Reshoring Content

Spend Matters welcomes this guest post from Jason Middleton, Ray Products vice president of sales and development.

Our trade deficit with China surpassed $301 billion in 2018 — and it’s no mystery why. Thanks to cheap labor and fewer regulations there, it tends to be more cost-effective to have “Made in China” stamped on your product than it is to have “Made in America.”

In the last year, however, the trade war has prompted many companies to re-evaluate their outsourcing practices and consider a “maker-to-user” model of sourcing locally. With the U.S. imposing approximately $250 billion in tariffs on Chinese imports, it’s simply no longer cost-effective to source products and materials from China.

Procurement and supply chain professionals reacted to the new USMCA trade deal this week with relief that they now know what to focus on in a post-NAFTA landscape — and that they can begin figuring out how the pact fits with ongoing tariff disputes with China. Trade negotiators on Sunday finalized the U.S.-Mexico-Canada Agreement, a new pact that will replace NAFTA. After about two years of turmoil, the deal was welcome news for supply chain professionals because it removed uncertainty from their planning processes.

In a related article last week, we tried to get (a little closer) to the bottom of the whole Mexico border tax issue. Although there are still two potential camps of “tax” — President Trump’s potential blanket tax on Mexican imports, and the broader Border Adjustment Tax (BAT) that comes from proposed Republican corporate tax reform — procurement organizations on both sides of the border have immediate concerns.

President Donald Trump followed through on one of his central campaign promises Monday by officially withdrawing from the Trans-Pacific Partnership (TPP). And while trade with China, Vietnam and other Asian countries is certainly of concern to most procurement groups, our neighbor to the south also needs to be on your radar for 2017.

When it comes to creating a harmonious society, the Communist Party in China pays far greater attention to fundamental economics than most western countries do. Keeping GDP growth above certain levels is not juts a goal – it is religion for the politburo’s economic planners that know that the country is held together by growth and economic improvement at all levels, not ideology. Given this foundation, the questions that this blog from Supply Chain Management Review raises are fascinating indeed.

I don’t usually expect to get sage procurement and operations advice from mainstream newspapers. But The Guardian recently published a cheekily titled piece that’s worth reading even for those who are deep into the procurement profession: The sharks and the bees: what nature’s patterns teach us about sourcing.

The conventional wisdom of outsourcing as a means to remain competitive is now being called into question. An ever-growing number of firms, including the likes of GE, Ford, Whirlpool, and Caterpillar, are undergoing re-shoring initiatives. The drivers behind this transition are multi-faceted and reflective of inherent challenges in the off-shore production model as well as emerging global trends. Some of the most prevalent forces are as follows.

The strength of localized supply chains with certain UK brands and markets will no doubt continue as well. After all, we just can’t see something as distinctly English as a Barbour jacket or a Mini being produced anywhere else. Yet perhaps the biggest change in both the apparel and manufacturing sector will come from a resurgence of lower-tier supply sources coming from onshore. But the rhetorical consumer branding question remains to be answered, namely, will that make these brands more “English”?

Spend Matters welcomes a guest post from David Simchi-Levi, MIT engineering Professor and OPS Rules Chairman. On December 6th, Apple's CEO Tim Cook announced a […]