Note: Today’s post is part of our “Editor’s Pick” series where we highlight recent posts published by our sponsors that provide practical knowledge and advice on timely and important supply chain and logistics topics. This post from Amber Road’s blog discusses several factors companies must consider if they are thinking of moving out of China as a manufacturing or sourcing base.
There has been a lot of recent buzz about companies relocating sourcing or manufacturing out of China. It’s easy to understand why. Supply chains are running at full steam as the economy is booming in many parts of the world, while in other parts economies are taking a hit from obstacles to open commerce and trade. Protectionist trade policies have led to new tariffs – actual and potential – and the accompanying cost increases have led to a general attitude of trade uncertainty, specifically between the US and China. According to an Amber Road and AAEI 2018 report on Trade Trends, 77% of US importers surveyed consider shifting trade policies as their top challenge in the road ahead. More than half of these companies also rank the cost of goods sold as their top concern. These higher tariffs add to the total landed cost, eventually affecting the price on the shelf.
For decades, China has dominated supply chains, with most manufacturing countries following a “China Plus One” strategy for sourcing – diversify their operations by adding another location in Asia. But many recent reports suggest that China’s growth has weakened because of the volatility. China’s production numbers are dropping and factory activity is slower than expected. It’s not hard to see why.