We’ve heard a lot about how countries with low labor costs are outcompeting the U.S. when it comes to manufacturing, but a new study from Deloitte and the U.S. Council on Competitiveness has found the U.S. will overtake China as the most competitive manufacturing nation by 2020.
The prediction is based on survey reactions from over 500 top executives at manufacturing companies around the globe. The executives were asked to rank 40 countries on their existing and future manufacturing competitiveness. The respondents also ranked the top drivers of international manufacturing competitiveness.
Rather than labor costs, the top executives said advanced technologies will be driving manufacturing competitiveness in the next few years. These critical technologies include predictive analytics, precise tracking, smart products and digitally integrated factories.
China is still expected to be highly competitive, falling just to No.2, while India is projected to climb the ranks, going from 11th to fifth by 2020. Furthermore, countries in Southeast Asia and the Southern Pacific are expected to rise. The report said Malaysia, India, Thailand, Indonesia, and Vietnam (dubbed the MITI V or “Mighty 5”) could essentially become a “New China” by 2020.
As technology is making the U.S. more competitive, other factors are causing some countries to fall down the rankings. The report found evidence of economic and political uncertainty being a drag on manufacturing in countries like Russia and Brazil.
Talent is always a key driver
When asked about the top drivers of manufacturing competitiveness, the respondent said talent was the main driver with an emphasis on the quality and accessibility to highly skilled employees that could assist in a change towards greater invention and advanced manufacturing practices.
The survey respondents also cited Germany as the most competitive on talent, with 73 percent. Japan was next at 67 percent, and the U.S. was third at 66 percent. After talent, cost competitiveness, productivity, supplier networks, and regulatory systems were ranked respectively as top drivers of overall competitiveness.
The fact that talent is ranked as the key driver of competitiveness combines with the emergence of millennials in the workforce suggests employers need to prioritize both the recruitment and retention of younger workers.
The effect of tech on productivity
A recent study by the MAPI Foundation has revealed just how much capital investment and educated labor have on productivity. In particular, the study found that making capital investments allows for productivity innovations to spread through companies, industries and the larger economy.
The report said interconnectedness of productivity performance, due to supply chain linkages and innovation spillovers, causes the spread of groundbreaking innovations, leading to faster productivity growth and impacts that extend to other subsectors.
At ZDA, we’re always keeping an eye on business trends and how they are poised to impact our client companies. If your supply chain organization is looking to acquire tech-savvy talent to drive innovation, please contact a leading supply chain recruiter today to take advantage of our deep pool of skilled individuals.