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Mexico Again Tops Competitiveness Index

Commentary by JP McDaris

Global analyst firm Boston Consulting again released a worldwide study in which Mexico manufacturing stood out from the pack, being identified as a “Rising Global Star,” on the strength of high productivity, low operating costs and currency stability.

“Many companies are beginning to see the world in a new light,” said Harold L. Sirkin, a BCG senior partner and coauthor of the report. “They are finding that many old perceptions of low-cost and high-cost countries are out of date, and they are starting to realign their global sourcing and production networks accordingly.”

The report also revealed that shifting dynamics in worldwide manufacturing are changing how nations are perceived competitively. Such changes include:

• Manufacturing costs in Mexico are now lower than in China, causing Asian electronics manufacturers like Foxconn and Sharp to increase production there
• Global automakers are expanding production in the UK, which has emerged anew as one of Western Europe’s most affordable manufacturing locations
• Many nations that had been traditionally viewed as “low-cost” production centers – China, Brazil, Russia and the Czech Republic – are now not much cheaper than the U.S.
• Chinese manufacturing wages have quintupled since 2004, while Mexican wages have risen by less than 50% in U.S. Dollar terms. Mexican labor costs are now estimated to be 13% lower than those in China.

So what is the main takeaway from all of this? Apart from the fact that Mexico continues to gain a competitive edge globally, another key theme stood out. That’s the importance of companies staying flexible and judging locations based on the entire picture – labor costs, logistics, risk, currency fluctuations – when they go through site selection. Harold Sirkin put it well: “The winners are likely to be companies that align their operations with the shifting economics of global manufacturing — and build in the flexibility to shift gears as those economies continue to evolve.”

Source: Boston Consulting Group