The key players in foreign manufacturing are widely known to be China, India, and Brazil. What may not be as well known is that there are several other developing countries like Vietnam, Indonesia, Malaysia, and Singapore that are also emerging as world players in global manufacturing. All of these countries are ranking within the Top 20 (ahead of many European countries) in the manufacturing competitiveness index and are all expected to move into the Top 15 within the next five years.
So what can these developing countries offer in regards to manufacturing that the major world leaders cannot? For one, these developing and emerging economies have access to cheap labor. For manufacturing jobs that do not require as much of a skilled workforce the developing and emerging countries like Vietnam have a clear advantage. The cost of living is significantly lower in these countries. This plays a huge factor in keeping the cost of unskilled labor at a significantly lower price than other countries.
It is often more costly for companies to improve or change an existing manufacturing process than it is to move the entire operation to another country with inexpensive labor.
Improvements to Innovation
Another factor gives developing countries and edge is the high cost of innovation and improvements to the manufacturing process – It is often more costly for companies to improve or change an existing manufacturing process than it is to move the entire operation to another country with inexpensive labor. Over the long haul, many companies are viewing moving to developing countries as the most cost effective way to improve their operations and lower manufacturing costs.
In some instances, the switch from automated assembly to manual assembly can be equally cost effective in developing countries. If the country has access to a cheaper workforce, then this will make the option for choosing a manual manufacturing process even more attractive over a more expensive automated process. Asian countries like Vietnam and Malaysia have this clear advantage over not just the industrialized nations but also over the Latin American countries when it comes to manufacturing low cost commodity products. These lower cost options are the force that is driving many companies to either outsource their manufacturing operations or move them altogether to developing Asian countries.
Access to New Markets
Developing countries also offer access to new markets – With a higher working population comes an increased demand for products and services, such as healthcare. All of a sudden, some of the products that are being manufactured are now in high demand in the very country that manufactured them. This, of course, means a lower cost to market since there is significantly less cost in shipping and transportation.
Developing countries like Vietnam, Malaysia, and Thailand are certainly giving China and the world a run for their money as far as manufacturing goes. Many companies that produce low-cost commodity products like gloves, bags, and apparel are moving or considering moving their manufacturing operations over to these new players in the world manufacturing economy. The world is not being turned upside down – As the gap in global manufacturing is certainly shortening, China is and still will be the undisputed leader in global manufacturing for the foreseeable future.