Manufacturing Competitiveness - College of Europe · Manufacturing exports by size, skill and...

1 Copyright © 2013 Deloitte Development LLC. All rights reserved.

23 April 2013

Manufacturing Competitiveness Critical Elements for Competing Globally and

New Challenges for Developed Economies

Tim Hanley

Global Leader, Manufacturing

Deloitte .

Fourth Bruges European

Business Conference -

“Europe as a Location for

Industry and Innovation”

- 2 - Copyright © 2013 Deloitte Development LLC. All rights reserved.

1. Our research background to discuss manufacturing competitiveness

2. Where are we and how did we get here?

3. Does manufacturing still matter?

4. What trends are shaping competitiveness today? In the future?



© 2013 Deloitte © 2013 Deloitte

Comments Today Drawn From Two Primary Sources

2 year Collaboration with

The World Economic Forum

5 year Collaboration with

The Council of Competitiveness

Manufacturing for Growth Strategies for driving growth and employment

Draf

t

Manufacturing for Growth Strategies for driving growth and

employment

© 2013 Deloitte © 2013 Deloitte

The Future of Manufacturing Initiative - Davos 2012

The Future of Manufacturing Initiative explained:

1. The World of Manufacturing Competitiveness today

2. Key Trends shaping future Global Competition

Prepared by Deloitte LLP 7 Source: Deloitte Touche Tohmatsu Limited and U.S. Council on

Competitiveness, 2013 Global Manufacturing Competitiveness Index

Manufacturing GDP has grown dramatically for

emerging economy nations over the most recent past

…..driving higher total real GDP

8 Copyright © 2013 Deloitte Development LLC. All rights reserved.

What were the primary drivers of manufacturing’s

rapid globalization?

Digital Technology

Infrastructures

The Rise of a New

Global Middle Class

Global Disaggregation

of Manufacturing

Supply Chains

Free Trade

Proliferation

Rapid globalization has changed the economic fabric of the world, and

manufacturing supply chains, in profound and significant ways

Over the past 20 years, rapid globalization has occurred and the global manufacturing

eco-system has experienced more change, impacting the prosperity of more

companies, nations and people than at any time since the Industrial Revolution.


Global middle class growth will precipitate a dramatic

shift in consumption over the coming decades

Source: OECD Working Paper – Emerging Middle Class in Developing Countries, Homi Kharas

Shares of Global Middle Class Consumption 2000-2050

Globally, middle class demand may grow from US$ 21 trillion to US$ 56

trillion by 2030, with 80% of growth from Asia – presenting the potential

for significant changes in supply chains around the world…….

But how will those supply chains be configured?


New “demand centers” are emerging as populations of

middle class consumers grow around the world

World GDP by Region, 1990-2030 Expressed in Purchasing Power Parity

Source: mongabay.com using EIA 2009 data

China

OECD

Europe

United

States

South

Korea

India

GDP projections also demonstrate the ‘Big Shift’ in

process, with emerging economy nations growing rapidly

12

The Future of Manufacturing also answered the

question: Does Manufacturing Still Matter?

The Answer: YES! Based on research done by Harvard and the MIT Media Lab

regarding Economic Complexity, numerous implications in the

context of manufacturing and the linkage to economic growth emerged.:

• The advancement of manufacturing

capabilities is the most important link to

increasing the economic prosperity of a

nation: advanced manufacturing capabilities directly determines the

ability to accelerate economic development.

• Many emerging economies are primed for

rapid growth, enabled by the complex economic infrastructures

they have developed and the manufacturing knowledge and capabilities

accumulated.

• Competition for high value jobs will intensify as nations and companies build more and more advanced manufacturing

capabilities, …leading to more and more competition for talent

• The proverbial “bar” will continue to be set

higher and higher. Developed nations must also continue to

advance their manufacturing capabilities, knowledge and skills in order to

innovate, create more robust economies and to stay competitive.

Thailand: ‘Tree’ Maps

Source: The Atlas of Economic Complexity; Hausmann and

Hidalgo, 2011

2008

1968

Prepared by Deloitte LLP

13

Advanced Manufacturing as “The” Driver of

Economic Prosperity

Pro

du

cts

(A

dvanced)

Economic Growth

Emerging economy nations recognize the economic benefits derived from

manufacturing and have enjoyed economic growth as the products they produce

have become more advanced

China, 2010

China, 1995 Brazil, 1995

Brazil, 2010

Thailand, 1995

Thailand, 2010

Prepared by Deloitte LLP

Prepared by Deloitte LLP 14

Manufacturing exports by size, skill and technology from 2000 to 2011

Source: Deloitte Touche Tohmatsu Limited and U.S. Council on

Competitiveness, 2013 Global Manufacturing Competitiveness Index

US$ 1,768 Bil

US$ 952 Bil

US$ 645 Bil US$ 219 Bil

US$ 1,226 Bil

US$ 459 Bil

US$ 449 Bil US$ 725 Bil

While manufacturing exports have grown for developed economy

nations, the rapid growth of exports by emerging economies….

……coupled with the shift to more advanced products….

signals increasing challenges for developed economies

Council on Competitiveness and Deloitte Over 550 CEO Respondents Around the World

Ranking by CEOs of the most competitive manufacturing nations

For both Today

And 5 years from now

Over 550 CEO Respondents Around the World!

A closer look at the top fifteen

Other than Germany; CEOs ranked all of Europe below the top 15; with some moving up…..

