1. The article’s main ideas
The author, David Simchi-Levi, contends that the current economic slowdown in China is partly due to a change in the global supply chain strategies of American and European manufacturing companies.
The author uses a series of separate surveys conducted by different organisations to show that the practice of producing closer to the consumer, or “near-shoring”, is resulting in a decline in manufacturing activity in China. He suggests that global companies are moving from a global supply chain strategy to a situation where American companies are moving production to the USA or Latin America and European companies to countries in Eastern Europe.
The increase in oil prices over the last decade is first reason Simchi-Levi argues has led to ‘near-shoring’ of manufacturing activity, as it has increased the cost of shipping goods from China.
Secondly, the author points out that labour costs in China have increased by 20% per annum over the last few years which has increased the cost of manufacturing in China relative to the USA or Eastern Europe which have not had the same labour cost growth.
Thirdly, the article suggests new technologies that have increased the productivity of automation have reduced the importance of the low labour costs available in China when global companies are determining their …show more content…
Companies with high capital investment in manufacturing will find it harder to change their supply chain, than companies with labour intensive production. Similarly, multinational companies with significant markets all over the world will have a far more complex supply chain than this article suggests. The impact of near shoring will also vary by country and state within the regions identified. For example, Germany and Japan have been able to maintain significant elements of their supply chain
The author, David Simchi-Levi, contends that the current economic slowdown in China is partly due to a change in the global supply chain strategies of American and European manufacturing companies.
The author uses a series of separate surveys conducted by different organisations to show that the practice of producing closer to the consumer, or “near-shoring”, is resulting in a decline in manufacturing activity in China. He suggests that global companies are moving from a global supply chain strategy to a situation where American companies are moving production to the USA or Latin America and European companies to countries in Eastern Europe.
The increase in oil prices over the last decade is first reason Simchi-Levi argues has led to ‘near-shoring’ of manufacturing activity, as it has increased the cost of shipping goods from China.
Secondly, the author points out that labour costs in China have increased by 20% per annum over the last few years which has increased the cost of manufacturing in China relative to the USA or Eastern Europe which have not had the same labour cost growth.
Thirdly, the article suggests new technologies that have increased the productivity of automation have reduced the importance of the low labour costs available in China when global companies are determining their …show more content…
Companies with high capital investment in manufacturing will find it harder to change their supply chain, than companies with labour intensive production. Similarly, multinational companies with significant markets all over the world will have a far more complex supply chain than this article suggests. The impact of near shoring will also vary by country and state within the regions identified. For example, Germany and Japan have been able to maintain significant elements of their supply chain