Dive Brief:
- The shrinking cost advantage of doing business in Asia is a significant factor impacting the global supply chain, reducing the cost of manufacturing gap down to roughly 1%, the Harvard Business Review reported Wednesday.
- Between 2000 and 2015, the fraction of global manufacturing done in Asia jumped from 29% to 45%, based on valued added. The shift toward Asia may have gone too far, and other global factors — including cheap energy in the U.S. — have leveled the playing field.
- A shift toward protectionism, particularly in light of the United Kingdom's exit from the European Union as well as the American presidential election, creates uncertainty with regards to global trade policy and the impact on companies within the supply chain.
Dive Insight:
Some companies have already begun preparing for a changing economy, making a wager on what the global economic landscape will look like during the Trump presidency. Constellation Brands, the distributor of Corona Beer, is considering shifting its natural gas purchases and packaging resources back to the U.S. in order to reduce taxes on its Mexican beer imports. Though the company plans to take action only if costs demand it, the fact that it has formulated an advance plan allows insight as to how companies might hedge against a potential border tax.
Representative Kevin Brady's announcement of the GOP's tax proposal to balance U.S. trade interests received a mixed reaction. Proponents hailed it as a leveling device bent on forcing business back to America, but opponents believe the plan will punish industries who have long done business overseas.
Yet the reality of bringing business back to America brings with it new challenges: are there enough skilled workers available to reengage domestic business? And what role will automation play? Cost of production may be reduced due to robotics, but the overarching complexity — and cost — may override those marginal gains, leaving companies without the margin they need to remain nimble amidst the shifting supply chain landscape.
