Global Manufacturing Competitiveness Index

Talent seen as key to success says Deloitte and U.S. Council on Competitiveness

WASHINGTON, D.C., 23 June 2010: A report issued today indicates that access to talented workers capable of supporting innovation is the key factor driving global competitiveness at manufacturing companies—well ahead of “classic” factors typically associated with competitive manufacturing, such as labor, materials, and energy. Further, difficulties accessing the right kind of talent are likely to contribute to the United States’ becoming less globally competitive in the next five years.

These are the findings of the 2010 Global Manufacturing Competitiveness Index, a research report from Deloitte’s Global Manufacturing Industry group and the U.S. Council on Competitiveness. The report is based on the responses of more than 400 chief executive officers and senior manufacturing executives worldwide to a survey conducted in late 2009 and early 2010. It also draws on select interviews with key manufacturing decision makers.

“At its broadest level, the study confirms that the global competitive landscape for manufacturing is undergoing a transformational shift that will reshape the drivers of economic growth, high-value job creation, national prosperity, and national security,” according to Deborah L. Wince-Smith, president and chief executive officer of the U.S. Council on Competitiveness.

A key finding of the report was that talent-driven innovation ranked the most significant driver of competiveness in most markets. The top three drivers─talent-driven innovation, cost of labor and materials, energy cost and policies─remain relatively stable across all geographic regions, with the most notable differences being Mexico and South America, where ‘quality of physical infrastructure’ outranked talent.

“A strong manufacturing sector is a crucial component of a country’s intellectual capital, innovation capacity, and economic prosperity. In today’s environment, manufacturing competitiveness is driven by an empowered talent base, especially as manufacturers around the world integrate technology platforms and interfaces into their products,” said James Quigley, CEO, Deloitte Touche Tohmatsu. “From the Americas to Europe and from Asia, to Africa, understanding the public policy and market forces that shape the manufacturing landscape is essential to winning in the global economy.”

Newcomer economies to gain ground — while United States slips
The report also identified the emergence of a new group of leaders in the manufacturing competitiveness index over the next five years. These include Mexico, Poland, and Thailand—countries not always considered alongside longer-standing, up-and-comers like Brazil and Russia. Not unexpectedly, Asian giants like China, India, and the Republic of Korea are projected to dominate the Index in five years, as they do now.

Further, dominant manufacturing super powers of the late 20th century—the United States, Japan, and Germany—are expected to become less competitive in five years. Other Western European nations will be similarly challenged, especially the Czech Republic, the Netherlands, Switzerland, the United Kingdom, Ireland, Italy, and Belgium—a finding made more dramatic by the continuing upheaval of the Euro.

“All Western European nations show an expected decline in rank over the next five years, which should be a cause for concern across the Continent,” says Hans Roehm, Global Managing Partner, DTT Global Manufacturing Industry Group.

The report’s research-team leader and co-author, Craig Giffi, who serves as vice chairman and national industry leader for consumer and industrial products at Deloitte LLP, in the United States, went on to explain that the ‘epicenter’ for manufacturing continues to shift to emerging markets—Asia, in particular“What had been the world order in the second half of the late 20th century, is giving rise to new manufacturing paradigms. But even with the rise of China, India, and Korea and the overall competitive repositioning of nations, the United States, Germany, and Japan are still formidable and very competitive.”

However, the study also shows the United States slipping in rank from fourth to fifth by 2015, the highest ranking country to show a decline—while China and India remain in first and second place. “This finding deserves careful consideration as the U.S. evaluates its global competitiveness position,” cautions Giffi.

Competing seen as easiest in Asia, tougher in United States and Europe
The report identified a clear geographical divergence in the perception of public policy support for competitiveness. Most respondents from China think that their government makes competitiveness easy compared to respondents in Europe and the United States, with 70 percent of them citing government support of science, technology, and innovation as advantageous. The European respondents identified public policy support for infrastructure development (46.1 percent), science and technology and innovation (43.4 percent), and intellectual property protection (42.1 percent) as their advantage. Respondents in the Unites States cited intellectual property policies (75.5 percent) and technology policies (61.3 percent) as their competitive edge.

