Friday, August 8

A paradigm shift with global consequences

Many of us in the United States have given up on the idea that this country can recapture its once-mighty manufacturing industry. Who would ever believe that IKEA, the mega-global-department store with super-low prices, would sell products made in the USA? IKEA has announced that it is opening manufacturing plants in the east coast states of Virginia and the Carolinas, which were once powerhouses of furniture manufacturing until cheap labor in southeast Asia put them out of business.

What could possibly be causing such a dramatic shift from making products in labor-rich wage-cheap southeast Asia? The price of oil. The cost of shipping has risen to uneconomic levels. Not only that, but the huge container ships have reduced their speed by 20% to save fuel, thus slowing deliveries. It is no longer feasible for companies to ship raw materials from one part of the world to another to be made into something that is then shipped to still another place for sale. Lots of hardwood is grown on the east coast, so that’s now the cheapest place for it to be manufactured into furniture to be sold in the United States.

The New York Times has a very good article on this whole trend here. I bookmarked it for further perusal. It’s a good one.

No comments: