Repatriation of manufacturing in Europe
What we’ll cover
Are companies repatriating?
What is primarily driving this change?
What does all of this mean for Europe?
Re-shoring: real trend or hype? The flow of offshoring and re-shoring
IS RE-SHORING NEXT?OFFSHORING
Is re-shoring a natural phaseof the cycle?
% manufacturing in GDP in Western Europe
1850 1950 2000
Rising cost of labourGlobalisation
??
DOMESTICALLY DRIVEN MANUFACTURING
Industrialisation
Economic & population growth
A lot of publicity…. but in facts?
Let’s take a step back …
… potentially a lot of room for repatriation!
Over 60% have offshored more than 50%of manufacturing!!
Extent of Offshoringas % of manufacturing production
3%7%
21%
7%
0%, all production is domestic
1-25%
26-50%
51-75%
76-99%
100%41%
21%
Production vs. consumption centres:but rebalancing is underway…Consumption vs production markets
USA / Canada
19%
37%
Western Europe
27%
47%
EE + Turkey+ Russia
12%3%
Asia
35%
10%
Latin America
4% 0%
Top manufacturing centre
Top consumption market
Repatriation still the exception…
17%
Yes, to mydomestic market
In the last five years, have you moved all or parts of your offshore manufacturing operations back to your domestic market ormacro-region?
7% Yes, to my macro-region
76%
No
…with no big changes in sight
11%
Yes
Are you considering repatriation in the next 3 years?
89%
No
Drivers of offshoring: proximity matters as much as costs!Offshoring main drivers
4%
46%
4%Cost of labour
Other operational costs
Proximity to new consumer markets
Government grants
Proximity / availabilityof suppliers
35%
12%
Reasons for repatriation
Top three considerations; % of sample
Proxi
mity
to k
ey m
arke
ts
Supply c
hain o
ptimis
atio
n/ tra
nsport
cost
s
Erosi
on of c
ost a
rbitr
age
Shortage
of req
uired s
kills
Cultura
l issu
es a
nd man
agem
ent d
iffic
ulties
Reputa
tion
0%
20%
40%
60%
80%
Offshoring vs Re-shoring
Drivers of offshoring and re-shoring in our analysis…
Proximity
Labour Cost
Supply chain
TWO SIDES OF THE SAME COIN?
Offshoring Re-shoring
1
2
3
Proximity
Supply chain
Labour Cost
1
2
3
Offshoring + Re-shoring= “Best-shoring”
IS RE-SHORING NEXT?OFFSHORING
% manufacturing in GDP in Western Europe
1850 1950
BEST
SHORING
2000
Rising cost of labourGlobalisation
DOMESTICALLY DRIVEN MANUFACTURING
Industrialisation
Economic & population growth
Manufacturing in Western Europe:the past and the future
Evolution of manufacturing output:
last 5 years next three years0
5
10
15
20
25
30
35
up
down
%
Only European companies All sample
Competitiveness:Europe losing ground
Source: Deloitte, Manufacturing Competitiveness Index
Europe 2013 In five years
Germany 2 4
Poland 14 18
United Kingdom 15 19
Czech Republic 19 22
Netherlands 23 24
France 25 27
Belgium 27 30
Italy 32 34
Portugal 35 37
“Hot spots” for manufacturing Intentions regarding production capacity in the next three years
Increase in production capacityStable production capacityDecrease in production capacity
USA / Canada
37% Western Europe
52%EE + Russia
+ Turkey
48%
China
44%
India
37%
Japan
31%
Latin America
30%
Africa & Middle East
26%
Rest of Asia
33%
Regional specialisation
Source: Top European Logistics Hubs, Colliers Internationalwww.colliers.com/emea/logisticshubs
Main advantage for each region
The future of manufacturingin Europe
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+
+/-
+/-
TECHNOLOGIC INNOVATION INFRASTRUCTURE + LOGISTICS IMPROVEMENTS
3D printing Deep sea water ports
Cheaper robots and
growing automation Railway connections
Dilbert’s Best-shoring plans