For global companies, transportation costs are souring to the extent that shipping costs are fundamentally changing the value-added proposition of off-shore outsourcing. For companies with high freight costs (steel, cars, and so on), these companies can now be extremely more competitive manufacturing locally than overseas.
E-Sourcing Forum’s posting, Reverse Globalization, provides a good overview on how transportation costs are creating a fundamental change in how global companies do business. Cost examples include:
“…the cost of shipping a 40ft Container from the Far East to the Eastern Seaboard of the US, has almost tripled since 2000 ($3,000 to $8,000). This will double again once the price of a barrel of Oil reaches $200.
Furthermore, at Today’s oil prices, every 10% increase in a trip distance, translates into a 4.5% increase in transport costs.”
Tags: Outsourcing, supply chain, Transportation