Supply Chain Conundrum: In or Out of China

As China has raised their labor costs more than 20%. Many US companies start to reevaluate their sourcing and manufacturing in China. Like stay in China, return manufacturing to some U.S. states that still known for lower cost labor, or find out new labor sources such as Vietnam, Cambodia and South America.

But there are still some good effects on raising supply chain operations and costs. Rising Chinese wages means an increase in standard of living for the largest potential market on the planet, which consists of nearly 1 billion employed consumers. Many of those potential consumers are beginning to see a pay increase that allows for disposable income that can now be spent on products and services that would have been unaffordable even a decade ago. This new realization coupled with a similar increase in labor costs across the rest of Asia is causing companies to reconsider their strategy in China and its mostly untapped market potential.

The companies need to weigh the potential benefits of staying in China, moving somewhere else or repatriating some of those positions to the U.S. Obviously, managing supply chain risk is more easily done when operations are firmly planted on home soil, but time will tell whether convenience and a narrowing wage gap will send these positions back to the U.S

The increasing popularity of technology in supply chain such as transportation management software and warehouse management software buffered some of the added costs within today’s supply chain. They upgraded the supply chain with smoother operations and lowered costs. And business start to rely on technology to lessen financial strain.


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