On Jan. 17, virtually unnoticed by the rest of the world, the architect of China's economic reforms died in Beijing. For the past 15 years, former Chinese premier Zhao Ziyang had been under house arrest after being ousted as the country's Communist party leader. His crimes? Advocating the market reforms that eventually transformed a backward Chinese economy into the powerhouse it is today, and opposing the military suppression of the 1989 pro-democracy student demonstrations at Tiananmen Square.
We can only wonder what he must have been hinking in his later years as he watched China's transformation into a major global economic force with a gross domestic product (GDP) of $6.449 trillion and a reputation as the world's workshop. Did he feel vindicated? Was he concerned? Whatever the case, soaring demand for Chinese-made goods has enormous implications for U.S. businesses. Right now Canada remains the number one source of U.S. imports, but China is quickly closing the gap.
Despite America's enormous appetite for inexpensive Chinese goods, U.S. companies still find it difficult to negotiate the process of exporting from China. Whether it's cultural differences or a gross misreading of local economics and business customs, they've found countless ways to get into trouble. To help companies steer clear of some of the more common logistics-related problems, we offer the following tips:
Hire locally. If you want to do business in China, you'll need Chinese employees—even if it means training them from the ground up. Global 3PL Schenker, for example, sends qualified Chinese logisticians to Germany, Austria, and Sweden for 12 months of training in the automotive, electronics and consumer goods industries. They then return to China to work in a Schenker facility. It's far easier to educate Chinese employees on the fine points of logistics than it is to teach an American the Chinese ways of doing business.
Forget everything you've learned about DC economics. In China, the normal rules do not apply. For example, I worked with a 20,000-square-foot, two-story warehouse in Shanghai, staffed by 25 or 30 warehouse workers (the exact number was hard to tell). Daily operations were strictly manual: Eight or 10 workers stationed on the second floor would push cases down a slide to the loading dock, where another five or six would load them into trucks. Others moved product around the building on hand trucks. This facility was clearly a candidate for automation, right? Not at all. Not only did this method work just fine, but an analysis revealed that with an average wage of 50 cents per hour (most Chinese workers still earn less than $1 an hour), the payback for a single fork lift would be a whopping 17.2 years!
Keep in mind that piracy still runs rampant. Although the Chinese government is taking a stab at corrective measures, the Jolly Roger is still flying in China. Protections against piracy of intellectual property— whether ideas or brands— are practically non-existent. There's nothing the Chinese can't copy—whether it's software or the uniforms of company delivery people. Beware.
Forget just-in-time; think just-in-case. This is not the place to try out the latest inventory reduction techniques. Unfortunately, the Chinese have more port loading resources than the United States has unloading facilities; and for the time being, port congestion and delays at home will be the norm. Those delays, combined with inland transportation capacity problems, ensure that lead times will be long and delivery dates erratic.
Consider going it alone. At one time, all business was done as a joint venture with a Chinese partner. Today, that's changed. The government no longer insists on JVs. Now that the constraints have been lifted, many companies are concluding that their Chinese partners simply aren't adding the expected value and are deciding to go it alone.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.