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Home » Technology and Automation Drive Global Change in Manufacturing Sector
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Technology and Automation Drive Global Change in Manufacturing Sector

March 8, 2017
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Chicago, March 7, 2017 - The manufacturing sector, globally, is at the center of a period of great change with far reaching implications for businesses across the industrial landscape, according to a research report released today by Cushman & Wakefield.

The 'manufacturing risk index' is an annual survey of the manufacturing sector, assessing how political, economic, technological and environmental risks are managed during portfolio assessment and site selection by occupiers, including countries outside of the U.S. The report contains an Established Index, which ranks the 30 largest countries by manufacturing output, and a Pioneering Index, which measures the attractiveness on less mature markets where manufacturers are seeking lower operating costs.

Asia Pacific countries continue to dominate the top 10, occupying seven places within the top half of the Established Index, with Malaysia retaining its position as the most attractive market for locating manufacturing facilities. Costa Rica has risen four places on last year to top the Pioneering Index table, as it continues to witness increasing growth through rising levels of foreign direct investment, in both advanced and light manufacturing options.

According to the research report, the North American market will continue to see changing dynamics, as manufacturers and supply chains are impacted by potential trade policy shifts under the new President Trump administration. With the new administration indicating intended reviews of (and taking some early action to impact) both the Trans-Pacific Partnership (TPP), as well as the North American Free Trade Agreement (NAFTA), manufacturers are considering the strategic and tactical changes they may need to consider under multiple 'what-if' scenarios. In the first month of 2017, some U.S. auto manufacturers have already announced domestic plant investments and/or geographic shifts in production and plant capacity.

Looking at the market as a whole, the report states that in the short term, manufacturing remains partly constrained by a lack of capital investment in plants, reducing near-term radical shifts in location decisions. However, in the medium term, many questions will be raised about locations that fundamentally service a different era as the sector migrates into what management consultancy McKinsey has called Industry 4.0, which places a greater emphasis on emerging technologies. As a result of the findings from this report Cushman & Wakefield anticipates different criteria becoming more important to future decision making.

John Morris, Head of Logistics & Industrial for the Americas at Cushman & Wakefield, noted: "Even before the 2016 U.S. Presidential Election, we saw shifts in manufacturer and supplier location strategies, as U.S. customers demand faster turnaround times and product customization or value-add options that are often best suited for domestic or North American-based production. With the ongoing changes in maritime shipping alliances, some shipment interruptions in Q4 resulting from the Hanjin bankruptcy, and fluctuating oil prices in 2016, some manufacturers and shippers were reviewing their long-range production strategies to meet customer demands. The North American manufacturing workforce is also experiencing a sea change in demand for higher technical skills required for manufacturing jobs in a technologically (and often highly automated) industry."

Neil McLocklin, Partner, Strategic Consulting at Cushman & Wakefield, commented: "While macro events such as Brexit and the US Presidential election result carry risks in terms of regulation and market access, disruptive technologies such as additive manufacturing and Robotic Process Automation also continue to transform the manufacturing world by reshaping the production cycle in the longer term."
"The breadth of the manufacturing sector is expanding beyond the physical production of goods to incorporate research and development, supply chain management, distribution and service provision throughout a product's lifecycle. Failure to recognize and embrace the advent of such technologies carries significant risk. As such, there is a necessity to get to grips with a 'new norm', with more complex, horizontally structured ecosystems of design, technology and service."

Robert Hall, International Partner, Logistics & Industrial EMEA, said: "Manufacturers' decisions on where to locate is being challenged by the need for smarter products, production and supply chain management. This is filtering through into demand for more sophisticated manufacturing space - for which the term 'shed' does a disservice."

Simon O'Reilly, International Partner, Enterprise & Portfolio Solutions EMEA at Cushman & Wakefield, said: "In a period of accelerating change and digital transformation, pure cost-reduction strategies are being challenged. Companies are increasingly honing in on those activities with the greatest potential for creating value and i

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