Responsive supply chain needed
“[Ten years] ago nine out of 10 companies would tell you they were thinking about building their next plant in China. Today it’s more like three out of 10, and maybe five out of that 10, say they want to build in the U.S.” So says Antoine van Agtmael, chairman and chief investment officer of Emerging Markets Management LLC (EMM) and a director of Strategic Investment Partners. “My belief is that markets are not efficient, but they are emotional. They are driven by raw feelings. Why has everybody been surprised by how well the U.S. stock market has done lately? Because they’re only beginning to realize the glass is half-full again instead of half-empty.”
Supply chain managers would do well to consider his words as gospel. Mr. Van Agtmael is the man who, in 1981, coined the phrase “emerging market” and he’s been watching them closely ever since. So much so, his company, EMM, now controls some $13 billion-worth of investments in them. So when he says he believes the United States is the next emerging market to boom, we should all sit and pay attention. He now sees the birth of a U.S. industrial revitalization that few other investment analysts have even acknowledged. With his finger firmly on the pulse of international markets, he observed Chinese executives complain last year about American competition—“something I had never heard in 40 years in Asia.”
Hot. Any way you spin it
Late last year the Bastard posted a related story “Reshoring becomes more and more compelling.” If you boil it down, the essential message was that manufacturers should be checking their math a bit closer. Some are discovering what is an additional 20-30 percent of real cost associated with doing business abroad they had not previously factored into the equation. Hence, reshoring is becoming a compelling new strategy and hopefully a trend.
Alas, manufacturers are slowly beginning to realize they had jumped on a sweeping trend armed with only rudimentary calculations to analyze (and later justify) the cost/benefit of offshoring. Many industrialists, who also factor the growing “buy American” trend for consumer goods, consider the strategy a win-win.
The mind game should always come first
Markets are emotional, as Mr. Van Agtmael asserts, and it’s not difficult to understand how these feelings eventually convert to trends.
For one, there has been a lot serious effort put forth to make manufacturing in the states more sustainable. As a result the U.S. has quietly cut its energy-related carbon dioxide emissions by 12 percent in the five years from 2007 to 2012 alone.* We are now emitting the lowest energy-related CO2 since 1994. And this trumps Europe’s effort, which reduced its carbon emissions by only 8 percent from 2005 to 2011.
Add to that America’s shale gas boom and, the vast new oil reserves that continue to surface from California and Texas to North Dakota and Alaska. In all of the above examples, we put our minds to it, and in short order, trends emerge.
Labor saving manufacturing efficiencies aside, you must also consider the impact of the threat that jobs (both blue and white collar) could be outsourced. This played a significant role in a mind-shift of the American workforce. A natural tempering that bodes well for manufacturers and supply chain alike. Trending: a more flexible workforce willing to work for lower pay, particularly in southern states.
Last Word
Mr. van Agtmael is as bullish about emerging markets as ever and in 2013 he picked the United States as the one to watch. Emergence is synonymous with “develop” and over the past 40 years Mr. van Agtmael has seen developing markets produce some of the worlds biggest and best companies. If you’re a supply chain, you may be needed, but you have to be ready. It’s looking like a point of departure for American industry and it should make you feel a little anxious.
HIT Solutions believes the more your business keeps up with important trends, the more you will improve your product, and improve your bottom line.
Leave me your comments below; share your thoughts.