Parcel - June 2008 - (Page 23)

Top 10 Destinations for Foreign Direct Investment (FDI) in Developing Asia Source: Boston Logistics analysis of UNCTAD data human capital. Some examples capture the extent to which these countries are building physical infrastructure: • The Chinese government has built a $4.2 billion rail line between Beijing and Lhasa. • Taiwan has built a $15 billion high-speed line between Taipei and Kaohsiung • India is investing over a billion dollars in airports in Bangalore, Mumbai, Delhi and Hyderabad Should US manufacturers and logistics providers invest in infrastructure based on the continued growth of Asian imports? The shift toward Asia has long-term implications for stafﬁng, logistical design, and infrastructure investment. Everybody — absolutely everybody — has a stake in the ultimate answer. • Western manufacturers, surviving mostly on thinner margins, have been busy deﬁning a growth strategy that can succeed in the face of competition from low-cost sources. Boston Logistics’ ﬁfth annual State of Supply Chain study explored service, technology and pricing strategies that can help them differentiate from low-cost competition (the full study can be requested at www.bostonlogistics.com). • West Coast states, as well as regional consortia and public-private partnerships, have committed over $7.7 billion to fund infrastructure and freight mobility between now and 2020, and Tacoma plans to quadruple container capacity by then. • The Panama Canal is investing in a $5+ billion expansion to serve burgeoning Asia-US and Asia-Europe trafﬁc — and increasingly, global trade in general. • Ocean carriers took vessels out of other trade lanes and deployed them to Asia to the Trans-Paciﬁc over the last decade; many of them are now reviewing these vessel deployments in light of decreased West Coast volume connected with a devalued US dollar, decreasing margins on the trade connected with higher bunker fuel prices and opportunities to redeploy them in the booming intra-Asia and Asia-Europe trades. • US shippers have invested in distribution networks built on the assumption of continued growth of eastbound import volume through the West Coast. • Rail and intermodal operators have invested in equipment, infrastructure, information systems and de-bottlenecking to increase eastbound throughput to handle surge of the Asian imports. www.PARCELindustry.com Five factors will impact China’s future competitiveness, and shippers and carriers should consider them when making operations and infrastructure plans Supply chain planners should consider the potential impact of ﬁve variables that could affect China’s advantage as a low-cost country source moving forward. These include: • • • • • Chinese labor cost inﬂation Devaluation of the US dollar Increasing shipping costs Dual sourcing Environmental regulations China’s rising labor cost will divert imports to other regions The main reason attributed to China’s growing share in the global markets is that it can produce goods at relatively lower cost than its competitors due to lower wages. The average Chinese wage is three to four times lower in China than in the Latin American countries. However, rising wages have started to change how companies operate in China. US corporations and their suppliers are starting to rethink where to locate facilities, whether deeper into the interior (where salaries and land values are smaller), or even farther aﬁeld, to lower-cost countries such as Vietnam or Indonesia. Already, higher labor costs are beginning to price some manufacturers out of more developed Chinese cities such as Shanghai and Suzhou. “There is a break point where people will say this is too expensive,” says a general manager at the Suzhou plant of an American manufacturing company. Already, Boston Logistics sees companies taking an active interest in sourcing from other Asian countries, Latin America and Eastern Europe as alternatives to China. The list of newcomers includes Mexico, Brazil, Costa Rica and the Philippines, just to name a few. Exchange rate changes are tempering the beneﬁts of off-shoring to American companies and making US exports to Europe more competitive. Over last three years, the dollar has devalued by 12% against the Euro and 13% against the Chinese Yuan. This has helped US manufacturers’ export competitiveness and dampened the thirst for off-shoring. Conversely, Europe’s export competiMay 2008 23 http://www.bostonlogistics.com http://www.PARCELindustry.com

Table of Contents Feed for the Digital Edition of Parcel - June 2008

Parcel - June 2008 Contents Editor's Note What Would Augello Say? Success Means Never Being Satisfied Moving from Manual to Automated Fulfillment Regional Carriers Move to the Forefront Understanding Warehouse Management Systems Negotiating Carrier Contracts It’s All About the Data! How Long Will The East-West Trade Imbalance Last? Educate the Shipper, or Fix the Software? Product Profile On the Mark New Products & Services Advertiser Index Wrap Up

Parcel - June 2008

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