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By Sarah Scudder
Discussing the shift to US sourced materials for complex packaging and shipping requirements: the impact of the pandemic and beyond.
End of Chinese Advantage
The days of assuming China’s advantage in lower cost and higher output are over. More and more American companies have ended their sourcing relationships there and are, instead, working with U. S. suppliers.
One of our new clients recently reached out to us because of their frustration with their Chinese supplier. Their company had placed an order and, after weeks with no response from their many inquiries, they were told that they might receive the shipment in October. This was a job that should have been shipped in two to three weeks.
And this is no isolated incident: according to an April 2020 Thomas survey of 878 North American manufacturing and industrial sector professionals polled during the Covid-19 pandemic, 64% of companies across manufacturing and industrial sectors “are likely to bring manufacturing production and sourcing back to North America to avoid similar difficulties in the future.”
At our company, we are now taking on new clients who have previously, some for over 10 years, sourced their non-traditional, large quantity print materials with complex packaging and shipping requirements to China.
Why are companies now “reshoring” to the United States?
Is it the pandemic? Not completely. The initial sourcing concerns about China were actually pre-pandemic. We are all aware of the “trade war” that started during the prior administration in Washington. This caused a wide range of tariffs and duties to be implemented or increased, which affected pricing and deliveries. These tariffs and duties were frequently changing, causing significant uncertainties about future orders and deliveries.
In the new administration, the frequent changes seemed to have stopped, but many of the tariffs and duties remain. According to PIIE, as of February 14, 2020, the average U.S. tariffs on imports from China were at 19.3 percent. These tariffs are more than six times higher than before the trade war began (prior to the pandemic) in 2018 and cover 66.4 percent of Chinese exports to the United States.
And, yes, the pandemic has an impact as well. During the height of the Covid-19 pandemic, many Chinese companies had to shut down. The companies that stayed open or that reopened have been uncertain about shipments and have raised prices on both the printing and shipping. Companies placing orders in China have been living with skyrocketing price increases and, even worse, not knowing when, if ever, they will receive their orders. As you can imagine, the ability to receive samples and proofs on a timely basis has been fraught with problems and uncertainty.
The days of assuming China’s advantage in lower cost and higher output are over. More and more American companies have ended their sourcing relationships there and are, instead, working with U. S. suppliers. Increased tariffs and the uncertainty about their orders (discussed above) are not the only reasons companies are reshoring to the U.S. Others include:
There are other factors that can more powerfully position your company as environmentally and human rights conscious, such as carbon footprint, the concern for exploitation of workers, and the importance of keeping jobs in the United States.
So, how does a company transition from Chinese to U.S. suppliers? Two possible solutions follow:
“By embracing real-time resource management, redundancy, reshoring, and the convergence between the digital and physical supply chains, manufacturers will come out of this crisis even stronger than they were before.” – Thomas CEO Tony Uphoff
Need help sourcing print in the US? Real Sourcing Network (RSN) sources print for companies in the US.
About the author
Sarah Scudder, Real Sourcing Network (RSN)