Since the advent of the Industrial Revolution, manufacturing facilities have located in proximity to low-cost labor. Advances in technology will continue to reduce labor as a percentage of a product’s cost. As a result, other factors will increasingly determine the location of manufacturing.
For example, if governments respond to global warming by taxing products’ carbon footprints, manufacturing facilities could decentralize and locate closer to demand, paralleling the locavore movement seen in food supply. Alternately, facilities could locate closer to raw material supplies (including low-impact power sources).
Whether regulation, environmental concerns, taxes, or end-user demand … labor cost will no longer be the determining factor in supply chain design.
Nerone is CIO of Buyers Products, manufacturer of work truck equipment and trailer accessories.