How Low Must You Go to Combat Emerging Competition?

How Low Must You Go to Combat Emerging Competition?

Here's the fourth blog in this series that explores the top challenges facing manufacturers in construction-driven markets, and how to meet them head on. Manufacturers in this space include producers of:

  • Architectural and structural metals
  • Cement and concrete
  • Glass
  • HVAC equipment
  • Lighting equipment
    Paint and coatings
  • Plastic resin and synthetic fibers
    Switch, connector and other wiring devices
  • Windows and doors
  • Wood products

Emerging Competition: Low-Cost Offshore Labor, Alternative Products

Most economists agree that the surge of foreign imports into the United States has taken a toll on American workers. But a new study reported in the Wall Street Journal suggests that the brunt of the blow of competition from cheap Chinese imports is borne by low-income U.S. workers: "American factory workers with high wages generally took an initial sharp financial hit when the 'trade shock' of Chinese goods hit their industry between 1992 and the beginning of the recent financial crisis, according to a paper published by the National Bureau of Economic Research." 1 This has not only affected domestic workers, but also domestic manufacturers whose workforce is not "high pay or high tech."

Here's a deeper dive by submarket:

Lower labor costs and economies of scale in certain developing economies, primarily China, have resulted in increased competition for U.S. manufacturers of HVAC and commercial refrigeration equipment. Imports, which account for about 25 percent of the U.S. market, come both from foreign companies and U.S. manufacturers with foreign plants. Between 2002 and 2012, U.S. imports of HVAC and commercial refrigeration equipment increased nearly 150 percent. During the same period, imports from China increased more than 285 percent; imports from Mexico rose more than 300 percent.

These lower cost structures are affecting many manufacturing sectors. U.S. imports of current carrying electrical wiring devices increased 25 percent between 2008 and 2012. Imports from China rose more than 20 percent; imports from Mexico, the largest exporter to the U.S. market, increased 15 percent. To remain competitive, U.S. manufacturers may establish manufacturing operations in low-cost regions.

Some recent research indicates that this move depends on where manufacturing is based in the U.S. "Made in America, Again: Why Manufacturing Will Return to the U.S.," published by the Boston Consulting Group, noted that the southern states have lower labor costs that are somewhat competitive to those in China.2

How Microsoft Dynamics AX Can Help

Microsoft Dynamics AX is an enterprise resource management system for process, discrete and mixed mode manufacturers that includes business analysis, an enterprise portal, supply chain management, customer response management, human resource management and financial management modules; runs on a Microsoft platform; and uses technology already familiar to most of today's business employees.

To help address the challenges presented by emerging competition, Dynamics AX includes functionality to help gain insight into costs and be more efficient and competitive; support RFQ development time; manage multiple discount structures; support lean initiatives and conduct detailed production cost analysis.  For example, its robust planning tools can help you quickly adjust your product mix to respond to changes in demand and estimate the impact of different sales scenarios using "what-if" simulations. Additionally, you can schedule multiple package types and consider recurring or rework products when scheduling. You can also deploy finite or infinite capacity and materials scheduling, backward or forward scheduling, detailed scheduling by hours and minutes, or scheduling by day. This flexible and power capable lets you be more agile, and therefore able to compete more effectively.

For more information, download our white paper, The Top Challenges Facing Manufacturers in Construction-driven Markets & How to Meet Them Head On

Other blogs in this series:

Seasonal Demand

Volatile Raw Material Prices

Regulatory & Environmental Issues 

Next up:

Commodity Pricing Pressures

 

Sources:

  1. "Study: China Imports Punish Low-Wage U.S. Workers Longer," Real Time Economics, The Wall Street Journal, July 22, 2013.
  2. "Market Report: Plastics Industry to Follow Manufacturing's Growth Trend," Area Development Online, http://www.areadevelopment.com/Plastics/April2012/market-report-plastics-industry-2614177.shtml,December 12, 2013.

business trends, building products manufacturers, Building Products Manufacturing, Discrete Manufacturing, emerging competion