A Boston Consulting Group (BCG) study released in April of this year ranked the top 25 exporting countries on competitiveness. As expected, China was at the top of the list, but continues to be pressured by rising labor costs that have doubled over the last few years, higher transportation costs, and slowing of productivity improvements.
A surprise was that the United States was ranked number two. Contributing to the rise for the U.S. were energy costs that have decreased by half over the last ten years and stable wage growth. Wage costs in the U.S. are now 10 to 25% lower than next eight countries in the ranking of competitiveness and about the same as Eastern Europe.
BCG’s ranking was based on wages, productivity growth, energy costs and exchange rates. Here are the top ten:
- United States
- South Korea
- United Kingdom
Another surprise from the BCG study was that, although it is not in the top ten, Mexico is a rising star with wage costs that are lower than China’s. A May 2014 article in the New York Times expanded on the changes in Mexico. Familiar major brands like Caterpillar, Chrysler, Stanley Black & Decker and Callaway Golf have increased manufacturing in Mexico.
Smaller companies are also moving to Mexico. Examples include Plantronics headsets, Hoopnotica Hula Hoops, Casabella toilet brushes, Meco outdoor furniture, DJO medical supplies, and Viasystems cabinets.
Proximity gives Mexico a transportation advantage with faster delivery that the typical six to ten week time from China, lower transportation costs, and higher sustainability through less pollution associated with the movement of goods.
Closeness to the United States contributes to more cross-border movement of parts during the manufacturing process. About 40% of parts in Mexican imports originate in the U.S., while about 4% of parts in Chinese imports come from the U.S.
Although manufacturing costs are an important component of the global supply chain, so are the other constituents necessary to deliver competitive products to consumers.
A new 2014 study this year by the National Retail Foundation points out that on average 70% of the value of an article of clothing sold in the United States comes from the United States. Much of the value comes not just from manufacturing but from U.S. based research and design, logistics, marketing, advertising, and IT services as well as advice from lawyers, bankers, and accountants.Surprising 2014 Manufacturing Trends You May Have Missed by Steve Brewer