SOURCE: AlixPartners
February 03, 2010 09:00 ET
U.S. Manufacturing Slips in Competitiveness, According to AlixPartners Study
Mexico Continues to Lead as Lowest-Cost Country for U.S. Outsourcing; Vietnam, Russia and Romania, Making Huge Strides, Also Edge Out China
SOUTHFIELD, MI--(Marketwire - February 3, 2010) - Battered and bruised in 2009, U.S.
manufacturing faces serious challenges as American manufacturers slipped to
from 5th to 8th in a new a ranking of cost competitiveness released today by
AlixPartners LLP, the global business-advisory firm. The study shows that
Mexico continues to lead as the number-one low-cost country (LCC) for
outsourcing from the U.S., while China, improving considerably over last
year's study, still came in 6th.
"There is no doubt that economic forces worked against U.S. manufacturers
this past year," said Stephen Maurer, a managing director with AlixPartners
and a leader of the firm's Manufacturing Improvement practice. "This study
shows that despite recent improvement in U.S. productivity, hungry global
competitors have become even more formidable, both as out-sourcing
destinations and as competitors to U.S. companies."
In last year's study, the Index showed that Mexico had jumped ahead of both
China and India to take the top spot as the low-cost manufacturing source
for the U.S. for the market basket of parts analyzed. It also showed that
U.S. manufacturers gained ground on most overseas LCCs. The 2010 study
shows that China has made a strong comeback, recouping much of its cost
advantage relative to the U.S. However, China's improvement was not enough
to wrest back the top ranking from Mexico, or the #2 ranking from India.
Vietnam, Russia and Romania, newly entering the ranks of the study this
year, made impressive showings as #3, #4 and #5, respectively -- all edging
out China. Meantime, almost all of the countries analyzed improved their
cost competitiveness relative to U.S. manufacturers.
Overhead, Equipment, Tooling Costs Also Deserve a Look
The study also helps highlight some of the complexity in determining the
true lowest-cost manufacturing location. "While most people think of
labor, shipping and exchange rates as the principle variables in evaluating
outsourcing costs, a variety of overhead costs can have a dramatic impact
on the bottom line, and are often overlooked," noted Steve Hilgendorf, a
director in AlixPartners' Manufacturing Improvement practice. "Things like
electricity rates, tax burden and construction costs all vary widely from
country to country, and in many otherwise low-cost countries, capital
equipment and tooling are actually more expensive than in the U.S., because
they largely need to be imported."
"In today's highly dynamic environment, our study is a powerful tool for
companies to understand the true costs underpinning their manufacturing and
supply-chain strategies," said Maurer. "In the past, you could be
relatively comfortable that the manufacturing-strategy decisions you made
today would still be valid two or three years from now. That's not
necessarily the case any more. Today's reality calls for constant
vigilance and flexible strategies to ensure that companies stay ahead of
global changes, rather than fall victim to them."
About the Study
The AlixPartners U.S. Manufacturing-Outsourcing Index™ this year
analyzed a variety of manufactured products and compared the cost to build
these items in 12 low-cost countries versus the cost of doing so in the
United States. The analysis covers well-established LCCs like Mexico,
China and India, as well as emerging countries such as Russia, Romania, and
Vietnam. It tracks changes in seven key cost drivers (exchange rates,
labor costs, transportation costs, raw-materials costs, inventory costs,
capital-equipment, and overhead costs and duties) and their combined impact
on total cost for a range of fabricated parts and products by country.
Highlights of the study can be found at:
http://www.alixpartners.com/en/MediaCenter/IntellectualCapital/tabid/89/language/en-US/Default.aspx.
About AlixPartners
AlixPartners LLP is a global business-advisory firm offering comprehensive
services to improve corporate performance, execute corporate turnarounds,
and provide litigation consulting and forensic accounting services. The
firm's specialty is urgent, high-impact situations when results really
matter. The firm has more than 900 professionals in 14 offices across
North America, Europe and Asia. The firm can be found on the Web at
www.alixpartners.com