Organisation:

TMX

Resource Link:

Published in 2021, Link

My Key Takeaways

If you’re working on the business plan of your “Factory of the Future” , what location factors should you consider?

Here’s a TMX analysis of location selection for manufacturing for 9 countries – Cambodia, India, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

The first part of the report analyses current and direct operating costs, following by equally important long term qualitative factors.

Labour (Pg 8)

Labour is the major component of total operating costs in all 9 countries, except in Myanmar.

Singapore has the highest labour cost but also outperforms the other 8 countries in terms of talent competitiveness, ranking 3rd globally in the latest Global Talent Competitiveness Ranking (77.3 score).

Sizable and relatively affordable labour pool, but more modest talent competitiveness (40.9 – 33.4 score)?

Consider Thailand, the Philippines, Indonesia, India, and Vietnam.

Real estate (Pg 9)

Despite the pandemic, rental rates for prime warehouses across the 9 countries remained flat ($2.54 – $16.50 sqm/month), benefiting from the China Plus One strategy and e-commerce growth.

Logistics (Pg 11)

4 main different groups emerged (Pg 11) from evaluating the following sectors:

• Cost/month of international shipping
• Logistics quality & competence
• Efficiency in customs clearance & shipping time to major export markets globally
• Shipping connectivity & routing efficiency

For reliable logistics performance and low logistics cost/month, top countries are Singapore & Malaysia.

If low logistics costs are a priority and performance is less important, consider India, Indonesia, the Philippines and Myanmar.

Utilities & Telecommunications (Pg 11)

Electricity (largest cost item in category), water, land lines, cell phone and internet costs contribute ~ 16% of total costs.

For electricity costs: Cambodia is the highest and Vietnam is the most affordable.

For internet costs: Myanmar and Cambodia are the highest whereas Singapore and India are most affordable.

Report recommendations (Pg 14)

Manufacturing companies can find here a holistic comparison of direct costs AND qualitative factors like business environment, talent & logistics performance, and readiness for manufacturing digitalisation (Pg 12, 13).

Singapore has the highest direct operating costs, but is also the report’s overall most competitive manufacturing location (Pg 14)

To benefit from the advanced manufacturing hub, prioritise higher-value added, IP-sensitive manufacturing requiring complex processes and automation requirements (e.g. Semicon, Additive Manufacturing, Biochem)

1) Basic assembly lines – Myanmar, Cambodia
2) Basic assembly lines + Developing Supply Chains – Philippines, Indonesia, Vietnam
3) Early automation – Thailand, Malaysia, India

Other countries’ positions along the value chain:

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In this prolonged climate of global supply chain shocks from the pandemic, turmoil in Europe, and US-China tensions, you as a manufacturing leader need to look at both current direct costs AND long term stability.

You can’t just uproot your site, production equipment and best talent to a new location overnight, can you? 🏭🤔

Follow my LinkedIn post here.

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About Zhilin SIM

Having worked and lived in Singapore, the Nordics, China, Spain, UK, I’m now based in Paris.

I’m fluent in English, French and Mandarin, and I’m learning Arabic because it’s a beautiful and fascinating language.

My team creates and supports one-many initiatives connecting corporate and startup ecosystems in Europe to business and innovation opportunities in Singapore and Southeast Asia.

I’m passionate about horticulture, watercolour, startups/tech as well as French cuisine, Peranakan kueh techniques and other global cuisines.

Feel free to connect with me if you think my network in Europe and Asia could be of benefit to your business and innovation activities.

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