Once automation takes over, companies will care less about the cost of human labour—and how it varies from country to country. This could encourage some of them to stay putby Finbarr Livesey / July 10, 2017 / Leave a comment
For many years it has been blindly accepted that countries like the UK and the USA are post-industrial, done with the dirty business of making things and moving into a so-called “weightless economy.” So why are there still factories in Wales making computers, in Germany making running shoes and in the US making planes, trains and automobiles? Why has Walmart committed to spending an extra $250bn on US-made goods over the next decade?
Our understanding of how companies are organising themselves to make the physical things we buy, our tables, iPads and SUVs, is woefully out of date. Many believe that hyper-globalisation has won out and that all things are made on the other side of the world now. But this is less and less true as time goes on. The regionalisation of trade is deepening.
Why are companies like Adidas and Raspberry Pi making their products in what we think of as very high-cost locations? Well, a mixture of different trends and forces have changed the economics of making over the past decade. Time has become an increasingly important factor, with consumers expecting delivery in a day or two. You can’t easily have things on a slow boat from China and meet those kinds of expectations. While shipping costs have fallen, uncertainty around oil prices and potential increases in emissions regulation mean that shipping will not be the answer for many companies in the future.