’s watch it closely” mode, 2008 How global U.S. co How global U.S. companies are looking ‘homew are looking ‘homeward’ to beat the current bu beat the current business li climate. BY LARA L. SOWINSKI he says. One company, a manufacturer of outdoor gear and sleeping bags, announced they were pulling back production from China and expanding an existing plant in Alabama. Another company has also decided to move some of their manufacturing back to the U.S. because the shipping costs for their steep products had become too expensive. They will stay in China though, but it will be to serve the growing domestic market there. According to Cox, a lot of companies now have “one leg in China and one leg in the U.S.,” which allows them to leverage the unique advantages inherent to each market. The growing strength of the U.S. export sector, which is being fed by the weak dollar, is also a reason to look for opportunities right here in the U.S., explains Cox. “Our exports are rising at a much faster pace than imports and they’re much more competitive today. We actually have a trade surplus in manufacturing with those countries in which we have free trade agreements,” he points out. The Midwest gets in on the trade game As more companies review their supply chain strategy in light of the current business climate, many are finding that a robust international trade network has quietly been developing in what was once the unlikeliest of places—the nation’s Midwest. Nebraska is a prime example. The state has been working aggressively to attract international investment and it’s been paying off. “In 2005, our legislature made a significant overhaul to our tax incentive program,” explains Richard Baier, Director, Nebraska Department of Economic Development (www.neded.org). The resulting pro-business program, known as the Nebraska Advantage, has been responsible for generating a great deal of interest in the state, he says. 16 WORLD TRADE SEPTEMBER http://www.neded.org
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