By APICS CEO Abe Eshkenazi, CSCP, CPA, CAE | 0 | 0 | May 04, 2012
“China Offshores Manufacturing to the US.” Nope, it’s not a typo. It’s a headline of a story that appeared last week on the CNNMoney website. The article outlines why Chinese manufacturers are opening facilities in the United States.
One big reason for these US sites is to circumvent hefty tariffs that are imposed on Chinese companies for manufacturing goods in China, then selling them in the United States for less than they do in their home countries__
Of course, offshoring for many people used to mean manufacturing jobs moving to China. However, Chinese labor isn’t cheap anymore, and businesspeople now more than ever must consider the total cost of ownership. As far as labor goes, the United States offers a highly trained workforce.
There are other economic reasons for Chinese companies to build factories in the United States. According to CNNMoney, “cash-strapped states desperate for revenue and jobs are rolling out the welcome mat for foreign companies that can guarantee both.” For example, Golden Dragon Precise Copper Tube Group makes copper tubing used in air conditioning, refrigeration, and automobiles. The company, which is based in Xinxiang, China, is building a $100 million facility in Thomasville, Alabama. When it opens in 2014, an expected 300 new jobs will be available for Americans. Alabama offers special tax credits to companies building in the state.
The article includes commentary from Raymond Cheng, CEO of SoZo Group, a Hong Kong consulting firm. “For many of these companies, their biggest customers are in the United States,” Cheng says. “It’s a tactical advantage to be next door to your biggest client.”
The CNNMoney article also references China’s Nanshan Group, which is building a Lafayette, Indiana, factory that makes aluminum components. Set to open later this year, experts anticipate the facility will create 200 local jobs by 2013. Experts note Nanshan built the factory to be closer to the company’s top market, which is in the Midwest United States. Nurturing strategic thought
Clearly, in deciding to build manufacturing facilities in the United States, leaders at these Chinese companies are making operations decisions they anticipate will further the companies’ strategies. Consider the following from the APICS Operations Management Body of Knowledge Framework
: “Execution of operations strategy is critical to the execution of business goals. The business plan typically is focused on financial objectives, market and product objectives, technology, and growth. Operations must align these goals with processes such as speed, flexibility, cost, and quality. Typically, trade-offs must be considered, such as speed of delivery versus cost.”
Strategic thinking is an important part of supply chain and operations management. Yet, in an APICS survey, 60 percent of respondents indicated that there is no difference in perception between supply chain management and supply chain strategy at their organizations. There is important alignment between the management and strategy of supply chains, but they are not the same. Professionals that can facilitate that alignment are highly valued in their companies and highly respected in their profession.
APICS can connect you with the right supply chain strategy information for your needs. One place to start is the Strategic Management of Resources module, part of the APICS Certified in Production and Inventory Management courseware. Additionally, APICS offers research, an executive summary, and a folio
on the subject. These resources can help you understand, develop, and advance supply chain strategy within your organization.
Now, you can take the APICS Operations Management Now discussion to your social networks on LinkedIn, Facebook, Twitter, and the APICS Supply Chain Channel. Be sure to use the hashtag #OMNow and include @Tweet_APICS in any tweets to have your words featured on the APICS homepage.
In other news
- Why are US locations attractive to Chinese manufacturers?
- How does total cost of ownership influence offshoring? Is it more or less likely now than in the past to be considered?
- What is the future of offshoring in this increasingly international business environment?
- How does your operations strategy align with business goals? Are you as an operations or supply chain management professional able to relate to your business’s strategy?
Related APICS education
Not an APICS member
Testing the Waters
By Dave Turbide, CFPIM, CIRM, CSCP, CMfgE
March/April 2012, APICS magazine
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