U.S. and Mexico are ‘rising stars’ in manufacturing competitiveness

For almost 30 years, the U.S., Western Europe, and Japan have seen their high manufacturing costs drive one industry after another to Asia, Latin America, Eastern Europe and other cheaper labor countries.

But 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,” according to a study by the Boston Consulting Group.

In some cases, it says, “The shifts in relative costs are startling. Who would have thought a decade ago that Brazil would now be one of the highest cost countries for manufacturing — or that Mexico would be cheaper than China?”

And while London remains one of the priciest places in the world to live and visit, the United Kingdom has become the lowest cost manufacturer in Western Europe. Costs in Russia and much of Eastern Europe have risen to near parity with the U.S., the study notes.

The Boston Consulting Group, a global management consulting firm that bills itself as “the world’s leading advisor on business strategy,” analyzed manufacturing costs for the world’s 25 leading exporting economies, which account for nearly 90 percent of global exports of manufactured goods.

Stay current on what’s happening in Mid-South agriculture: Subscribe to Delta Farm Press Daily.

The result, it says, “revealed shifts in relative costs that should drive many companies to rethink decades-old assumptions about sourcing strategies, and where to build future production capacity.” Four distinct patterns of change were identified:

• Several economies that traditionally have been regarded as low cost manufacturing bases appear to be under pressure. For example, at the factory gate, China’s estimated manufacturing cost advantage over the U.S. has shrunk to less than 5 percent. Brazil, Poland, the Czech Republic, and Russia have also seen their cost competitiveness deteriorate on a relative basis.

• Several traditional high cost countries have lost more ground, resulting in 16 percent to 30 percent cost gaps relative to the U.S. They include Australia, Belgium, France, Italy, Sweden, and Switzerland.

• From 2004 to 2014, the manufacturing cost competitiveness of several countries held steady relative to the U.S. They include India, Indonesia, the Netherlands, and the United Kingdom.

• Cost structures in Mexico and the U.S. have improved more than in all of the other 25 largest exporting countries. “Because of low wage growth, sustained productivity gains, stable exchange rates, and a big energy cost advantage, these two nations are the current rising stars of global manufacturing,” the report says.

Keep up with important upcoming events: Delta Farm Press Calendar of Events

“These dramatic changes in relative costs could drive a large shift in the global economy as companies are prompted to reassess their manufacturing footprints … (and) more goods consumed in the Americas, Asia, and Europe will be made closer to home.”

At a recent Mississippi Reshoring Summit, held at Mississippi State University’s Franklin Furniture Institute, Jay Moon, president and chief executive officer of the Mississippi Manufacturers Association, offered similar insight.

“The wage differential between the U.S. and China isn’t as big as it once was,” he told the attending manufacturing representatives and members of the states business and education community.

TAGS: Agenda
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.