Repatriation of manufacturing in Europe

What we’ll cover

Are companies repatriating?

What is primarily driving this change?

What does all of this mean for Europe?

Re-shoring: real trend or hype? The flow of offshoring and re-shoring

IS RE-SHORING NEXT?OFFSHORING

Is re-shoring a natural phaseof the cycle?

% manufacturing in GDP in Western Europe

1850 1950 2000

Rising cost of labourGlobalisation

??

DOMESTICALLY DRIVEN MANUFACTURING

Industrialisation

Economic & population growth

A lot of publicity…. but in facts?

Let’s take a step back …

… potentially a lot of room for repatriation!

Over 60% have offshored more than 50%of manufacturing!!

Extent of Offshoringas % of manufacturing production

3%7%

21%

7%

0%, all production is domestic

1-25%

26-50%

51-75%

76-99%

100%41%

21%

Production vs. consumption centres:but rebalancing is underway…Consumption vs production markets

USA / Canada

19%

37%

Western Europe

27%

47%

EE + Turkey+ Russia

12%3%

Asia

35%

10%

Latin America

4% 0%

Top manufacturing centre

Top consumption market

Repatriation still the exception…

17%

Yes, to mydomestic market

In the last five years, have you moved all or parts of your offshore manufacturing operations back to your domestic market ormacro-region?

7% Yes, to my macro-region

76%

No

…with no big changes in sight

11%

Yes

Are you considering repatriation in the next 3 years?

89%

No

Drivers of offshoring: proximity matters as much as costs!Offshoring main drivers

4%

46%

4%Cost of labour

Other operational costs

Proximity to new consumer markets

Government grants

Proximity / availabilityof suppliers

35%

12%

Reasons for repatriation

Top three considerations; % of sample

Proxi

mity

to k

ey m

arke

ts

Supply c

hain o

ptimis

atio

n/ tra

nsport

cost

s

Erosi

on of c

ost a

rbitr

age

Shortage

of req

uired s

kills

Cultura

l issu

es a

nd man

agem

ent d

iffic

ulties

Reputa

tion

0%

20%

40%

60%

80%

Offshoring vs Re-shoring

Drivers of offshoring and re-shoring in our analysis…

Proximity

Labour Cost

Supply chain

TWO SIDES OF THE SAME COIN?

Offshoring Re-shoring

1

2

3

Proximity

Supply chain

Labour Cost

1

2

3

Offshoring + Re-shoring= “Best-shoring”

IS RE-SHORING NEXT?OFFSHORING

% manufacturing in GDP in Western Europe

1850 1950

BEST

SHORING

2000

Rising cost of labourGlobalisation

DOMESTICALLY DRIVEN MANUFACTURING

Industrialisation

Economic & population growth

Manufacturing in Western Europe:the past and the future

Evolution of manufacturing output:

last 5 years next three years0

5

10

15

20

25

30

35

up

down

%

Only European companies All sample

Competitiveness:Europe losing ground

Source: Deloitte, Manufacturing Competitiveness Index

Europe 2013 In five years

Germany 2 4

Poland 14 18

United Kingdom 15 19

Czech Republic 19 22

Netherlands 23 24

France 25 27

Belgium 27 30

Italy 32 34

Portugal 35 37

“Hot spots” for manufacturing Intentions regarding production capacity in the next three years

Increase in production capacityStable production capacityDecrease in production capacity

USA / Canada

37% Western Europe

52%EE + Russia

+ Turkey

48%

China

44%

India

37%

Japan

31%

Latin America

30%

Africa & Middle East

26%

Rest of Asia

33%

Regional specialisation

Source: Top European Logistics Hubs, Colliers Internationalwww.colliers.com/emea/logisticshubs

Main advantage for each region

The future of manufacturingin Europe

+

+

+/-

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TECHNOLOGIC INNOVATION INFRASTRUCTURE + LOGISTICS IMPROVEMENTS

3D printing Deep sea water ports

Cheaper robots and

growing automation Railway connections

Dilbert’s Best-shoring plans