According to a recent report by the Boston Consulting Group, the manufacturing cost competitiveness of Mexico and the U.S. has improved substantially over the past decade when compared to the other 23 leading exporting economies. Shifts in wages, productivity, currency, and energy costs have changed the landscape of low cost manufacturing, and many companies are beginning to rethink where to best allocate production to reduce manufacturing costs.
The report, cited by Delta Farm Press, breaks its economic index into four categories: under pressure, losing ground, holding steady, and rising stars.
Under pressure and losing ground
The most notable country under pressure is China, whose estimated manufacturing cost advantage over the U.S. has diminished to less than 5 percent, according to the Boston Consulting Group's report. Labor costs have been consistently on the rise along with energy costs in this former manufacturing powerhouse, while much of Western Europe has seen similar problems.
Wages in Brazil have more than doubled in the past ten years but have not been countered by a rise in productivity, causing this emerging market to slide even further down in BCG's ranks. Other countries such as Poland, Russia and the Czech Republic have been made the losing ground part of the list as well.
Holding steady and rising stars
The U.K. now does the most competitive manufacturing in Western Europe, though London is one of the most expensive places to live in the world. Other countries that have held steady according to the report include Indonesia, the Netherlands and India, while the manufacturing cost competitiveness in the U.S. and Mexico has improved more than in all other economies in the index. The cost of labor adjusted for productivity in both these nations alongside rising currency values and a symbiotic NAFTA relationship means that both have made significant economic gains as of late.
"Because of low wage growth, sustained productivity gains, stable exchange rates, and a big energy cost advantage, these two nations are the current rising stars of global manufacturing," said the Boston Consulting Group's report.
The report excluded several major manufacturing economies such as Canada, Taiwan, South Korea, Germany and Japan, as cost structure changes didn't go in one particular direction or the other. As Mexico's economy continues to expand, more and more companies manufacturing in Mexico will reap the benefits of this productive, highly-skilled manufacturing powerhouse.