Ever since European imperial powers first pursued agricultural products such as sugar, tea and rubber, global trade has relied on economy of scale and low labour costs to minimise total production costs.
This has remained a cornerstone in the industrialised age of manufactured goods; the most recent wave saw manufacturing migrate from developed western nations to the tiger economies of Asia-Pacific. China with its vast labour resource occupies a commanding place in the story of accelerating globalisation.
However, the choice to source products or components from the lowest cost labour economy should no longer be automatic because the logic that supports this accepted wisdom is breaking down.
Chinese manufacturing costs are on the up; Apple manufacturing partner Foxconn recently raised salaries 25% for some Chinese workers, highlighting a trend of increasing labour costs across China. While the cost of manufacture may be the price that catches the eye, the smartest wholesale distributors have a handle on the total landed cost (TLC), which factors all the costs of bringing goods to buyers’ doors.
Rising fuel costs and market over-capacity are driving up international shipping costs from Asian ports to North Europe and the Mediterranean. UK import duty and import VAT may exceed 25% or 30% for some goods.
This week Budget 2012 carried a resounding ‘Britain open for business’ message. So, is it time to repatriate manufacturing back to the UK? It may be a little too early right now to move the whole operation, but it may work for local consumption… How can you tell unless your supply chain management system gives you the 360 on total landed costs?
NetSuite’s cloud-based ERP enables its mid-market wholesale distribution customers to get a complete handle on total landed costs. BlueBridge One is a leading UK NetSuite solution provider specialising in custom-fitting powerful NetSuite online enterprise software tools to the specific needs of each customer.
If you think making better strategic decisions about configuring your supply chain could boost your business performance, click here and register for a 14-day FREE trial of NetSuite.