Fuel affecting the China based supply chain

I just read an interesting article on the Canada Gazette about the effect that high fuel prices are having on China based supply chains. According to the article, with soaring fuel costs, companies are second guessing putting all of their eggs in the China sourcing basket.

Now China’s cost advantage is being eroded by soaring oil prices, rising wages and an appreciating currency. Canadian companies that outsource their manufacturing to China are already feeling the pinch and some are even bringing production closer to home.

The article says that many companies are now looking to lower cost manufacturing countries such as Vietnam as well as the maquiladora factories in Mexico again. In the last couple of months I have been receiving an increase in pricing requests from many of my clients for transportation out of Mexico and South America. These companies are looking to benchmark their total China based production costs against those in Mexico. Back in the late 90’s many of my customers were utilizing the maquiladora plants in Tijuana for contract manufacturing, but with the shift of manufacturing to China over the last 8 years, Mexico based manufacturing became less prevalent.

Fuel is an increasingly hot topic in the supply chain community right now and rightfully so. Over the next couple of weeks we will be posting various articles on the cost of fuel and its effect on the logistics industry.