Skip to content
Search AI Powered

Latest Stories

newsworthy

Leaving China to avoid tariffs? Look before you leap

The costs and complexity of shifting sourcing to another country can potentially outweigh any tariff savings, said speakers at a recent trade and transportation conference.

The Trump Administration's higher tariffs on U.S. imports from China have accelerated a trend that began several years ago: U.S. companies are shifting some sourcing from China to other, typically lower-cost countries in Southeast and South Asia, as well as sub-Saharan Africa, Eastern Europe, and the Western Hemisphere. But the consequences and costs of relocating can potentially outweigh any savings from avoiding the tariffs, cautioned panelists at the recent 18th Annual Northeast Cargo Symposium hosted by the Coalition of New England Companies for Trade (CONECT) in Providence, R.I. Any importer contemplating such a move should be realistic about the pros and cons of leaving China, they said. 

Manufacturers often rely on local suppliers for an array of materials, parts, and components, so relocating production may require finding new suppliers that meet quality standards and can take on more business on a specified timetable. But those suppliers may not always be available when and where you want them, said Jack Daniels, president and CEO of EastBridge Strategic Sourcing, a consulting firm that helps U.S. companies manage overseas sourcing and production. He told of one company that moved production of one of its products from China to Myanmar. "The tariffs disappeared," he said, but for several reasons some specialized parts still had to be sourced in China, which added time and complexity. Additionally, there were no direct ship calls from Myanmar to the company's U.S. destination, so the product had to ship via Singapore, which also added time and cost.


Daniels said that so far, only a few of his clients, many of which are in the electronics industry, have moved any production out of China. That's partly because these contract manufacturers depend on multiple suppliers of numerous small parts, and it's "too painful to move all of that at this point," he said. About 85% of the world's printed circuit boards are made in China now, and it will be "years and years before the entire ecosystem of manufacturers and suppliers can shift out of China—if it ever does," he added.    

Some other types of products are starting to leave China, though. Ocean carriers are responding to increased demand for service from Vietnam and other Southeast Asian countries and have started to offer more direct calls and transshipments in the region, said Sri Laxmana, vice president, global ocean services for third-party logistics (3PL) provider C.H. Robinson. Ocean shipping, however, is a "very asset-heavy industry," so carriers must be certain there will be sufficient inbound and outbound volume to justify the additional costs and transit time, he said. They must get commitments from ports, container terminals, and local labor, yet in developing economies, transportation and logistics infrastructure and services may not be adequate or reliable enough to handle the additional demand. That can lead to delays and capacity shortages, he said.

Careful research needed 

One company that's adjusting its sourcing strategy in response to tariffs is Manchester, Conn.-based Bob's Discount Furniture. Last fall, Bob's moved about 25% to 30% of its business from China to factories in Vietnam, some of which are owned by its existing Chinese suppliers. The company also has been increasing its sourcing from India and Indonesia, said Amy Elmore, director of international logistics. 

Elmore outlined some of the steps she and her team have taken to keep the cost and service impact associated with sourcing shifts under control. They included:

  • Negotiating new product pricing to mitigate the cost of additional tariffs.
  • Having "people on the ground" to onboard new vendors and make sure everything from raw materials to logistics goes smoothly.
  • Assessing logistics infrastructure and services in terms of capacity, availability, and reliability.
  • Accurately quantifying how much volume would be produced in the new locations. This was helpful when negotiating pricing and service with ocean carriers and consolidators, Elmore said.
  • Adjusting internal lead times to account for the more frequent delays in loading containers at new ports and the longer transit times to U.S destinations.

Elmore said that anyone who is thinking about relocating production should consider taking similar steps. In addition, she recommended that importers think about the end-to-end supply chain, and not just the international segment. It's important to know, she said, "if you have to change your routing, will it impact your domestic costs, distribution, and transit times?"

The Latest

Artificial Intelligence

AI: Is it the real deal?

More Stories

Logistics economy picked up speed in January

Logistics Managers' Index

Logistics economy picked up speed in January

Economic activity in the logistics industry expanded in January, growing at its fastest clip in more than two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.

The LMI jumped nearly five points from December to a reading of 62, reflecting continued steady growth in the U.S. economy along with faster-than-expected inventory growth across the sector as retailers, wholesalers, and manufacturers attempted to manage the uncertainty of tariffs and a changing regulatory environment. The January reading represented the fastest rate of expansion since June 2022, the LMI researchers said.

Keep ReadingShow less

Featured

Disrupting the furniture supply chain: An interview with Jay Rogers

Disrupting the furniture supply chain: An interview with Jay Rogers

As commodities go, furniture presents its share of manufacturing and distribution challenges. For one thing, it's bulky. Second, its main components—wood and cloth—are easily damaged in transit. Third, much of it is manufactured overseas, making for some very long supply chains with all the associated risks. And finally, completed pieces can sit on the showroom floor for weeks or months, tying up inventory dollars and valuable retail space.

In other words, the furniture market is ripe for disruption. And John "Jay" Rogers wants to be the catalyst. In 2022, he cofounded a company that takes a whole new approach to furniture manufacturing—one that leverages the power of 3D printing and robotics. Rogers serves as CEO of that company, Haddy, which essentially aims to transform how furniture—and all elements of the "built environment"—are designed, manufactured, distributed, and, ultimately, recycled.

Keep ReadingShow less
chart of GenAI effect on workforce

Gartner: GenAI tools create anxiety among employees

Generative AI (GenAI) is being deployed by 72% of supply chain organizations, but most are experiencing just middling results for productivity and ROI, according to a survey by Gartner, Inc.

That’s because productivity gains from the use of GenAI for individual, desk-based workers are not translating to greater team-level productivity. Additionally, the deployment of GenAI tools is increasing anxiety among many employees, providing a dampening effect on their productivity, Gartner found.

Keep ReadingShow less
warehouse worker driving forklift between racks

German 3PL Arvato acquires two U.S. logistics firms

The German third party logistics provider (3PL) Arvato this week acquired the U.S.-headquartered companies Carbel LLC and United Customs Services, saying the move would grow its client base, particularly in the fashion, beauty, and lifestyle segments.

According to Arvato, it made the move in order to better serve the U.S. e-commerce sector, which has experienced high growth rates in recent years and is expected to grow year-on-year by 5% within the next five years.

Keep ReadingShow less
photo collage of warehouse tech

Supply chain pros are wary of inflation and labor woes

The top worries that supply chain leaders hope to address with new innovations this year include inflationary concerns (68%) and labor shortages (50%), according to a survey on innovation from the third-party logistics provider (3PL) Kenco.

And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.

Keep ReadingShow less