Manufacturing Cost Advantage Shift

manufacturing cost advantage

New studies reveal that the cost competitiveness of manufacturing across the globe has shifted. For example, according to the Boston Consulting Group, even though China remains the number one country in terms of manufacturing competitiveness, the manufacturing cost advantage over the U.S. has shrunk to less than 5 percent.

Changes in Labor Cost

One of the reasons for that is changes in labor cost. In many Eastern countries, wages are rising. At the same time, Western manufacturing companies have concentrated on productivity.

During the last decades, they have downsized from an average of 41.2 workers employed per establishment in 2001 to 35.3 in 2012 (Bureau of Labor Statistics). While output per hour for workers in the manufacturing sector in U.S. has increased by more than 2.5 times since 1987 (National Association of Manufacturers).

Modern MRP Systems

Adopting lean manufacturing practices and implementing modern IT solutions have made this shift possible. In previous decades ERP/MRP systems were seen as a tool for management, and only very big plants could afford implementing IT system at shop floors. Today, thanks to affordable software packages and greater computer literacy even smaller manufacturers can use software for real-time work: assigning tasks to specific workers, reporting of results, transmitting information to next stages.

Showing the right information to the right people reduces paperwork, decreases confusion, reveals constraints, gives an adequate overview, and thus allows companies to be more cost-effective.