Today China is the world’s major manufacturing site. During the last 20 year large manufacturing capacities have been moved to China; de-industrializing many European countries in fact. Today we are facing long and unflexible supply chains from China, resulting in a lot of inventory and safety stocks.
Interesting to see, what the Boston Consulting Group calculated in a study concerning China’s manufacturing cost advantage over the US: (Made in America, again. Why manufacturing will return to the US)
In the year 2000 China had a 59% labor cost advantage and a 21% manufacturing cost advantage over American manufacturers, even factoring in productivity differences. According to the BCG projection the Chinese manufacturing cost advantage will shrink to only 12% by 2015, due to rapidly rising wages in China, expected increases in the value of the Yuan currency, and greater labor flexibility in many regions of the US. Even if Chinese labor productivity will be on the American level by 2015, the remaining manufacturing cost advantage will only be 14%, the BCG study says. Adding cost of the longer supply chain, the difference in total cost might not be worth the effort to source in China for many companies.
A comparison of Chinese vs. European cost structures might probably lead to similar results.
Should these projections prove true, we might witness a rebalancing of global supply chains with manufacturing capacity moving back to the US and Europe. And most probably the remaining European industrialized countries will profit most; …provided, no other countries move in for China…