The shifting economics of global manufacturing
For the better part of three decades, a rough, bifurcated conception of the world has driven corporate manufacturing investment and sourcing decisions. Latin America, Eastern Europe, and most of Asia have been viewed as low-cost regions. The U.S., Western Europe, and Japan have been viewed as having high costs.
But this worldview now appears to be out of date. 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. The new map increasingly resembles a quilt-work pattern of low-cost economies, high-cost economies, and many that fall in between, spanning all regions.
To understand the shifting economics of global manufacturing, The Boston Consulting Group analyzed manufacturing costs for the world’s 25 leading exporting economies along four key dimensions: manufacturing wages, labor productivity, energy costs, and exchange rates. These 25 economies account for nearly 90 percent of global exports of manufactured goods.
The new BCG Global Manufacturing Cost-Competitiveness Index has 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. To identify and compare the shifts in relative costs, we analyzed data in 2004 and 2014. The evaluation is part of a series of findings from our ongoing research into the shifting economics of global manufacturing.