Trend: manufacturing is moving

I sense a trend that manufacturing companies in the Western world are preparing to relocate manufacturing from so called low cost countries. Latest is the faucet manufacturer Ostnor, owners of the brands FM Mattsson and Mora Armatur, is planning to insource manufacturing from China to their plant outside Mora in Sweden.

They state that cost advantage no longer outreach the benefits of having the production site close to research and development, which in turn entails greater flexibility and shorter lead times. Summarized this gives the way to substantial cost cut in logistics cost and transport lead times for Ostnor’s European customers.

The financial crisis caused a shift in competition

The conclusion that you come to is that we in Sweden no longer have the same cost disadvantage regarding manufacturing as we used to compared to the surrounding world. In general there are two ways of competing; either you have cheap work labour and the cost per produced hour is low implying that you can add man hours into creating a value add to your customers, alternatively you compete by high competence and efficient processes with a high degree of automation with the use of high tech and IT.

The evolvement shows that former major manufacturing countries in the Western world, such as the USA and Germany work with specific political programs on how to actively get production back. A research study shows that the US has lost nearly 40% of their manufacturing jobs during 2000 – 2010. Now the situation has changed. The financial crisis has contributed to decrease the relative labour cost compared to so called low cost countries, which means that we in the Western world is slowly getting more competitive.

Advantage Sweden

To conduct such a big change as moving production from one part of the world to another of course demands a flexible supply chain that easily can be adapted to this kind of new market conditions. The generally high industrial competence in Sweden, the proven leadership of flat organisations, high IT maturity and now also relatively low labour cost is likely to give way for more manufacturing movements. Do you agree?

Lena Ridström
VD
lena.ridstrom@primelog.com