China slips in ranking of low-cost nations
By Fu Chenghao |
February 9, 2010, Tuesday
|
Print Edition
Print Edition
DESPITE showing improvements in cost advantage relative to the United States, China has slipped two spots in a new ranking of cost competitiveness, according to the latest report.
Mexico continues to lead as the No. 1 low-cost manufacturing source for the US, followed by India.
AlixPartners, the global business advisory firm which released the ranking, analyzed a variety of manufactured products and compared the cost to build them in 12 low-cost countries versus the cost of doing so in the US.
China dropped to 6th from 4th in the study. China made a strong comeback by recouping much of its cost advantage relative to the US, but the improvement was not enough to wrest back top ranking from Mexico or India.
China was also edged out by Vietnam (3), Russia (4) and Romania (5). The two east European nations made major advances as their currencies dropped significantly against the US dollar.
The study helps highlight some of the complexities in determining the true lowest-cost manufacturing location. "While most people think of labor, shipping and exchange rates as the principle variables in evaluating outsourcing costs, a variety of overhead costs can have a dramatic impact on the bottom line, and are often overlooked," said Ivo Naumann, a managing director with Alix and head of the firm's Shanghai office.
"Things like electricity rates, tax burden and construction costs all vary widely from country to country, and in many otherwise low-cost countries, capital equipment and tooling are actually more expensive than in the US, because they largely need to be imported."
The study showed that US manufacturing faces serious challenges as American manufacturers slipped from 5th to 8th. Almost all the countries analyzed improved their cost competitiveness compared with the US.
Mexico continues to lead as the No. 1 low-cost manufacturing source for the US, followed by India.
AlixPartners, the global business advisory firm which released the ranking, analyzed a variety of manufactured products and compared the cost to build them in 12 low-cost countries versus the cost of doing so in the US.
China dropped to 6th from 4th in the study. China made a strong comeback by recouping much of its cost advantage relative to the US, but the improvement was not enough to wrest back top ranking from Mexico or India.
China was also edged out by Vietnam (3), Russia (4) and Romania (5). The two east European nations made major advances as their currencies dropped significantly against the US dollar.
The study helps highlight some of the complexities in determining the true lowest-cost manufacturing location. "While most people think of labor, shipping and exchange rates as the principle variables in evaluating outsourcing costs, a variety of overhead costs can have a dramatic impact on the bottom line, and are often overlooked," said Ivo Naumann, a managing director with Alix and head of the firm's Shanghai office.
"Things like electricity rates, tax burden and construction costs all vary widely from country to country, and in many otherwise low-cost countries, capital equipment and tooling are actually more expensive than in the US, because they largely need to be imported."
The study showed that US manufacturing faces serious challenges as American manufacturers slipped from 5th to 8th. Almost all the countries analyzed improved their cost competitiveness compared with the US.
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