February 25, 2012 - Modern Distribution Management

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February 25, 2012

Trend Points to Less Offshoring by Manufacturers

For years, we’ve been talking about the trend of offshoring – companies sending operations to other countries to take advantage of lower labor costs. But there are signs that trend may be reversing. More manufacturers want to source product closer to home. This article looks at current conditions, challenges to offshoring and expectations for sourcing going forward.

For years, a core element of cutting costs for many major manufacturers was moving operations to countries with cheaper labor. The belief was that labor savings would more than offset the transportation costs associated with reimporting the finished products. As a result, manufacturers set up shop in places such as China and India and prepared to increase their profits.

But a problem developed: “China’s labor isn’t so cheap anymore,” says Barry Lawrence, director of the global supply chain laboratory at Texas A&M University. And transportation capacity has also become an issue.

As a result, a shift appears to be taking place in the market. While it is currently known by many terms – near-sourcing, insourcing, onshoring, etc. – it all means one thing: Manufacturers are looking for ways to bring production closer to the consumers of their products.

In its 2011 Global Manufacturing Outlook, global accounting and consulting firm KPMG reported that the U.S. was second as a destination for new sourcing in the next 12 to 24 months; only China registered higher.

Increased volatility in the global market has led ...

Trend Points to Less Offshoring by Manufacturers Read More »

Building a More Profitable Supply Chain

In the recent MDM Webcast, Operating for Profit: The Coming Revolution in Supply Chain Finance, Jonathan Byrnes, senior lecturer at MIT and author of “Islands of Profit in a Sea of Red Ink,” said companies need to take advantage of a new approach to their supply chains that can grow profitability and tighten relationships with customers. Here’s a summary of the webcast, now available on-demand or on DVD at www.mdm.com/operatingforprofit.

Imagine what your competitor could do in terms of customer service that would be your worst nightmare.

Jonathan Byrnes, senior lecturer at MIT, posed this scenario to attendees of the recent MDM Webcast, Operating for Profit: The Coming Revolution in Supply Chain Finance. When he’s asked his students in the past, he said the answer from many has been a competitor finding a way to provide service that made a customer or vendor better off in ways their companies could not.

Companies can in fact accomplish this before a competitor beats them to it, he said. “Supply chain management today can have ...

Building a More Profitable Supply Chain Read More »

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