Global manufacturing investment trends are shifting according to a new study recently released by the Boston Consulting Group (BCG). During the last several decades, corporate manufacturing investment decisions were driven by costs. Regions such as Latin America, Eastern Europe, and most of Asia have been viewed as low-cost, while the U.S., Western Europe, and Japan have been viewed as having high manufacturing costs.
“The Shifting Economics of Global Manufacturing: How Cost Competitiveness Is Changing Worldwide” by Harold L. Sirkin, Michael Zinser, and Justin Rose paints a picture of how that worldview now appears to be out of date. The authors cite years of steady change in wages, productivity, energy costs, currency values, and other factors are quietly but dramatically redrawing the map of global manufacturing cost competitiveness. Today, the new map increasingly resembles a quilt-work pattern of low-cost economies, high-cost economies, and many other that fall in between, across multiple regions.
“Many companies are beginning to see the world in a new light,” said Harold L. Sirkin, a BCG senior partner and coauthor of the report. “They are finding that many old perceptions of low-cost and high-cost countries are out of date, and they are starting to realign their global sourcing and production networks accordingly.”
O’Neal, a full-service project delivery firm headquartered in Greenville, S.C., has several clients that have experienced this first hand. Countries, such as Brazil and China, which were seen as low-cost manufacturing sites have seen a steady increase in costs. This has spurred companies to look at their manufacturing footprint and address these changing dynamics.
“The trend seems to be increasing,” says Brian Gallagher, Director of Marketing for O’Neal Inc. “We are noticing a steady increase in the number of companies looking to relocating manufacturing operations to the U.S. and Mexico. Our firm is becoming engaged with companies that are evaluating their manufacturing operations.”
O’Neal recently helped a European-based chemical processing company define the cost schedule and overall project scope in an effort to make its manufacturing investment in the United States. O’Neal is now in the process of helping a client evaluate bringing certain manufacturing lines from other countries to the United States, and assisting another company with a feasibility study for a plant in Mexico.
Global automakers are expanding production in the UK, for example, which has emerged as one of Western Europe’s lowest-cost manufacturing locations, while at the same time they are reducing capacity in Australia, now one of the most expensive. In Mexico, where manufacturing costs are now estimated to be cheaper than those of China, Asian electronics manufacturers such as Foxconn and Sharp are expanding production. O’Neal is currently working with several manufacturers that are considering expansions and investments in China.
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