There is a lot to consider when planning to reduce manufacturing costs and increase profits by moving manufacturing offshore. It's usually always safe to stay put as long as the business is profitable and there are no other large hindrances of doing business in the home country. The strategy to move manufacturing offshore makes sense when businesses can greatly increase profits while maintaining a high quality product without any delays.
After reviewing some of the top countries for business around the world it may be worthwhile for businesses to look further into an international move. China, the United States, India, Brazil, Germany, Mexico, and Canada are all top countries to consider. A few countries stand out in manufacturing more than others. China, the United States, and Mexico are the best options for U.S. companies.
It is hard to buy anything that doesn't have a "Made in China" sticker or stamp on the back of it. For many years China has been the number one choice for many manufacturing companies. They rate highest in foreign direct investment in a 2010 Kearney study.
China will continue drop as a favorite manufacturing locale since their emerging economy is outgrowing their long-lasting manufacturing identity. The disadvantages of manufacturing in China include language and cultural differences, work-in-progress commercial laws, high intellectual property costs, long start-up times, quality issues, long supply chains, increasing labor costs, and delays. Taking into consideration the high cost of fuel and transportation, shipping from China to outside markets can be significant and may climb even higher.
Two solid and emerging manufacturing countries are the United States and Mexico. I know it sounds odd, but research suggests these countries have the highest potential to excel.
Rated second highest on an A.T. Kearney survey, the United States is definitely a top contender for manufacturing companies wanting to make a sound investment. As far as "Reshoring", there may be many reasons for businesses to return to the U.S.
Some advantages of manufacturing in the United States include more control over quality and intellectual property, shorter supply chains, and lower costs of shipping goods. Some of the disadvantages are high corporate taxes, tough environmental and safety laws, and high labor rates.
Possibly developing as the world's premier power player, Mexico has a lot of potential. Many large corporations are already manufacturing here with great success. A foreign company can do business with Mexico in order to minimize tax and regulatory consequences of doing business in their home country.
According to North American Product Sharing Incorporated in 2011, the advantages of manufacturing in Mexico include a growing population that is young, highly educated and motivated, an affordable workforce with hourly wages starting at $2.10, proximity to the United States to expedite shipment time to offer advantages for companies looking to sell to the United States, intellectual property protection, excellent infrastructure, world-class facilities, and multiple Free-Trade Agreements. The North American Free Trade Agreement (NAFTA) has also lifted many of the complications of setting up and conducting business in Mexico.
New manufacturing markets are opening around the world. Manufacturing trends are on the move and should allow companies to seize more control over their operations.