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Why Businesses Are Moving Logistics Operations Out Of China

Todays Date: January 18, 2019

Manufacturing goods takes a lot of money, and transporting them can be just as costly. Businesses can cut down on their costs by outsourcing operations to China, which is known for its low labor costs. Regardless of this fact, some businesses are now finding that their third party logistics operations are best outsourced to other places.

The first reason businesses want to move their logistics operations is because of the lack of management. By outsourcing your logistics to another country, you will also have to send management staff to the country to ensure proper management of the production process. This isn’t feasible for medium-sized businesses who don’t have the personnel to perform such an act.

The products and materials you ship to and from China must be shipped and transported a long distance if you are from the United States. Obviously, you will have to pay a large amount of transportation costs in order to get your products to a final location. With oil prices surging each and every year that passes, it doesn’t seem like China-based logistics operations will become any more cost effective than present.

A single recall from one shipment of goods can cost a company millions. A recent case that was made into a global news story would be with Mattel- a famed toy company. Mattel ended up losing millions of dollars due to a single recall that affected millions of toys that were shipped from China. Not only does Mattel lose out on profits, but also on the lack of trust that is now instilled in consumers who were once fans of Mattel’s commitment to excellence.

Since China does indeed have cheap labor, most of the workers are considered to be replaceable. This fact doesn’t bode well with businesses who have products that are tough to create, since workers will have to be trained over a long period of time in order to manufacture it. If you do find a manufacturer with a high turnover of employees, you are at worse odds of actually finding a logistics operation that is going to be efficient and adhere to strict deadlines.

The patriotism of consumers can go a long way in sales. A business that claims they only do production and manufacturing in the home country of a nation will see better sales than a company that states it outsources its operations. This is because citizens of a nation want to see their nation thrive, have jobs, and be stable enough to create a good quality of life. Outsourcing operations can sometimes be seen as counterproductive to this goal.

Closing Comments

Even though there are some negative aspects of outsourcing your operations, the goal to move logistics operations to China is still worthwhile for some businesses. You should speak with a logistics company for more information on what you should do in your situation.

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