US manufacturers and retailers are shifting their domestic warehouses and distribution facilities to China as they seek to make supply chains more efficient.

Until recently, Chinese-made goods typically passed through a US warehouse before being directed towards their final destination, but now more goods are sorted, packaged and labelled before leaving China.

Once in the US, the goods are delivered direct to the retailer or consumer, bypassing US warehouses. "You are skipping a couple of steps in the supply chain and doing it at a fraction of the cost," said Bill Zollars, chief executive of Yellow Roadway, a large US trucking and logistics group.

Rather than building their own warehouses in China, most US companies use facilities provided by their logistics partners, such as UPS and DHL. Mr Zollars said that Yellow Roadway was planning to offer warehouse services for its US customers in China via a logistics joint-venture it recently set up there.

UPS expects to have 50 warehouses in China by the end of this year and plans to open a further 10 next year.

Red Wing, a US shoe maker, has shifted some work from its main warehouse in Salt Lake City to a UPS facility in Yantian.

"We were doing the same thing in Utah with more people taking longer to get it done at a higher cost," said Peter Engel, Red Wing director of marketing.

Warehouse workers cost about $2 (€1.68) an hour in China, against $14 to $15 in the US, said Satish Jindel, president of SJ Consulting, a transport consultancy.

But Mr Engel says the US warehouse will never disappear completely. "If a retailer needs their stocks replenished, they cannot wait two weeks for a ship to arrive from China. They need it in 48 hours," he said. "So we will always have warehouses in the US for back-up inventory." - (Financial Times Service)