Are companies reconsidering their worldwide strategies?

Executive Summary

Corporations rushed to expand their global operations over the last three decades, motivated in part by China's aggressive policies seeking foreign investment. Industries including automobiles, clothing manufacturing and technology opened factories there and in other parts of the developing world, with the United States losing jobs from the shift: In 1979, a record 19.5 million Americans worked in factories; now, around 12.3 million do so, and China has replaced the United States as the No. 1 manufacturing nation. But the complexity of operating overseas, rising labor costs in China and rapidly changing consumer tastes are causing some companies to reconsider their global manufacturing strategies. A growing number view Mexico as a closer-to-home low-wage alternative, and a few corporations are bringing work back to their home countries in a process known as “re-shoring.” The challenges of global manufacturing raise a number of questions. Can China keep its manufacturing lead? Will low wages continue to drive global manufacturing? Is re-shoring real?

Resources

Bibliography

Books

Isaacson, Walter, “Steve Jobs,” Simon & Schuster, 2011. Best-selling biography of the late Apple CEO discusses his life and influence across seven industries—personal computers, animated movies, music, phones, tablet computing, digital publishing and retail stores.

Martinez, David, “Zara: The Vision and Strategy of Amancio Ortega” (Spanish edition), Random House Mondadori, 2012. Zara, the Spanish clothing and accessories retailer, has made Ortega one of the world's wealthiest and most successful businessmen.

Maynard, Micheline, “The Selling of the American Economy: How Foreign Companies Are Remaking the American Dream,” Broadway Books, 2009. Journalist specializing in automotive industry and the economy explores investments by foreign manufacturers in the United States and the impact on workers, communities, states and regions.

Ohno, Taiichi, “Toyota Production System: Beyond Large-Scale Production,” Productivity Press, 1998. The creator of the much-copied Toyota Production System explains its principles.

Roos, Daniel, James P. Womack and Daniel T. Jones, “The Machine That Changed the World,” Harper Perennial, 1991. Based on a five-year study of the automobile industry by MIT researchers, the book introduced the concept of “lean manufacturing.”

Vance, Ashlee, “Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future,” Ecco, 2015. A technology writer looks at the life of the entrepreneur whose gigafactory project could be the next wave of global manufacturing, or a disaster.

Articles

“Still made in China,” The Economist, Sept. 12, 2015, http://tinyurl.com/p9d8fxb. A special report looks at the “Made in China 2025” plan approved by China's State Council to upgrade the nation's factories.

Bremmer, Ian, “The New Rules of Globalization,” Harvard Business Review, January-February 2014, http://tinyurl.com/o6oq2cj. Thirty-one years after Theodore Levitt predicted globalization's rise, a political scientist analyzes a “guarded globalization” that is slow moving and selective.

Kazer, William, “China Manufacturing Gauge Hits Two-Year Low,” The Wall Street Journal, Aug. 3, 2015, http://tinyurl.com/pq8bn5f. China's key economic measurement of factory activity slumped to a two-year low in July 2015.

Levitt, Theodore, “The Globalization of Markets,” Harvard Business Review, May 1983, http://tinyurl.com/mtx9gaw. In a classic article, a Harvard University economist predicted the rise of global manufacturing.

Philips, Matthew, “The U.S. South Rises as a Manufacturing Hub,” Bloomberg Business, Sept. 4, 2014, http://tinyurl.com/q7wwl2p. Companies from the United States and abroad continue to invest in Southern states.

Reports and Studies

“C.A.S.E.—Car of the Future: The AlixPartners Global Automotive Outlook 2015,” AlixPartners, June 2015, http://tinyurl.com/nsnrkxo. The growth of automotive production is expected to slow, says a consulting firm.

“Global Manufacturing Outlook 2015,” KPMG Consulting, June 2015, http://tinyurl.com/q9w6hf8. Manufacturers are tightening the supply chain and stressing innovation, according to a management consulting firm.

“Mexico's Manufacturing Sector Continues to Grow,” Stratfor Global Intelligence, April 6, 2015, http://tinyurl.com/npb5dyr. Mexico continues to see solid growth because of its integration with and dependence on the U.S. market, says a global consulting firm.

“Sustaining Employment Growth: The Role of Manufacturing and Structural Change,” United Nations Industrial Development Organization, 2013, http://tinyurl.com/o2woudk. A United Nations agency reviews the status of global manufacturing employment.

The Next Step

Automotive Industry

McCarthy, Tom, “Trump's flawed policies would threaten the global economy, say analysts,” The Guardian, Aug. 26, 2015, http://tinyurl.com/pheun4w. Republican presidential candidate Donald Trump's proposed 35 percent import tax on cars produced in Mexico would not help bring more manufacturing jobs to the United States, according to a professor of international politics at Tufts University.

