The Global Manufacturer

Why Manufacturers Are on the Move

More than four out of 10 manufacturers say they expect to move operations in 2012 and 2013, according to a new survey from Accenture.

That follows a two-year period where 65% said they had moved operations to new locations. Executives most frequently said they moved operations to the United States (40%), China (28%) and Mexico (21%).

The United States also led in closures of operations (65%), followed by Western Europe (35%) and Canada (15%).

What's prompting the moves? Reducing operating costs was the main reason cited by senior manufacturing executives. They also are moving in order to enter new markets and improve customer service.

"As companies consider where to maintain or move operations, they need a clear view of all the costs associated with their global footprint," said Richard Bergmann, Accenture managing director for manufacturing. "Managing those costs in the face of rising oil costs, changing government regulations and disruptions to demand, supply and pricing requires investment in new skills and capabilities to ensure their supply chains are robust and adaptable."

The Accenture survey showed manufacturers making a variety of other moves in the face of what Bergmann called "today's era of permanent volatility":

Some 85% of the manufacturers said they would invest in or strengthen their company's operating model.
More than half of the manufacturers (52%) are considering increasing their use of contract manufacturing as a way to vary their cost structure and increase their flexibility.
To improve profitability, 85% of manufacturers said they will reduce their cost of goods sold, and 82% said they intend to improve their operational efficiency.

All the moves to lower costs and improve profitability come even as senior executives predict good times ahead. Some 89% expect their company's revenue to grow in 2012, and 50% predict growth of at least 6%. Moreover, two-thirds of the respondents are optimistic about global economic growth.

What's keeping them up at night? Approximately two-thirds cited uncertain consumer demand and 60% pointed to rising commodity prices as potential obstacles to meeting their growth targets. The manufacturers are also concerned about weaker pricing power for finished goods and services (43%) and pressure to reduce operating costs (41%).

TAGS: The Economy
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