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Role reversal

For years, the U.S. and Europe have seen China as a low-cost manufacturing center, as a place to build factories, make things, and then export them back to Western countries.

That may be old-fashioned thinking, according to research conducted by Tompkins Associates, a supply chain consulting firm. Tompkins principal Greg Hazlett shared this research in the report, “China is Changing Supply Chains Around the World,” released in March.

As companies worldwide have absorbed the fact that China has 1.3 billion consumers, they have worked to provide more goods and services to that potential powerhouse of customers. That, in turn, according to Hazlett, has led to more advanced distribution centers and logistics systems in the world’s most populous country.

Shanghai has overtaken Singapore as the world’s busiest port. As a top exporter, China has had to increase its export distribution capabilities and enabling technologies. A few years ago, any site in China that had some type of warehouse management system (WMS) would be considered world class for that country. Now, a number of facilities have a Tier 1 WMS, wireless networking, automated material handling and experienced logistics staff, Hazlett wrote. Value-added services, traditionally available only from U.S. or European distribution resources, are more available in China.

These improvements have led to China’s emergence as more of a global supply chain hub. Hazlett believes that will become even truer in the future. For example, a company can have goods produced off-season to save costs and save even more by storing the products in China rather than immediately shipping them to sit in a warehouse in a higher-cost country.

And, Hazlett wrote, a company can source low-cost supplies in Indonesia and Vietnam and use a site in China as a multicountry hub.

As the rapid changes of the last 40 years continue, it’s worth questioning whether China will house a new breed of supply chain leaders for a manufacturing dynamo, a dynamo that could build plants closer to Western customers, increasing competition for Western suppliers.

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