BOSTON – Congestion at North America’s West Coast ports and continuing capacity problems at major European ports have complicated the China sourcing equation to such an extent that companies need to consider alternatives, experts at The Boston Consulting Group contend.
While the situation is worse in North America than Europe and likely to worsen even more, say George Stalk Jr., a BCG senior partner based in Toronto, and Kevin Waddell, a partner in BCG’s Warsaw office, companies in both regions need to look closely at the effects such transportation bottlenecks can have on their profits and reevaluate their manufacturing and distribution assumptions, GlobalAutoIndustry.Com reported.
With no solution in sight, they say, many U.S. companies may be better off manufacturing in Mexico or at home, though labor and other costs are significantly higher than in China. Similarly, West European companies that now source from China may want to switch all or part of their manufacturing operations to Central and Eastern Europe.
“In their rush to source from China,” Stalk and Waddell write in the newly published BCG report, Surviving the China Riptide: How to Profit from the Supply Chain Bottleneck, “many companies are blindly walking into a strategic risk.
“The risk is thinking that sourcing from China will result in lower product costs, when in reality the supply chain dynamics will, in many cases, drive up overall costs and reduce profitability.”
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