At the very beginning of this year, I penned my Supply Chain Predictions for 2009. Prediction Four was that the year would bring a very changed offshore and near-shoring decision framework. I noted that outsourcing decisions would become much more analytical and differentiated, focusing more on the trade-off for market access and growth vs. outsourcing for pure direct labor cost advantage in a low-cost country. I also noted that the U.S. and Europe are very large markets, and although these markets may well experience declines in product demand during 2009, they still provide ample opportunity for near-shoring sourcing alternatives.

 

Last week there was a significant twist to an outsourcing decision.  Daimler AG announced that it will manufacture its popular C-Class vehicles at an existing plant in the U.S. vs. current manufacturing performed in Germany.  This move was described as strategic, allowing Daimler to move production closer to its major U.S. market along with reducing its exposure to foreign exchange pressures. According to the blog entry, this move would allow Daimler to save $2000 Euros per vehicle.

 

I must admit that when I penned the original prediction, I had not assumed that there would be an appreciable fall in the value of the U.S. dollar.  The fact that such a well-known German auto manufacturer, which prided itself in German manufacturing sourcing and competitiveness has made this move leads to wonder if other manufacturers will follow with more U.S. sourcing decisions.  While many foreign automotive brands have established some form of a U.S. manufacturing presence, other high-value industries have not. 

 

The question is whether this is a trend that will extend itself in 2010, if the U.S. dollar continues to fall, and inflation makes a sharp rise.

 

Bob Ferrari