Sunday, August 3, 2008

NYT: "Shipping Costs Start to Crimp Globalization "

From the New York Times:

"When Tesla Motors, a pioneer in electric-powered cars, set out to make a luxury roadster for the American market, it had the global supply chain in mind. Tesla planned to manufacture 1,000-pound battery packs in Thailand, ship them to Britain for installation, then bring the mostly assembled cars back to the United States."

Higher transportation costs are changing the game for global business. The increasing costs of movement [shipping/logistics] are reducing labor cost savings. Those saving are being reduced, reversed and offset by increasing shipping costs.

Tesla is a great example of this. They were going to reduce costs by manufacturing in lower cost locations. The rapid increase in oil prices has made transnational shipping more expensive. Expensive enough to bring manufacturing back the the United States.

What are your thoughts?

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