Just a few decades ago, the buzz was all about “off-shoring” — where manufacturing moved to cheaper cost bases, such as China or Latin America.
Then came something of a reversal with “near-shoring” — of companies returning production closer to home markets, such as the US, as the price of fuel and labor rose elsewhere.
However, in today’s globally connected economies, it is about much more than just cost. Now, the balance of manufacturing is shifting — yet again.
Next-shoring — not moving manufacturing from one location to another, but “adapting to, and preparing for, the changing nature of manufacturing everywhere” is the new frontier, as a recent McKinsey report said.
The difference is that today’s revolutionary shift is not a matter of geography, nor is it a competition between countries or continents.
It is a trend to something much greater and far more complicated — a trend of shifting mindsets, of access to innovative manufacturing techniques, of thinking beyond the basic numbers and coming up with the most efficient supply chains.
It is about how companies need to look at the big picture to make better business decisions.
As FedEx transports by air, land and sea, it bears witness to the global trends affecting all kinds of industries.
FedEx has seen a growing trend in its own business toward the greater use of ocean as part of its shipment solutions, not just the air express it pioneered and is known for.
Across the 220 nations and territories it operates in, it has also witnessed underlying shifts in global wages, purchasing power and energy costs.
So, where to set up a manufacturing base is no longer a straightforward calculation for many companies.
Within Asia, manufacturing is shifting to central and western China, to Vietnam, Malaysia and Indonesia. Centers of expertise are also important. At the same time, China is no longer just a factory floor — it has moved from the origin to the center of the supply chain.
Intra-regional trade with China is booming — it now accounts for 37 percent of ASEAN’s total trade — with the intra-Asia trade corridor today acknowledged as the fastest growing in the world. In Taiwan, exports to China reached about US$82 billion in 2014, increasing by 130 times from US$623 million in 1996, and China has become one of Taiwan’s top-five export destinations since 2001.
Emerging markets as a whole are forecast to grab a 66 percent share of global demand by 2025.
So, for some industries, it can make more sense to keep production in emerging markets in Asia, rather than the US or Mexico, so they are near the huge consumer markets of China and India.
Yet Canada and Mexico can still be seen as attractive options for manufacturing for the same reason — their closeness to the vast market that is the US — and the accompanying advantages of the North American Free Trade Agreement.
Some companies want close language and cultural connections to the place they set up factories; others want control over their business that only proximity can provide.
Crossing borders is also an obstacle for some; though it does not have to be. FedEx works with countless customers to expedite customs clearance and ensure import/export rules and regulations do not impact their operations, even if they are far from a firm’s headquarters.
However, it is not a case of “a one size fits all.” China might offer economies of scale and a large labor force, such as being a leading producer and marketplace for the auto industry. Yet nations such as Mexico and the UK also offer the advantage of skilled labor in this sector.
Innovative technology is also likely to play a key role in the future of manufacturing, and where it is located. McKinsey cites the advance of 3D printing as a way that companies could actually replace traditional suppliers of parts with targeted usage of in-house printers.
Others are working on greater visibility of the best solution for manufacturers and how to piece the complex global picture together. A software tool called the Cost Differential Frontier developed by the University of Lausanne in Switzerland and supported by the US Department of Commerce helps companies figure out the best place to locate by comparing labor, trade financing, regulatory compliance and shipping costs, as well as issues of oversight, and political and security risks.
Whatever the solution, it is about taking advantage of access to global connections in many different parts of the world.
The days of simply assessing cheap versus expensive labor costs are long gone. For most companies, “next-shoring” is unlikely to be just one thing to consider, but many.
Modern manufacturers want variety and flexibility in their supply chains, which require multiple and cost-efficient connections to the diverse, demanding and truly global customers now being served.
Karen Reddington is president of FedEx Express Asia Pacific Division.
Two major Chinese Communist Party (CCP)-People’s Liberation Army (PLA) power demonstrations in November 2024 highlight the urgency for Taiwan to pursue a military buildup and deterrence agenda that can take back control of its destiny. First, the CCP-PLA’s planned future for Taiwan of war, bloody suppression, and use as a base for regional aggression was foreshadowed by the 9th and largest PLA-Russia Joint Bomber Exercise of Nov. 29 and 30. It was double that of previous bomber exercises, with both days featuring combined combat strike groups of PLA Air Force and Russian bombers escorted by PLAAF and Russian fighters, airborne early warning
On Tuesday, the Mainland Affairs Council (MAC) issued a statement criticizing Song Siyao (宋思瑤), a student from Shanghai’s Fudan University, saying she had offended the sensibilities of Taiwanese. It also called for the Ma Ying-jeou Foundation — established by former president Ma Ying-jeou (馬英九) — which had organized the tour group, to remind group members to be careful with their statements. Song, during a visit to a baseball stadium in Taichung, said that the tour group “would like to congratulate China, Taipei team (中國台北隊) ... we wish mainland China and Taiwan compatriots can be like the team Chinatrust Brothers and
For three years and three months, Taiwan’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has remained stalled. On Nov. 29, members meeting in Vancouver agreed to establish a working group for Costa Rica’s entry — the fifth applicant in line — but not for Taiwan. As Taiwan’s prospects for CPTPP membership fade due to “politically sensitive issues,” what strategy should it adopt to overcome this politically motivated economic exclusion? The situation is not entirely dim; these challenges offer an opportunity to reimagine the export-driven country’s international trade strategy. Following the US’ withdrawal from the Trans-Pacific Partnership
“Integrated Diplomacy” (總和外交) is the guiding principle of Taiwan’s current foreign policy. It seeks to mobilize technology, capital and talent for global outreach, strengthening Taiwan’s international connections. However, without a robust information security mechanism, such efforts risk being reduced to superficial courtesy calls. Security clearance serves as the “entrance examination results” for government agency personnel in sensitive positions, qualifying them to access sensitive information. Senior aides in the US Congress must also possess security clearance to assist lawmakers in handling classified budgets. However, security clearance is not an automatic right or a blanket necessity for accessing sensitive information. Access is granted only
RSS