Who will benefit from reshoring?15 May 2012
By Will North
Over recent issues, I've considered how changes in world trade will affect the material handling industry. At the MHIA's Modex show in Atlanta last month, my colleague Cristina Brooks attended a presentation by Rick Blagsen, CEO of the Council of Supply Chain Management Professionals, that highlighted another way trade patterns may change in future.
Blasgen argues that, in the US at least, there may be a trend away from offshoring of manufacturing, to reshoring. Blasgen referenced work by the Boston Consulting Group. Their report, Made in America, again, received wide attention last year.
Blasgen and BCG argue that as China's once abundant pool of available labour begins to dry up, savings from labour will become less significant. At the same time, rising oil prices will mean shipping finished goods from Chinese manufacturing plants to consumers becomes more expensive. Together, these will make it more of a difficult decision whether to manufacture in China. It will, Blasgen argues, mean that US companies increasingly choose to "reshore" manufacturing.
Trade patterns like this affect the material handling industry in three places: at the dockside, in factories using lifting equipment, and at plants manufacturing lifting equipment.
The flow of goods around the world requires dockside cranes. Any overall trend for manufacturers to return to local production would have an impact here. However, as Mike Clark finds out on p21, other changes, like the widening of the Panama Canal, will continue to boost demand for new equipment in this sector.
A resurgent local manufacturing sector would be good news for crane distributors in developed economies. New factories will require new cranes. At the same time, remaining differences in labour costs may mean factory owners look to replace manual handling with mechanical handling.
It's less clear though if a trend like this will benefit local manufacturing of cranes. Blasgen and BCG's arguments could apply to this sector. However, there's nothing in current trade figures to suggest this yet. The United Nations Conference on Trade and Development figures for material handling equipment make grim reading for anyone working in a crane factory in the USA. Since 1995, Chinese mechanical handling equipment exports have soared, passing US exports in 2007. Since then, and the financial crisis, the gap between the countries has only widened.
While a general trend towards local manufacturing may help crane distributors around the world, there's no sign yet that it will slow the movement of crane manufacturing to developing economies.