3PL CEO Survey Boosts Evidence That Some Production Shifting From China
A recent survey sponsored by Penske Logistics provides further evidence that manufacturers are moving some production from China to lower-cost Asian countries and from the Asia-Pacific region to Mexico.
Rising wage costs in China have caused a number of companies to move some manufacturing and export consolidation to lower-priced places such as Thailand, Vietnam, Indonesia and Sri Lanka, according to the survey of 34 major third-party logistics company CEOs in North America, Europe and the Asia-Pacific region conducted over the Internet this past summer.
The shift toward nearshoring in North America continues, according to the survey, with some key 3PL accounts moving to Mexico from Asia-Pacific. Automotive, technology and pharmaceutical companies have moved some sourcing and manufacturing to Mexico, the survey said.
Of the North American CEOs surveyed, 87% reported providing 3PL services in Mexico that generated an average of 9.3% of their U.S. revenue, according to the survey, which said the revenue figure is predicted to rise to 12.5% in three years.
“As companies begin shifting their product origins to local regions, they will look for a third-party logistics provider that can strategically navigate through the new normal in the supply chain industry,” Joe Carlier, Penske Logistics senior vice president for sales, said in a press release announcing the report on Oct. 21. “This includes the shift in supply chain length, changes in speed and demand for warehousing and transportation along trade corridors.”
Among other findings in the annual survey, author and Northeastern University D’Amore-McKim School of Business Professor of Supply Chain Management Robert Lieb and co-author Kristin Lieb, Emerson College associate professor of marketing communications, said:
• Finding and keeping managers has ranked as one of the most significant challenges in each region over the past 20 years of the survey.
• The North American 3PL industry is getting “greener,” with more than half of the companies in the region starting new sustainability efforts last year, but these moves so far don’t correspond to attracting or retaining customers.
• A move toward “omnichannel” retailing has resulted in more reverse-logistics activity in North America.
More broadly, the survey showed industry expectations for expansion, although only North American CEOs projected higher company growth than they did in last year’s questionnaire; they predicted their revenues will increase an average 14.6% over the next three years. European and Asia-Pacific CEOs projected average annual company revenue boosts of 10.3% and 11.6%, respectively.
Slightly more than half of the companies met or exceeded revenue projections last year, a decrease from 2011, the study found.
“Despite Euro-zone challenges and some slowing of manufacturing activity in China, opportunities to expand services geographically have both regions poised for growth,” Robert Lieb said. “Expansion into eastern Europe and Russia and an increased focus on servicing domestic consumption within China provide 3PLs with the opportunity to strengthen and stabilize their operations in those regions by filling out the services offered and customer base.”
Penske recently presented the survey results at the Council of Supply Chain Management Professionals annual global conference. Click here to learn more.
