Supply Chain Essay

Supply Chain Shift
Topic:  
A study conducted by Drewry Supply Chain Advisors looked at the China’s low production costs that kept them at 30% of the 96% of imported apparel to the United States and the UK.   The questions asked are how long can China stay competitive over other countries, and what major changes would end China’s production advantages.
Bulleted Summary:
• Lost Opportunity Costs
• Outsourcers moving closer to their own market
• China’s rising labor costs
Summary:
A study conducted by Drewry Supply Chain Advisors examined the importing of men’s shirts produced and imported from China, and evaluated the issues China could face in keeping the lead in the importing of apparel to the US and UK.   In 2005, China supplied 30 of the 96 percent of all apparel being sold in the US.   The study examined the effect of changes in costs related to outsourcing and other shipping issues that negatively impact outsourcing decisions.   Although China is not ideally located geographically as compared to Mexico and the Honduras, ocean shipping has historically lower costs.   However, countries like Vietnam, Mexico, and the Honduras become more competitive as a lower costing producer over China.   Factor in delays in shipping or any other delays in the delivery of product, and the lost opportunity cost makes China less attractive as compared to Mexico or Honduras, due to the closeness of their market.   The study examined rising costs of labor in China compared to India and Vietnam.   Labor in China has risen about 10 percent a year, where India and Vietnam average 7 and 5 percent per year respectively.   The increasing value of the yuan, which is the Chinese equivalent to the dollar, would impact prices of all imports from China, making it less competitive.   Factor in delays in shipping or any other delays in the delivery of product, and the lost opportunity cost puts China at a higher risk, and less attractive compared to Mexico or Honduras, due to the closeness of...