Michael Zakkour, who constantly deals with global supply chains as part of his job as a China/Asia market strategist at Tompkins International,made a great comment on exactly that at our Linkedin China Law Blog Group today. Michael’s comment was in response to a Bill Dodson post entitled, “Backshoring to the Future.” In just a few paragraphs, Zakkour nicely lays out exactly what I see happening out there and gives lie to the idea that there is any one country for anything:
I think a lot of pundits, analysts and otherwise sober business thinkers, including my friend Jim Fallows are
- Blowing this “trend” out of proportion
- Seeing it as a Black/White (or Red/Red-White and Blue) issue
The real issue is not a simplistic Off-shoring vs. On-Shoring debate. It is much bigger than that. We are in the middle of “re-globalization” – whereby companies have to consider “right-shoring.”
In other words a number of factors including:
- Where your biggest customers are (what are your top three markets by region)
- Cost of shipping, fuel and logistics
- Cost of labor
- Protecting IP
- Profitable partnerships
- What each country region does best
These factors and many others will inform companies on what mix of “re-shoring” “near-shoring”, “off-shoring” is right for manufacturing as well as R&D, marketing and sales.
A company may well want to keep component manufacturing in SE Asia, 60% of final assembly in China and specialty, high-value add manufacturing in the US. Many are misinterpreting this trend to mean massive, assembly-line focused, dirty and low value add manufacturing is coming home in droves.
The fact is a smart company will consider a new mix of manufacturing, sales, marketing and logistics in a re-balanced and re-globalized world.
In that world China still has a huge role to play. As an example just consider “China for China” manufacturing. If you are an apparel company, and your biggest market for the next 10 years will be China, why on Earth would you move all your manufacturing back to the US?
Good points all, don’t you agree?
Or as we lawyers are always so found of saying, it depends on the specific situation.