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US firms shift warehousing to China
Move is part of efforts to make supply chains more efficient: report
US manufacturers and retailers are increasingly shifting warehouses and distribution facilities to China as part of efforts to make their supply chains more efficient, says a report in the Financial Times.
Until recently, China-made goods typically passed through US warehouses en route to their final destination.
But that has begun to change, the London financial daily pointed out, as a growing proportion of goods are sorted, packaged and labelled before leaving China. Once they arrive in America, the goods are delivered direct to the retailer or consumer, by-passing US warehouses.
'You are skipping a couple of steps in the supply chain and doing it at a fraction of the cost,' said Bill Zollars, chief executive of Yellow Roadway, a large US trucking and logistics group.
Rather than build their own warehouses in China, most US companies have preferred to use facilities provided by logistics partners, such as UPS and DHL.
Mr Zollars said Yellow Roadway was planning to offer warehouse services for its US customers in China through a recently formed logistics joint venture.
UPS expects to have 50 warehouses in China by the end of this year and plans to open a further 10 next year.
Red Wing, the US shoe maker, has shifted some work from its main US warehouse in Salt Lake City to a UPS facility in Yantian. 'We were doing the same thing (in Utah) with more people taking longer to get it done at a higher cost,' explained director of marketing Peter Engel.
A warehouse worker costs about US$2 an hour in China, compared with US$14-US$15 in the US, said Satish Jindel, president of SJ Consulting, a transport consultancy.
Lands End, the clothing retailer, is another user of UPS's Chinese facilities.
However, Red Wing's Mr Engel said US warehouses will never disappear completely. 'If a retailer needs stocks replenished, they cannot wait two weeks for a ship to arrive from China. They need it in 48 hours,' he said. 'So we will always have warehouses in the US for back-up inventory.'
Small, high-value items, such as iPods and laptop computers, have long been delivered direct from China to US retailers and consumers. But logistics companies such as UPS and Yellow Roadway are seeking to expand the concept to bulkier, lower-value ocean-going goods, such as shoes and clothes, which can be fed directly into domestic truck networks in the US.