…….but most European countries are moving down, as ranked by CEOs

Our Global Manufacturing Competitiveness model defines ten

major drivers of a nation’s competitiveness

Talent-driven innovation

Cost of labor & materials

Supplier network

Energy cost & policies

Local market attractiveness

Economic, trade, financial & tax systems

Legal & regulatory system

Physical infrastructure

Healthcare system

Government investments in

manufacturing & innovation

Manufacturing Competitiveness


2013 Global Manufacturing Competitiveness Index Report

#1 Talent Driven Innovation

Over 550 CEO Respondents Around the World

• Quality & availability of researchers, scientists,

engineers

• Overall quality and availability of skilled labor

• Quality of primary & secondary schools to

produce sufficient student populations proficient

in science, technology and math

• Quality of colleges & universities… and their

partnerships with business in research and

innovation

• Effective & efficient immigration policies

1

2

15

28

40

Rank

The most important driver of a nation’s competitiveness

25

Researchers Per Million

Population (INSEAD 2012)

Countries above average

Countries below average Relative positions of countries. Not to scale

Country comparison of key manufacturing macro economic indicators –

Researchers per million population (2012)

7038.4 6991.5 6285.9 6057.4 5305.4 5238.7 4822.5 4663.3 4661.6 4269.2 4260.4 4127.7 3435.4 3088.9 2980 2550.4 2431.5 1100.1 1070.9 136.9

Please refer to the notes section below for sources and other details

Japan Singapore South Korea Germany United States Canada Brazil China India Taiwan

Switzerland Sweden Spain France United Kingdom Czech Republic Belgium Netherlands Poland Italy

GMCI – Top 10 Select EU Countries Leading

Average*

Lagging

NA

26

Innovation Index Score (out of 100)

(2012)

Countries above average

Countries below average Relative positions of countries. Not to scale

Country comparison of key manufacturing macro economic indicators –

Innovation Index (2012)

49.7 47.2 45.9 45.4 44.5 40.4 36.6 35.7

Please refer to the notes section below for sources and other details

Singapore United States Canada Germany South Korea Japan China Brazil India Taiwan

Switzerland Sweden United Kingdom Netherlands Belgium France Czech Republic Spain Italy Poland

GMCI – Top 10 Select EU Countries Leading

Average*

Lagging

NA

63.5 57.7 56.9 56.2 53.9 51.7

68.2 64.8 61.2 60.5 54.3 51.8


0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US

D

China Germany IndiaIndonesia Japan PhilippinesUnited States of America Developed Country Average Developing Country Average

Projected

Future

Growth

Average Hourly Wages

Source: Economist Intelligence Unit

2.5%

2.7%

5.7%

9.0%

The cost of labour ranked as the 3rd most

important driver

Ratio of average wages in developed

nations to average

wages in developing nations

Wage rates in developing nations are outpacing

growth in developed nations……..

…but wage rates are only one component of the labour equation….

28

0.7% FRA

BEL

SWE

GER

USA

JPN

SGP

CHN

IND

CHE

ITA

GBR

ESP

POL

CZH

NLD

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

0,0

10,0

20,0

30,0

40,0

50,0

60,0

Labour Costs and Labor Productivity La

bo

r C

ost

s (i

n U

S$/

Ho

ur)

Lab

or

Pro

du

ctiv

ity

GD

P P

er

Wo

rkfo

rce

Me

mb

er

(‘0

00

US$

)

0.6%

-0.4%

1.2%

1.8%

1.0%

0.9%

10.4%

2.5%

5.7%

10-Yr CAGR Productivity

Correlation Coefficient : 0.6518

TWN

0.5%

GER

USA

JPN

SGP

TWN

CHN

IND

CHE

BEL

SWE

FRA

ITA

GBR

ESP

POL

CZH

NLD

2.7%

0.8%

2.7%

0.8% 2.2%

0.6%

European nations have the highest labour costs (with Switzerland the highest)

While the U.S. has the highest labour productivity

29

As we look to the future, there are a number of key areas where both companies and

countries will effectively share in the intensifying competition :

The infrastructure necessary to enable manufacturing to flourish and

contribute to job growth will grow in importance

Competition to attract FDI will increase dramatically, raising the stakes

for countries and complicating the decision processes for companies

Growing materials resources competition will serve as a catalyst to

significant materials sciences breakthroughs

Affordable clean energy strategies and effective energy policies will

be an important differentiator of highly competitive countries and companies

More innovative companies will achieve higher market share and better improve

profitability, and countries more successful at fostering innovation will

have greater GDP growth

Companies are struggling to fill advanced manufacturing jobs with the right talent

and access to the best human capital will become increasingly important

The strategic use of public policy as an enabler of economic development

will place a premium on collaboration between policymakers and business leaders

The Future of Manufacturing: Competition for

resources, capabilities; and on public policy

Prepared with the support of Deloitte LLP

30

As we look to the future, there are a number of key areas where both companies and

countries will effectively share in the intensifying competition :

The infrastructure necessary to enable manufacturing to flourish and

contribute to job growth will grow in importance

Competition to attract FDI will increase dramatically, raising the stakes

for countries and complicating the decision processes for companies

Growing materials resources competition will serve as a catalyst to

significant materials sciences breakthroughs

Affordable clean energy strategies and effective energy policies will

be an important differentiator of highly competitive countries and companies

More innovative companies will earn better market share and improve

profitability and countries more successful at fostering innovation will

have greater GDP growth

Companies are struggling to fill advanced manufacturing jobs with the right

talent and access to the best human capital will become more important

The strategic use of public policy as an enabler of economic development

will place a premium on collaboration between policymakers and business leaders

The Future of Manufacturing: Competition for

resources, capabilities; and on public policy

Prepared with the support of Deloitte LLP

About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of

Deloitte LLP and its subsidiaries. Copyright © 2012 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu

http://www.deloitte.com/about

http://www.deloitte.com/us/about

Manufacturing Competitiveness - College of Europe · Manufacturing exports by size, skill and...

Documents

Transcript of Manufacturing Competitiveness - College of Europe · Manufacturing exports by size, skill and...