Most U.S. and European companies have spent the past 20 years concentrating more and more of their manufacturing in East Asia to reduce costs by exploiting labor-arbitrage opportunities and address the promise of that rapidly growing market. It’s time for them to rethink their supply-chain strategies. Adjusting to new economic realities as well as political and economic uncertainties will require making their supply chains much more resilient.
Rethinking Your Supply Chain in an Era of Protectionism
Building resilience means questioning the most fundamental assumptions.
March 22, 2017
Summary.
Most U.S. and European companies have spent the past 20 years concentrating their manufacturing in East Asia to reduce costs. It’s time for them to rethink these supply-chain strategies, however, for three reasons. First, the cost advantage of manufacturing on the east coast of China vs. in the United States has shrunk to about 1 percentage point. Second, as robotics and other advanced manufacturing technologies are deployed over the next 10 years or so, global manufacturing cost differentials will shrink further. A final factor is the shift toward protectionism and all the regulatory uncertainty that brings with it. Consequently, companies should adjust by making their supply chains much more resilient.