What's Driving Global Manufacturing Competitiveness?

June 24, 2010

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Access to talent that supports innovation is the key factor driving global manufacturing competitiveness, well ahead of traditional factors such as materials costs and energy policies, according to a new report.

Industries and policymakers around the world are struggling with ways to recover from, or at least navigate, a still-volatile economic landscape. It is more important now than ever for countries to put into place the fundamentals underpinning economic growth and development.

According to a new report, access to talented workers capable of supporting innovation is the top factor driving global competitiveness in the manufacturing field today, more crucial than "classic" factors typically associated with competitive manufacturing such as materials and labor costs, energy policies and government investments.

In the 2010 Global Manufacturing Competitiveness Index, a joint report from Deloitte's Global Manufacturing Industry group and the United States Council on Competitiveness, manufacturing executives identify talent-driven innovation — comprising both the quality and availability of a country's brain trust — as the most important competitive driver.

"This includes its skilled workers, scientists, researchers, engineers, and teachers, who collectively have the capacity to continuously innovate and, simultaneously, improve production efficiency," the report says. "Worldwide, manufacturing executives and governments consistently view their talented people as one of their greatest assets and as having the greatest potential for realizing this winning combination of outcomes."

The findings, released yesterday, are based on responses from more than 400 chief executive officers and senior manufacturing executives in late 2009 and early 2010. It also draws on select interviews with key manufacturing decision-makers.

The study claims that difficulties in accessing the right kind of talent are likely to contribute to the United States becoming less globally competitive in the next five years.

"A strong manufacturing sector is a crucial component of a country's intellectual capital, innovation capacity, and economic prosperity," James Quigley, CEO of Deloitte Touche Tohmatsu, said in an announcement of the findings. "In today's environment, manufacturing competitiveness is driven by an empowered talent base, especially as manufacturers around the world integrate technology platforms and interfaces into their products."

The other two competitive drivers rounding out the top three are:

  • Cost of labor and materials — "The overall cost of labor — including all costs of development, compliance and employee benefits, along with the total cost of materials, which include logistics costs and material availability — continues to be a critical driver of manufacturing competitiveness," the report explains.
  • Energy costs and policies — As energy becomes scarce and countries compete to attain energy security and independence, the cost competitiveness of energy, and particularly country-specific clean and sustainable energy leadership, will be a prominent component of [national] manufacturing competitiveness," according to the findings.

The remaining drivers of global manufacturing competitiveness are as follows (in order of importance): economic, trade, financial and tax systems; quality of physical infrastructure; government investments in manufacturing and innovation; legal and regulatory systems; supplier networks; local business dynamics; and quality and availability of health care.

The study also shows that the "epicenter" for manufacturing is continuing to shift toward emerging markets and Asia in particular.

"What had been the world order in the second half of the late 20th century is giving rise to new manufacturing paradigms," the report states. "But even with the rise of China, India and Korea and the overall competitive repositioning of nations, the United States, Germany and Japan are still formidable and very competitive."

Overall, the U.S. is forecast to slip in rank from No. 4 to No. 5 by 2015 — the highest-ranking country to show a decline — while China and India remain in first and second place, a finding that "deserves careful consideration as the U.S. evaluates its global competitiveness position," according to Craig Giffi, the report's research-team leader and co-author.

Related

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U.S. Science and Engineering Report Card

Resources

2010 Global Manufacturing Competitiveness Index by Aleda V. Roth, Craig A. Giffi, Atanu Chaudhuri and Hans Roehm Deloitte and the U.S. Council on Competitiveness, June 23, 2010

Global Manufacturing Competitiveness: Talent Seen as Key to Success... Deloitte and the U.S. Council on Competitiveness, June 23, 2010

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