Vlasic, Bill, “In Former Hummer Plant in Indiana, Mercedes Turns Out S.U.V.s for China,” The New York Times, Aug. 11, 2015, http://tinyurl.com/nw8vx9a. To produce enough cars to meet Chinese consumers' demand, German car manufacturer Mercedes-Benz reopened a former General Motors factory in Indiana that had closed during the recession.

Young, Angelo, “China's Slowdown Could See Automakers Slowing Factory Construction Or Exporting Excess Cars From China,” International Business Times, Aug. 31, 2015, http://tinyurl.com/qfu8tu7. Automakers that recently opened factories in China are weighing whether to cut production or export cars to other countries due to sliding sales amid the Asian nation's economic slowdown.

China's Economy

Chen, Tim, “3D printing can help modernise China's economy: premier Li Keqiang,” South China Morning Post, Aug. 24, 2015, http://tinyurl.com/oqx3xp3. Chinese Prime Minister Li Keqiang told his nation's top administrative council that the country must use 3-D printing and other new technologies in traditional manufacturing to modernize its economy.

Curran, Enda, “How China's Economy Suffers When It Tries to Cut Pollution,” Bloomberg Business, Aug. 3, 2015, http://tinyurl.com/pxwgu64. Economic data show China's temporary limits on driving and on steel and coal production to reduce smog during international events significantly reduce industrial output.

Spence, Peter, “China leading world towards global economic recession, warns Citi,” The Telegraph, Sept. 9, 2015, http://tinyurl.com/qe6znag. Economic slowdowns in China and other emerging markets could lead to a worldwide recession in 2016–17, according to Citibank's global economics team.

Reshoring and Near-Shoring

Bounds, Andrew, and Tanya Powley, “UK textiles eye reshoring jobs boost,” Financial Times, Feb. 9, 2015, http://tinyurl.com/of962k5. The United Kingdom can add 20,000 textiles jobs by 2020 by relying less on labor from Asia and by building factories in underserved areas, according to a report backed by a member of Parliament, clothing manufacturers and the U.K. government.

Carey, Nick, “Wal-Mart taps manufacturer database to aid U.S. reshoring drive,” Reuters, July 8, 2015, http://tinyurl.com/nnvc6uk. The largest U.S. retailer will collaborate with a manufacturing vendor database to help its suppliers source more materials from American firms, part of Walmart's goal to sell $250 billion in domestically made products by 2023.

Woods, Bob, “Is there a renaissance in US manufacturing? Numbers don't add up,” CNBC, June 10, 2015, http://tinyurl.com/qeoegro. American companies' promises to bring more jobs to the United States or nearby Mexico will do little to replace the nearly 5 million manufacturing jobs lost since 2000, according to industry experts.

International Wages

Kynge, James, “Mexico steals a march on China in car manufacturing,” Financial Times, April 21, 2015, http://tinyurl.com/pgdfrb6. More auto manufacturers are investing in factories in Mexico instead of China, where automotive wages have climbed by 17 percent since 2009.

McLain, Sean, “Foxconn Seeks Manufacturing Sites in India,” The Wall Street Journal, Aug. 4, 2015, http://tinyurl.com/perurf7. Taiwanese electronics manufacturer Foxconn plans to build factories in India, which has a large labor pool and lower wages than China, where most of the company's facilities now operate.

Timmons, Heather, “The Philippines factory fire shows the grim reality behind a fast-growth economy,” Quartz, May 18, 2015, http://tinyurl.com/qce5edt. Economists say for the Philippines to improve domestic consumption and allow for more stable growth in its low-wage manufacturing sector, it must attract better-paying tech manufacturing jobs.

Organizations

Manufacturing Enterprise Solutions Association
107 S. Southgate Drive, Chandler, AZ 85226
480-893-6883
www.mesa.org
Education and training organization that works on global manufacturing topics.

The Manufacturing Institute
733 10th St., N.W., Washington, DC 20001
202-637-3426
www.themanufacturinginstitute.org
U.S. think tank that studies manufacturing topics.

Organization for International Investment
1225 19th St., N.W., Suite 501, Washington, D.C. 20036
202-659-1903
www.ofii.org
Trade group representing foreign companies investing in the United States.

Society of Manufacturing Engineers
One SME Drive, Dearborn, MI 48128
313-425-3000
www.sme.org
International professional organization serving the manufacturing community.

United Nations Industrial Development Organization
Vienna International Centre Wagramerstr. 5, P.O. Box 300, A-1400 Vienna, Austria
43-1-26026-0
www.unido.org
United Nations group that tracks international manufacturing data.

U.S.-China Chamber of Commerce
55 W. Monroe St., Suite 630, Chicago, IL 60603
312-368-9911
info@usccc.org
Trade group representing American companies investing in China.

World Trade Organization
Rue de Lausanne 154, 1202 Geneva, Switzerland
41-22-739-51-11
www.wto.org
International body that governs global trade rules.

DOI: 10.1177/2374556815611383