Cargo Business Newswire

Monday, March 9, 2015

Top Story

Port delays prompt retailers to consider U.S.-based manufacturing

Recently resolved labor problems at West Coast ports, along with other issues, have spurred retailers to consider goods made in the U.S. According to a new study by consulting firm BDO, even though the cost of manufacturing remains lower in overseas regions like Asia, 43 percent of retail chief financial officers said that North America features the most attractive sourcing opportunities for 2015.

Last year, only 30 percent of the respondent CFOs chose North America. The number of CFOs who said Asia is the best region for sourcing opportunities decreased from 39 percent to 37 percent; the number who chose Europe dropped from 7 percent to 2 percent.

"If you just look at pure dollars of the labor cost [in the U.S.], it's not cheaper," said Ted Vaughan, partner in BDO's consumer business practice. "But when you start adding up the costs of manufacturing overseas and you add in the additional shipping costs or the potential for delays and getting products, those costs will begin to equal out."

Retailers — including Macy's, the Gap and Steve Madden — cited delays at the West Coast ports where operations have been disrupted by a labor

dispute — as a substantial headwind for 2015. The International Longshore and Warehouse Union and the Pacific Maritime Association reached a tentative deal in February.

Macy's management said about 12 percent of its first-quarter buys would be delayed one to five weeks. At the Gap, executives predict delayed merchandise will dent its full-year earnings by 13 cents a share.

Cost increases include the cost of rerouting goods. According to a recent report by Macquarie Research, it costs roughly twice as much — $4,000 — to ship an FEU from China to the East Coast compared to the West Coast.

For more of the CNBC story: www.cnbc.com