Manufacturing networks need to adapt to internal and external changes to remain competitive. Yet companies tend to shy away from network restructuring for a variety reasons. It is complex and expensive, and there is often internal resistance. Building the right fact-base and understanding key drivers is necessary for success. For many organizations, the cost of being wrong can be significant. But restructuring, at times, is essential, as evidenced by BCG’s Global Manufacturing Cost-Competitive Index. This study looked at the top 25 export economies and revealed shifts in relative costs related to manufacturing wages, labor productivity, energy costs, and exchange rates.
These shifts should drive many companies to rethink decades-old assumptions about sourcing strategies and where to build future production capacity. Organizations need to be more vigilant in their pursuit of network decisions and where to produce, taking a holistic view of the cost structure while recognizing current and future demand. In doing so, they can determine how best to gain efficiencies and regain, or maintain, market competitiveness.
Gone are the days where manufacturing regions are neatly sorted as high cost or low cost, and there is reason to expect continuing volatility as relative costs rise and fall. Manufacturers with global operations can adapt by: