TeamNAFTA.com

 
The rising cost of fuel has become the leading risk factor facing global manufacturers. Although most news reports focus on the consumer, fuel costs are causing manufacturers to rethink their overall logistical supply chain costs of making products abroad.

Since 2000, the cost of shipping a standard 40-foot container from Asia to the East Coast has tripled, and will likely continue to increase as oil prices continue to climb towards $200 a barrel. Once containers from China reach U.S. ports, retailers and manufacturing companies are still burdened with the transportation cost of bringing products to market by either truck or by rail.

In a recent Wall Street Journal article, Jeff Rubin, chief economist at CIBC World Markets in Toronto, predicted that Mexico will be “the biggest winner of all” as increased transportation costs make China uncompetitive in an ever-growing list of businesses in North America.

Companies have already begun bringing production back to North America. Manufacturers like Emerson and retailers like Home Depot have shifted the production of some items from Asia to both Mexico and the U.S. Rising transportation costs were a significant factor for this decision.

In 2000, when oil was selling for $20 a barrel, Asia was an attractive option for manufacturers. With a closer proximity and faster ‘time to market’, Mexico is poised to see a tremendous production boom.

Your company would be well served by investigating the total costs of doing business along the U.S.-Mexico border.

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