Fuel prices shifting businesses' focus to local manufacturing
Increasing fluctuations in the price of fuel have many companies examining their supply chain for ways to cut costs. The need to minimize transportation expenses has shifted companies' focus from overseas production to a more localized approach.
China's economy continues to be a big pull for companies seeking cheap labor. Recent figures from the National Bureau of Statistics show that the country's manufacturing sector grew for the fifth straight month. However, rising fuel prices have helped to offset the gains from outsourcing manufacturing.
Many companies view sourcing from manufacturers closer to home as a way to reduce transportation costs. Crude oil is trading at $105.21 a barrel, with prices expected to climb higher this summer. This approach includes examining the need for warehouses and distribution centers that are near major markets.
In addition to saving fuel costs, a manufacturing base close to home is reducing delivery time. With less travel time, companies can more accurately track production in ways that allow them to reduce their overall storage needs. Fewer goods in transit reduces the disruption caused by changes in orders and enables organizations to react more quickly to shifts in regional economies.