Sunday, September 29, 2013

The Pendulum Swing and Global Supply Chains

The article, “Time to Rethink Offshoring?” mirrors a discussion in my Policy in a Global Economy class.  We have just begun to touch on “the pendulum swing” of US manufacturing jobs returning back to North America, specifically those in the textile industry. 

In the McKinsey article, they cite “soaring oil prices, a falling dollar, and rising wages”[1] as reasons companies are reconsidering their global supply chains.  In a similar article, “Analysis: Offshoring not as advantageous as it used to be”, the article looks at additional reasons including higher than expected administrative costs and fears of taking IT technologies offshore for fear of property right infringements. [2]

Companies in these “ seven broad groups of industries—machinery, computers and electronics, appliances and electrical equipment, fabricated metals, furniture, transportation goods, and plastic and rubber products—accounting for around 70 percent of the goods that the U.S. imports from China,” are most likely to be reconsidering offshoring.[3]

Countries with the comparative advantage will produce goods and there are always winner and losers in trade shifts.  In the case that manufacturing shifts back to the US this could mean US manufacturing workers are winners, along with those concerned with reducing variability in supply chains. We have already learned that variability is bad, reduction is therefore good.  Variability of supply chains could decrease in terms of transportation logistics, oil prices, and other cost or time reductions. 

My questions for this week then are…
Is manufacturing shifting back to the US? What does this mean for global supply chains? 

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