Rising prices in China and Global Supply Chain Impact

An article in the International Herald Tribune (30 January 2011) tracks the impact of rising prices in China (“20 to 50 % increases for leather shoes and polo shirts” according to the article) on sourcing decisions and shipping. Wage increases in China to counter inflation, increasing commodity prices as well as appreciation of the renminbi  are cited as reasons for this increase, in addition to a desire to move to higher value added products.  As a result, shipping lines are cited as cancelling 25 % of their sailings.  Buyers have tried to shift production to India and Vietnam, but face infrastructure challenges and capacity constraints.  Factories in China are being moved to the interior to access lower wages but this creates higher transport costs. Will all of these added costs suggest an increase in US manufacturing ? Will China’s move upstream in manufacturing create more pressure on prices for higher end manufacturing products ?  How long will it take for the global supply chain to adjust ?

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About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged , , , . Bookmark the permalink.

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