Technology has always played an integral role within the manufacturing industry. From the design process to manufacturing and logistics, technology has helped the entire industry evolve. As demand increased, technological advancements in conjunction with low-wage workers primed countries like China and India to become the manufacturing hub of the world.
Over the years, advanced technologies such as robotics, nanotechnology, 3D printing, cloud computing, and the internet of things have fundamentally transformed the manufacturing process and industry. Modern communication and other breakthrough technologies helped increase operational efficiency, strengthen relationships between stakeholders, as well as streamline the production process.
Although these technologies have played a major role in evolving the sector, the development of the offshore manufacturing industry has created an imbalance in the global supply chain.
This imbalance needs to be carefully managed to avoid bottlenecks and global shortages.
Internal supply chain reliance on China and India
The last few decades have cemented Asia as the manufacturing centre of the world. With brilliant logistical networks, reliable infrastructure, and low-wage workforces, countries such as China and India are positioned perfectly to manufacture and supply goods to the world.
Both China and India have incredible competitive advantages over the rest of the world that also help them maintain their status within the manufacturing industry.
With a pool of highly skilled engineers and scientists at their disposal, these countries are both skilled and efficient throughout the entire manufacturing process.
The manufacturing capabilities of China and India do not start and end with cheap consumer goods. The world relies heavily on China for a variety of products that include steel, computer products, textiles, clothes, accessories, mobile devices, integrated circuits, and a wide range of medical supplies.
Although the partnership between the world and these Asian countries has been successful, this reliance has become increasingly risky over the last few years.
With political influence on both sides taking strong stances in opposite directions, the relationship between China and the West can invertedly affect much of the US economy by disrupting the established supply chain.
The long and successful manufacturing partnership between these countries and the world makes it increasingly difficult to shift away from the existing supply chain. This is because there are no immediate replacements available. In this way, countries such as China and India have a distinct advantage over countries that depend on them during any diplomatic negotiations.
With this being said, diversification and diplomacy form the best strategy for countries to use to avoid bottlenecks and other supply chain interruptions
Domestic vs low-cost manufacturing centres
Making the choice of where to manufacture your goods can be a complicated process. Choosing to produce goods locally or overseas comes with various risks and rewards making it a strategic decision that does not fit every business case. In addition to this, technology and advancements in global logistics have contributed to bridging the gap to help international manufacturers stay competitive.
Domestic manufacturing typically refers to the production or assembly of products within your country of residence or within the country that they are to be sold in. Choosing to manufacture your products domestically can have many positive impacts on your business and avoid quite a bit of risk at the same time. Domestic partnerships are often more personal and allow you to have more influence on the entire process but usually cost quite a bit more to set up and per unit produced.
This is why businesses tend to opt to move their manufacturing offshore. Countries such as China and India have robust supply chain networks that can compete with local delivery whilst having machinery and equipment ready to produce whatever you desire. In addition to this, their major selling point is price related. Countries in Asia can offer production costs much lower than other countries due to their low-wage workforce and efficient use of technology and infrastructure to fulfil your order.
Technology and advancements in manufacturing technology have made this possible. Advancements in logistics technologies, big data, robotics, and artificial intelligence have allowed for large offshore factories to meet even the smallest of orders with the same low-cost efficiency as larger orders.
US and EU philosophy on domestic manufacturing
One of the major downsides of relying heavily on specific territories is the power imbalance that it can create throughout the global market. Since the majority of the global market still relies heavily on China for most of its manufacturing needs, this has become the topic of much debate throughout political spheres around the world.
Escalating over the last few years, the US has publicised a very strong stance on the manufacturing imbalances within the global market. The US is of the strong mind that they need to reform their reliance on China for the manufacturing of goods. The US philosophy aimed to decrease reliance on China and diversify their manufacturing to other countries including major incentives to allow for manufacturing to return domestically.
The EU philosophy on domestic manufacturing is slightly different as China is only the second-largest trading partner to the EU with the US in front.
This allows for the EU to let the US make major reforms as their reforms will ultimately trickle down through Europe. Despite this, the EU stands firm alongside the US in opposition to full reliance on China for their manufacturing needs and have dedicated resources to forming more equitable trade deals between the EU and China.
Although it may seem to be a decision based on simple math, the manufacturing industry is far more complex and political than you may think. In addition to this, technologies such as automation, IoT, and 5G allow for change at a much faster rate than ever before.
The manufacturing industry has always adopted the latest technologies to help increase operational efficiency in everything that they do. This operational efficiency incorporates international trade and can sometimes place an unequal reliance on the supply chain from territories such as China and India.
In the modern manufacturing environment, artificial intelligence, the internet of things, and big data pave the way for the next major revolution within the manufacturing industry. This transformation could also see a shift toward more domestic manufacturing to relieve some of the reliance on offshore manufacturing to fulfil local demands.