As China Devalues its Currency, Manufacturing-Sourcing Decisions Need to be More Strategic than Ever
Deep, case-by-case analysis and tight project management are key in "a world of constant flux"
By Patrick Burnson, Executive Editor
August 21, 2015
A new survey conducted by Alix Partners points to the fragility of today’s global supply chains.
Foster Finley, Managing Director at AlixPartners and head of the firm’s Operations Practice in the Americas, maintains that recent moves by China to devalue the yuan make already-complex manufacturing-sourcing decisions all the more complicated.
“These actions prove, as do what I’ll call the nuanced results in our survey, that the world of manufacturing and supply chains is in constant flux, and that in such a world there’s no substitute for deep, strategic, case-by-case analysis and tight project management,” he says.
Among the highlights contained in his recent briefing are these:
• 32% of manufacturing and distribution executives in North America (the U.S. and Canada) and Western Europe say their companies have recently “nearshored” production or are in the process of doing so, with 40% of North American business leaders saying that they have or will be nearshoring.
• Among North American respondents, the U.S. remains the most-attractive nearshoring destination, with 55% saying so, up from 42% in last year’s survey. Mexico took second place, at 31%, up from last year (28%), but down dramatically from 49% in 2012’s survey.
• The average estimated savings from nearshoring cited was 8.5% in this year’s survey, with 13% saying they expect to save 20% or more. Among North American respondents, the average estimated savings was 8.3%, up from 6.4% in last year’s survey.
• Safety and security issues continue to complicate nearshoring decisions, as only 42% of North American respondents expect improvement in those areas in Mexico, down from 55% in last year’s survey. Meanwhile, while 61% of European respondents say they expect an improvement in safety and security in Eastern Europe, their favorite nearshoring destination, 50% say they expect deterioration in North Africa.
• The biggest nearshoring challenge say respondents is the availability of skilled labor, with 48% of Europeans and 42% of North Americans citing that problem, up from 33% in last year’s survey for the latter.
• Among North American respondents, the U.S. remains the most-attractive nearshoring destination, with 55% saying so, up from 42% in last year’s survey. Mexico took second place, at 31%, up from last year (28%), but down dramatically from 49% in 2012’s survey.
• The average estimated savings from nearshoring cited was 8.5% in this year’s survey, with 13% saying they expect to save 20% or more. Among North American respondents, the average estimated savings was 8.3%, up from 6.4% in last year’s survey.
• Safety and security issues continue to complicate nearshoring decisions, as only 42% of North American respondents expect improvement in those areas in Mexico, down from 55% in last year’s survey. Meanwhile, while 61% of European respondents say they expect an improvement in safety and security in Eastern Europe, their favorite nearshoring destination, 50% say they expect deterioration in North Africa.
• The biggest nearshoring challenge say respondents is the availability of skilled labor, with 48% of Europeans and 42% of North Americans citing that problem, up from 33% in last year’s survey for the latter.
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