China Product Manufacturing, Supply Chain and 2022 Outlook
It has been Crazy! Literally Nuts! 2021 could be the worst year in recent history for China manufacturing and those who use China manufacturers. Material and electronic chip shortages, 5 X shipping costs increases, labor shortages and labor cost increases, and an extremely slow and delayed supply chain.
Q: What to do?
A: Consider all options but for the most part – Stay the Course
This isn’t our opinion but what is actually happening in the market. For the most part, U.S. companies large and small are still ordering consistently from China manufacturers.
- The problems in China are also happening all over the world and domestically. The saying China sneezes and the whole world can get a cold, does not fully apply here. What really happened is the whole world was sneezing (COVID) and the entire global economy suffered to some degree. So everyone is dealing with the same problems, everywhere.
- Alternatives to China product manufacturing are slowly sprouting up, which is why we say consider the options…carefully. However, these options are a still a minority and will take many months to years, to grow and to become more viable. A few options exist, for sure.
- China product manufacturing prices are still the best deal out there. Southeast Asia is a growing competitor, as is India, but mostly in narrow products or select markets. Pricing can be good but quality is something to sharply focus on. Taiwan can be a good option as well. Mexico and Latin America can be another option, but again only in select products and certain markets. China manufacturing is so huge in variety and options. They are set up and are ready to produce, as they have been for the past 40 years. China manufacturing still provides 60% – 120% lower costs, depending on the industry vs. the U.S.
When will the manufacturing market go back to normal?
Probably never. Sure the supply chain will get back to a better flow again, and shipping prices will fall lower…eventually. However, the cost of doing business has increased in materials and labor areas, everywhere. Everywhere.
The “new normal” is higher manufacturing costs, higher shipping costs as well as higher retail and commercial pricing.
We can only hope that these increases in costs and pricing, are digestible, and do not lead to a larger economic slowdown. So far that seems to be playing out OK, and the outlook for 2022 is also solidly, just OK.