How to beat the compition from China, India & Japan

 

It is no secret that in the last twenty years an enormous amount of manufacturing has moved away from the US and Europe to countries such as China, Korea, Mexico and India. The driving force behind this transition was the abundant supply of cheap labor in these countries.

 

Recently, however, there have been a number of very interesting trends that I believe will impact the manufacturing landscape in the future.

 

1. The sharply rising cost of oil is having a huge impact on transportation costs: Increased cost of imported goods.
2. Fear of uncertainty based on events in the Middle East could have a disastrous and unpredictable impact on supply lines.
3. Financial growth in the emerging countries: Increased wages leading to increased cost of labor
4. Higher wages will lead to an increased demand for US and European goods
5. The US dollar has been falling consistently for a couple of years, which effectively reduces the price of goods manufactured in the US.
6. More organized labor laws in developing countries will start to increase manufacturing costs.
7. Pressure from the rest of the world to improve working environments in developing countries will also increase manufacturing costs.
8. A growing need for customized products and shorter lead times, which cannot be easily addressed by off shore manufacturers.

 

So it is my opinion that all the above factors will lead to a resurgence of manufacturing in the US and Europe, but there is a catch here.

 

In order to compete in the new world market place, US and European manufacturers will have to put the building blocks in place that will enable them to deliver high levels of service built on speed and flexibility.