Global manufacturing is changing due to changes in wages, productivity, energy costs, and currency values. What was low cost (LATAM, Eastern Europe and most of Asia) and high cost (US, Western Europe and Japan) has transitioned. Flexible companies must reassess their global manufacturing footprints as there are shifts in the economics.
Brazil is now one of the highest cost countries for manufacturing; whereas Mexico is cheaper than China. As Russia/Eastern Europe’s wages increase 10-20% annually, they are now near parity with the US, where wages are only increasing 2-3%/year. In addition to moderate wage growth, the US has increased their competitiveness due to sustained productivity gains, stable exchange rates and energy cost advantages (primarily large scale production of shale gas resources). Also, a company should consider secondary factors, such as: ease of doing business, corruption perceptions, and logistics performance.
Another trend is manufacturing closer to consumption (regional), as low costs exist in all regions of the world. There are shorter supply chains, which enable speed to market, greater flexibility, and better customization for specific markets (Source: BCG).
Does your organization periodically evaluate the optimal sources for manufacturing on a global basis?
