The Harvard Business Review's You Can’t Understand China’s Slowdown Without Understanding Supply Chains covers the interesting possibility that China's recent economic issues are at least in part being caused by manufacturing moving away from China.
Key quote from the article, which is written by a MIT engineering professor:
I nonetheless believe that the slowdown is due, in part, to an acceleration of “near-shoring,” the practice of producing closer to the customer.
The article goes on to describe several surveys and studies that:
... may suggest that the world is in the middle of a transformation, with companies moving from a global manufacturing strategy, whose focus is on low-cost countries, to a more regional strategy, where China is for China, the United States (or Mexico and Latin America) is for the Americas, and Eastern Europe is for European markets.
The article lists 4 main drivers of the shift to near-shoring:
- Lower US energy prices
- Higher Chinese labor costs
- Automation, which favors highly skilled labor
- Supply chain risk is greater the longer the supply chain
We first noticed the shift to bringing some manufacturing back to the US in 2007. Since then we written extensively about this trend in our small manufacturing section (and yes, I'm definitely patting us on the back for this piece of trend spotting).
We continue to see more manufacturing moving back to the US. We also think a number of trends and shifts will drive the continued growth of small manufacturing, with a big one being the growing support infrastructure for small makers and manufacturers.
We'll have more on this sector in the near future.
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