Kamala Raman, Sr Director Analyst at Gartner Inc. explains why China is slowly losing some supply chain players. One of the reasons is Covid-19 but firms are looking for diversification. The labour cost is another major factor for this shift. What locations are being considered and how will this impact global manufacturing?
Will just-in-time change to respond to the move of manufacturing facilities to be more local than global?
Just-in-time inventory has really worked in global networks to keep inventory costs down even as goods are made far from the end consumers. But in today’s’ world where every company has more products on offer, the customers are more fickle with demand So the just-in-time is not just about finished goods inventory, but can be for the manufacturing process to improve the customer experience.
Could we expect a manufacturing boom in the US and Europe?
The cost differences between manufacturing in low cost regions of the world and the US or Western Europe are still significant. Further, the extended ‘ecosystem’ (the nuts and bolts and such components that go into every product) is still anchored in Asia (especially China). So unless there are huge government or trading bloc incentives to move manufacturing closer to ‘home’, private companies may only be diversifying some parts of their supply chain and not moving lock stock and barrel. So we will see some local manufacturing in these countries (like Jabil now making masks in the US in a heavily automated, sophisticated plant) we likely won’t see a manufacturing boom.
Read the full interview with Kamla Raman about the future of the supply chain HERE…