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68 SMT Magazine • August 2014 cost of holding local stock around the world, which simply reintroduces issues of price de- preciation and product obsolescence. Manufac- turers of key products in China, such as mobile handsets, have chosen direct shipping to the customer by air to avoid this issue. the Changing Face of Distributors It is not only big manufacturing companies who are direct shipping from China, however. Take a look at the seller profiles of many com- panies in the Amazon marketplace. Many of these are people based in China or Hong Kong, often with a haphazard website and what looks like their home apartment as a postal address. These guys have a deal with local manufactur- ers and distributors, buying in China to order and shipping directly to customers all over the world. This business model is becoming more popular because the prices are much more competitive this way compared to the tradi- tional distribution chain, such as a U.S.-based company ordering products in bulk from Chi- na and distributing around the country by con- ventional means. The cost of the whole distribution chain is still surprising for many people today. If you consider a product that retails for $100 in the United States, think about the actual cost of manufacturing the product. It is likely to be around $20. This gives the Chinese guys in- credible opportunity to undercut other forms of distribution, offering what seems like a huge discount through their portal on Amazon. Their weakness is the perceived risk, cost, and delay associated with offshore purchasing. With the savings created by the internet shopping mod- el, and the shorter lead-times and/or costs of shipping, on-shore manufacturing using the same distribution model as the Chinese manu- facturers would have the advantage, being com- petitive to deliver what the customer wants, at eSSenTiAl pioneer'S SurViVAl guiDe Figure 1: Reshoring can bring manufacturing closer to market, improve demand response and delivery, take advantage of site capability and capacity, support differentiation between prototype sites and vol- ume sites, reduce costs through better design and manufacturing agility, and cut down on geographi- cal and geopolitical risks. REshORINg MaDE sIMPLE continues

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