Boston Consulting Group’s (BCG) recent report The Shifting Economics of Global Manufacturing, How Cost Competitiveness Is Changing Worldwide provides a wealth of insights into how global manufacturing is changing rapidly. BCG analyzed the manufacturing costs of the world’s 25 leading manufacturing economies along the four key dimensions of manufacturing wages, labor productivity, energy costs and exchange rates.
BCG has also created their own Global Manufacturing Cost-Competitiveness Index to provide insights and intelligence in defining sourcing and production strategies for their clients. The consultancy analyzed ten years of data from 2004 to 2014 to initially create their index and found several key take-aways including distinct patterns of change in manufacturing-centric economies which are profiled in the key take-aways below.
- Most manufacturing-centric economies fall into four distinct patterns including under pressure, losing group, holding steady and rising global stars. The following graphic provides an analysis of the four distinct patterns of change.
- Cost competitiveness continues to shift significantly across global manufacturing economies with Australia and Brazil seeing the greatest declines.
- Wages, exchange rates, labor productivity and energy costs are most responsible for the most significant shifts in global manufacturing economies. Of these, wages continue to most differentiate manufacturing economies. The following graphic compares these four factors.
- The cost advantages of competitive economies are being offset by logistics costs, the overall ease or difficulty of doing business, and the presence of corruption and other issues. The following table provides a comparison of cost-competitive economies.
- BCG’s research shows that the competitiveness of China and Russia have eroded over the last ten years, as is shown in the following graphic:
- BCG found that manufacturing wages in the U.S. have increased 27% from 2004 – 2014 and 67% in Mexico during the same time period. Absolute productivity increased 19% in the U.S. during the same time period and 53% in Mexico. Globally manufacturing absolute productivity increased 27%. Please see the graphic below for a comparative analysis.
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