Respondents in each region also identified differing policies that inhibit competitiveness. In China, these included immigration policies (32.1 percent) and healthcare (27.7 percent); in the United States, government intervention and ownership in companies (59.2 percent), corporate tax policies (53.1 percent), healthcare policies (51 percent), product liability laws (42.9 percent) and immigration policies (32.7 percent); and in Europe labor laws and regulations (42.1 percent), environment policies (36.8 percent) and energy policies (31.6 percent).

To download the 2010 Global Manufacturing Competitiveness Index, please visit www.deloitte.com/globalcompetitiveness.

Drivers of global manufacturing competitiveness

Rank Drivers Driver Score
10 = High 1 = Low
1 Talent-driven innovation 9.22
2 Cost of labor and materials 7.67
3 Energy cost and policies 7.31
4 Economic, trade, financial and tax systems 7.26
5 Quality of physical infrastructure 7.15
6 Government investments in manufacturing and innovation 6.62
7 Legal and regulatory system 6.48
8 Supplier network 5.91
9 Local business dynamics 4.01
10 Quality and availability of healthcare 1.81


Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index

Current competitiveness

Rank Country name Index Score
10 = High 1 = Low
1 China 10
2 India 8.15
3 Republic of Korea 6.79
4 United States of America 5.84
5 Brazil 5.41
6 Japan 5.11
7 Mexico 4.84
8 Germany 4.8
9 Singapore 4.69
10 Poland 4.49
11 Czech Republic 4.38
12 Thailand 4.17
13 Canada 4.11
14 Switzerland 3.07
15 Australia 3.07
16 Netherlands 2.90
17 United Kingdom 2.82
18 Ireland 2.78
19 Spain 2.67
20 Russia 2.58
21 Italy 2.42
22 South Africa 2.28
23 France 1.70
24 Belgium 1.18
25 Argentina 1.03
26 Saudi Arabia 1.00


Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index

Competitiveness in five years

Rank Country name Index Score
10 = High 1 = Low
1 China 10
2 India 9.01
3 Republic of Korea 6.53
4 Brazil 6.32
5 United States of America 5.38
6 Mexico 4.84
7 Japan 4.74
8 Germany 4.53
9 Poland 4.52
10 Thailand 4.35
11 Singapore 4.30
12 Czech Republic 3.95
13 Canada 3.71
14 Russia 3.47
15 Australia 3.40
16 Spain 2.63
17 Netherlands 2.63
18 Switzerland 2.62
19 South Africa 2.52
20 United Kingdom 2.51
21 Ireland 2.43
22 Italy 2.37
23 France 1.92
24 Argentina 1.53
25 Saudi Arabia 1.32
26 Belgium 1.00


Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index

Expected change in manufacturing competitiveness in five years

Moving up Rank change
Brazil 5th to 4th
Mexico 7th to 6th
Poland 10th to 9th
Thailand 12th to 10th
Spain 19th to 16th
Russia 20th to 14th
South Africa 22nd to 19th
Argentina 25th to 24th
Saudi Arabia 26th to 25th
Sliding down Rank change
United States of America 4th to 5th
Japan 6th to 7th
Singapore 9th to 11th
Czech Republic 11th to 12th
Netherlands 16th to 17th
Switzerland 14th to 18th
United Kingdom 17th to 20th
Ireland 18th to 21st
Italy 21st to 22nd
Belgium 24th to 26th


Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index

About the study

To learn how manufacturing chief executive officers and other senior leaders view their industry’s competitiveness around the world, Deloitte’s global manufacturing industry group and The U.S. Council on Competitiveness undertook a multi-year Global Competitiveness in Manufacturing initiative. The initiative was based, in part, on the responses of more than 400 senior manufacturing executives worldwide to a wide-ranging survey discussing the current business environment and global competitiveness in the manufacturing sector. The study also draws on select interviews with key manufacturing players as well as unique insights provided by the professionals at Deloitte, the U.S. Council on Competitiveness and Clemson University. For more information concerning the specifics of this study and its participants, please consult the study’s appendix by downloading the full report at www.deloitte.com/globalcompetitiveness.

About the U.S. Council on Competitiveness

The Council on Competitiveness is a leadership organization comprised of chief executives officers, university presidents and labor leaders committed to ensuring that the United States remains the world leader. The Council has one goal: to strengthen America’s competitive advantage by acting as a catalyst for innovative public policy solutions. For more information, please visit
www.compete.org.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than140 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's approximately 169,000 professionals are committed to becoming the standard of excellence.

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