The world was a different place two years ago when Cequent Group decided--finally--to go into China. Like so many other manufacturers before it, the $500m maker of vehicle accessories and after-market supplies needed to cut costs. Cheap labor was the lure.
Unfortunately, much of the savings expected from moving production offshore has proved fleeting, eaten away by increasing costs. A number of factors are to blame; from fluctuating currency values and rising labor costs to miscalculating landed supply chain costs. By far the biggest variable, however, has been the cost of oil, which has reached levels that were unimaginable in 2006.
"All of the products that we manufacture in China are made of high-density steel--very heavy to ship," says Walt Mills, director of IT for Cequent, an operating group of TriMas Corp. "Increased logistics costs were not even on the horizon when we went into China. But when costs started to skyrocket, we started to see those benefits going away."
Source: Managing Automation