Are Rising Shipping Costs Shipping Industrial Jobs Home?

In recent years, shipping costs have risen as much as 71 percent because of higher oil prices, as well as cutbacks in ships and containers, according to IHS Global Insight. The costs for logistics and transportation had the second highest percentage increase during the Great Recession among the production variables examined in a study by the consulting firm Accenture. Increased transportation costs were reported by 57 percent of the respondents, trailing only the increase in material and supplier costs, cited by 73 percent of those participating in the Accenture survey.

Hidden costs revealed

Shipping costs weren’t the only thing shipping work back to North America. Missed delivery dates, shoddy workmanship and communication issues are no surprise to many OEMs bringing production closer to their assembly plants. A NADCA study conducted in conjunction with the U. S. Department of Commerce concluded that unexpected costs often drive up the final price of die cast products by as much as 20 percent for manufacturers and OEMs that use offshore sourcing.

Among the reasons for these unexpected costs were miscommunication, long lead times, the price of die failure, legal liabilities, and payment for products sight unseen. The study also noted that market share and technology may be put at risk because of unscrupulous offshore die casters passing along intellectual property, trade secrets, specifications and marketing information.

Rolling blackouts are now frequent in China, and average electricity costs have soared to 11.6 cents per kilowatt hour from 6.1 cents in 2001. By comparison, U.S. prices have risen to 6.7 cents per kilowatt hour from 4.73 over the same time frame. Similar conditions are common to many emerging markets lacking the resources to provide adequate infrastructure to support low cost manufacturing.

Many of our valued customers have learned that “Made in America” is the affordable high quality, reliable manufacturing alternative.