Transportation & Logistics International - Winter 2013 - (Page 12)

Near Shoring Winter 2013 NEAR SHORING TAKES HOLD More North American businesses are bringing their manufacturing operations closer to home because offshoring might be more trouble than it’s worth. — By John T. Costanzo tal catastrophes – ranging from the Arab Spring to the Japanese earthquake and tsunami – demonstrate how vulnerable an Asian-based supply chain can be to external factors; • Severe time-zone discrepancies hinder communication between U.S.based managers and their Asian production facilities; • The reduced value of the U.S. dollar has eliminated many of the cost advantages of manufacturing in lowcost countries; and • Difficulty in monitoring quality control and protecting a company’s intellectual property and assets. At the same time China was seeing its star fade, Mexico’s fortunes have risen. The Boston Consulting Group, for example, found that while average factory wages in China have risen to roughly Apple CEO Tim Cook made headlines percent of senior executives have either $4.50 per hour – with expectations of hit- recently when he announced plans to already taken steps to near shore manu- ting $6 per hour by 2015 – average wages move production for at least part of an ex- facturing operations or plan to do so in Mexico are $3.50 an hour. isting Mac line to the United States. In within the next three years. These find- fact, though, Apple joins a growing list of ings are reinforced by a survey, percent of a product’s total cost, are just North American businesses – General which found that 21 percent of North one factor at play in deciding to near Motors, General Electric, Microsoft and American manufacturers reported bring- shore. Other advantages include favor- Ford among them – that have recognized ing production back to, or closer to, North able trade agreements – NAFTA, in par- that overseas offshoring is no longer the America within the past three months – a ticular – along with access to a highly good deal it once was, nor does it comport 9 percent increase over a similar survey skilled work force, greater quality con- with today’s supply chain demands. conducted three months prior. trol, ease of visiting facilities, reduced Instead, businesses are increasingly Why the sudden “rediscovery” of Mex- Labor costs, which account for 20 to 30 transit times, greater inventory control, realizing that better options exist closer ico and Canada as viable manufacturing real-time access to production managers to home. Some of the world’s largest com- options? For one thing, a confluence of and an absence of visa requirements. panies have joined a steady stream of factors made China and other previously smaller companies in a concept known as desirable locations less attractive: “near shoring” – returning operations to nearby or neighboring countries. Near shoring has become so prevalent that a recent survey by international business consultants AlixPartners found that 42 12 TLIMAGAZINE.COM WINTER 2013 • Chinese labor costs have skyrocketed at a double-digit pace; • Volatility in world oil markets has driven up production costs; • Political instability and environmen- Canada is seeing a long-term investment in its technology sector pay off. Atlantic Canada – which includes the provinces of Nova Scotia and Prince Edward Island along with the eastern-most provinces of Newfoundland and Labrador – has established itself as one http://www.TLIMAGAZINE.COM

Table of Contents for the Digital Edition of Transportation & Logistics International - Winter 2013

Transportation & Logistics International - Winter 2013
Hurricane Sandy
Intermodal Rail
Near Shoring
Steel Bridges
Porsche Cars North America Inc.
TDS Transport
Aspen Equipment Co.
Consumers Energy
Mountain Valley Express Co. Inc.
Supreme Group
Miller Felpax Corp.
Rio Grande Pacific Corp.
TNT Sales
Usher Transport Inc.
Triad Transport Inc.
Traylor Bros. Inc.
Fusion Logistics
GulfMark Energy Inc.
Mode Transportation
Oregon International Port of Coos Bay
Trailways Inc.
Time Logistics Inc.
Verizon Communications Inc.
Sears Holding Corp.
Perry Ellis International Inc.
Tennessee Commercial Warehouse
J&P Hall Express
Pacific Air Cargo
Last Page

Transportation & Logistics International - Winter 2013