Changing Priorities Could Make U.S. Best Investment by 2020
Need to Know . . .
- Educational infrastructure and technology advances will emerge as important location drivers in the next five years
- Investments in physical infrastructure create business efficiencies and drive innovation and economic growth
- Companies are taking a long-term view on talent development
A new study produced by MAPI and Deloitte draws on a survey of global manufacturers to offer insights into which new markets manufacturers plan to enter in the next five years. As might be expected, the United States and China should see the greatest number of investments in existing operations by 2020. Various countries in Asia and South America should see increases in new project investments.
What’s just as interesting about the survey findings are the evolving drivers guiding where manufacturers are looking to invest. Today’s top six factors for deciding where to invest or expand facilities are new market opportunities, proximity to existing customers, talent availability, business disruption risk, infrastructure quality, and regulatory climate.
Five years from now, according to the survey, these will change. The first four will remain priorities but the last two drivers—infrastructure quality and regulatory climate—will be superseded.
From the vantage point of 2015, that may be hard to believe. When I talk with CEOs about the challenges they are facing, the regulatory climate is always among their top picks. While the stability and clarity of the legal system is a competitive advantage in developed markets such as the United States, the complexities and costs of regulations can clearly offset much of this benefit. Businesses in the United States are especially frustrated with the cumulative burden of layers upon layers of regulations, added year after year without consideration for whether rules have become outdated.
Similarly, access to reliable physical infrastructure continues to be a major concern for manufacturers, including the logistics involved in the movement of physical goods by road, rail, and ship as well as technology-based infrastructure investments in the electrical grid and other networks. Investments in physical infrastructure create business efficiencies and drive innovation and economic growth.
As critical as these factors are, educational infrastructure and technology advances will supplant them as top priorities by 2020.
This fits with the findings of similar research. Deloitte’s Global Manufacturing Competitiveness Index continues to show that talent-driven innovation is the most important driver of a country’s ability to compete. Educational infrastructure is necessary to develop a talent pipeline; the infrastructure to create technological advances, meanwhile, is needed for both product and process innovation.
Companies are starting to take a long-term view on talent development, as our report on manufacturing footprint notes. Considering the aging workforce in many developed countries (particularly in the EU, Japan, and China) and the expansion of sophisticated technology throughout economies, manufacturers need to know if a country’s educational institutions are able to deliver sufficient training for staffing 21st-century advanced manufacturing operations.
Moreover, manufacturers are focusing more on investments in technology advancements, such as automation, 3-D printing, and the Internet of Things. These kinds of investments ensure more opportunities for knowledge and network spillovers and a more effective platform for business innovation and increased competitiveness.
The challenge for the United States is that some countries, particularly in Asia and South America, are more focused on these up-and-coming areas than many developed economies. As Deloitte’s Matt Highfield observed recently in IndustryWeek, “Many emerging markets are currently investing heavily to improve their technology infrastructure and boost their educational programs to support evolving manufacturing needs.”
The United States has competitive advantages in these areas. We maintain a significant advantage as the software-innovation capital of the world and many global companies are investing here to ensure that this becomes the first home of the Industrial Internet and Internet of Things. These advantages, along with a more slowly aging workforce (thanks to immigrants) and the finest university system in the world, should ensure that the United States is among the top markets for manufacturing investment over the next half-decade.