By Keith Loria, Contributing Editor
Malaysia ranks as the world’s top manufacturing location, according to Cushman & Wakefield’s Manufacturing Index 2014, which assesses factors likely to affect the successful operation of production facilities in 30 countries with the largest manufacturing output, as defined by United Nations Trade and Investment.
Coming in at No. 1, Malaysia scores particularly well in the costs and risks categories, as it is one of the least expensive locations within the index. Overall, countries in Asia took the top five spots with Taiwan, South Korea, Thailand and China heading the list.
“Traditionally, over the past two decades, people are very aware of multinationals establishing a base of low cost production and producing things low cost and shipping them around the world to customers and that has continued to be the case,” Andy Mace, Cushman & Wakefield’s managing director, global business consulting, supply chain solutions, told Commercial Property Executive. “Asia, as its economy improves and its standard of living rises, becomes a place to sell products, not just a place to make them. It’s a demand center as opposed to just a supply or production region.”
According to Mace, more companies want to be in the East because it’s a customer market and cuts down on the shipment leg.
The largest manufacturing country in the world, China, is well positioned in fifth overall, performing strongly in terms of costs, but the nation falls short of the top spot due to its weak score in the risk category.
“Over the last several years, the trend in China in particular has been that cost production has been rising due to the demand of skilled labor,” Mace said. “Energy prices, labor and raw materials have gone up, so you have manufacturers looking for the next place. In several cases, that has been other countries in Asia that hadn’t been experiencing the same growth as China.”
The report examined three principal areas—costs, risks and conditions—and considered factors such as logistics; the likelihood of natural disaster; economic risk; and energy and labor costs.
“There’s a whole host of factors and that’s really critical,” Mace said. “Anytime you look at an index, they are a nice way to make general characterizations about relative cost structures, but individual facilities needs to take a look at its own cost and drivers of cost and productivity and evaluate these potential locations specific to its own industry and own facility.”
Mace said factors they should consider are costs in time to ship and receive raw materials that go into the manufacturing process. Also, they need to look at labor availability, suitability, and cost of labor for both short and long-term talent.
Canada came in at No. 6, largely due to its position as the least risky location of all of the 30 countries surveyed. The U.S. and Mexico also ranked highly in the table, finishing ninth and 10th respectively.
“The Americas account for almost a third of the top 10 positions in this year’s index, which is testament to the draw of the region for global manufacturers,” Mark Wanic, Cushman & Wakefield’s head of occupier services in the Americas, said in a company statement. “Manufacturing continues to expand in the U.S. and this will help to drive the wider region forward in terms of growth.”