In the first part of this series of columns looking at the latest in global sourcing trends for 2010, I examined the latest from Mexico and China by sharing a recent Industry Week write-up that captured the highlights of a recent Grant Thornton study. In Part 2, I’ll continue this analysis, sharing some other findings from the study. But let’s start by digging a layer deeper on the Mexico/China cost equation. Now the qualitative comments I’m about to quote from the article and study are nothing new, and represent first-grade level knowledge of a global sourcing education. But the numbers are fascinating, showing that the cost differential between China and Mexico (on a per hour basis) is shrinking, at least based on my own experience in LCCS projects not so long ago. Consider how “the wage difference between a typical U.S. worker and a Mexican worker is considerable (approx. $13/hr) … However, the labor rate difference between China and Mexico is not nearly as great (approx. $2/hr).” Moreover, “when determining a non-domestic source for a particular component the other cost and risk factors have a growing importance as a criterion.”
For those LCCS experts in the audience — if Dick Locke isn’t somewhere in the Pacific or Atlantic on his yacht right now I’m sure we’ll get a wisecrack response in the next 48 hours — this might seem like a statement of fact rather than a research finding. But I do think that more and more companies are finally realizing that piece part cost is but a single total cost component in the global sourcing equation. Among the other regional findings in the study, nothing else jumps out as overly newsworthy — or new at all, for that matter…
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