The shift of manufacturing’s center of gravity to Asia and the realignment of global supply chains should be at the top of every manufacturing executive's agenda.
Manufacturing in Asia is in the middle of a makeover. Although China retains a significant labor cost advantage over Western countries, the country has largely lost its competitiveness for some types of lower cost manufacturing. In some industries, this development is leading to a “flight from China” to Vietnam, Myanmar, Indonesia, Bangladesh and India. Yet despite the flight, the Chinese manufacturing sector is still alive and kicking, as Chinese manufacturers shift their focus to higher-value, higher-margin products. Meanwhile, India has several strengths that could help it become a manufacturing powerhouse: a large pool of engineers, a young labor force, wages that are half those of China, and significant domestic consumption of manufactured goods.
The power shift from West to East—and within Asia itself—calls for action now from Western manufacturers, beginning with a review of existing footprint strategies, productivity levels, and innovation capabilities to remain competitive and respond to new opportunities.