More fun with reverse globalization

High transportation costs are making Procter & Gamble rethink its supply chain strategy. But China still comes out on top.

By Andrew Leonard
Published June 27, 2008 1:51PM (EDT)

When I first glanced at a headline in this morning's Financial Times, "Oil costs force P&G to rethink supply network," I thought, aha, another example of reverse globalization. In a world of sky-high transportation costs, outsourcing production to where labor is cheapest might not always make economic sense. As Procter & Gamble's head of global supply, Keith Harrison, says, "I could say that the supply chain design is now upside down. The environment has changed. Transportation cost is going to create an even more distributed sourcing network than we would have had otherwise."

An example of this more distributed network? Moving a factory from one city in China ... to another city in China!

[Harrison] said high energy costs were already changing the calculations affecting the siting of new production facilities. As an example, he cited a babycare facility being built to meet growing demand in China. It is being located at Xiqing in the northern province of Tianjin, rather than at an existing plant near Guangzhou in southern China.

In related news, an excellent cover story in the June 19 issue of BusinessWeek, "Can the U.S. Bring Jobs Back from China?," suggests that the reconfiguring of global production chains is not going to happen overnight, if ever.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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