We've heard anecdotal reports of the shifts in costs to manufacture in various parts of the world—including the rising cost of labor in China—driving reshoring to North America. Now the Boston Consulting Group (BCG) has a new "Cost-Competitiveness Index" that finds Mexico is less expensive than China; the UK is the low-cost manufacturer of Western Europe; and many emerging markets known for low costs are no longer cheaper than the U.S.
Back in the 1990s when mold manufacturers, in particular, would gripe about China stealing their business, I would tell them to wait a few years—it would change. Nothing stays the same. As business picks up in China, and more factories open and more people enter the labor force, I would tell them, that country's labor rates will rise in response to internal competitiveness. Sure enough, it looks like it's happened.
According to new research released last month by BCG, the shift has happened. "Manufacturing cost competitiveness around the world has changed dramatically over the past decade, so dramatically that many old perceptions of low-cost and high-cost nations no longer hold."
In manufacturing, Brazil is now one of the highest-cost countries, for example. Costs in much of Eastern Europe are basically at parity with the U.S. These findings are part of BCG's ongoing research into the shifting economics of global manufacturing. Cost competitiveness is becoming increasingly important, as organizations around the world rethink their manufacturing networks and as governments recognize the economic importance of a stable manufacturing base, said BCG.