Global shifts in manufacturing, consumption trends and international competition are three leading factors that will shape the future of goods movement and the demand for warehouse and distribution space, according to a report issued by The NAIOP Research Foundation.

The report, Trends in Global Manufacturing, Goods Movement and Consumption, and Their Effect on the Growth of United States Ports and Distribution provides:

  • An overview of manufacturing as an industry and the competitive issues facing domestic and foreign manufacturing.
  • The accommodations being made in the logistics industry to support manufacturing.
  • An array of drivers that impact site selection for warehouses and distribution centers.
  • A perspective on the headwinds facing the United States manufacturing industry and the challenges that they will face from global competition.
  • Insights into the inter-relationships and demands that exist between manufacturing, distribution and warehousing and how they may create new opportunities

Manufacturing Trends

The report indicates that global shifts in manufacturing have occurred as supply chain tracking systems and logistics networks better support remote production sites that offer lower labor costs. However, challenges with the extra distance - including efforts to deliver parts for production and the delivery of the finished product - make it more difficult to retain predictability in the supply chain. Additionally, managing the longer and more complex supply chain adds expense, which must be tracked to make sure it does not erase lower-cost labor benefits.

Traditionally, products with high labor content have historically sought global production centers where they can access the lowest possible labor costs in wages and benefits. Manufacturing in the United States has been subjected to competition from countries with lower wages and viable platforms for business operations with an infrastructure to support production of labor intensive products. With adequate export systems, many countries have taken lower value-added jobs from the United States and used them to begin their own evolution toward economic stability.

Consumption Trends

It is estimated that in 2025, India and China will account for nearly 25-40 percent of the total world demand for goods and services, as the demand for consumer goods such as clothing, food, automobiles, phones and pharmaceuticals is driven by growing populations and a new and expanding global middle class. These consumers will have a dramatic impact on the site selection process for the manufacturing facilities and distribution centers supporting the flow of goods between global production centers and consumers.

In 2011, China is expected to out-produce the United States for the first time, producing $1.87 billion in goods output while the United States is expected to produce $1.71 billion in goods output.

Global Competition

International markets are improving their attractiveness to business and competing with the United States for multi-national marketing, investment, research and development and manufacturing. Top locations for foreign direct investment in 2009-2011 by multi-nationals include Brazil, Russia, India and China.

Additionally, U.S. government policies have a profound impact on manufacturing and manufacturing-related employment in the United States. Decisions that are made by multi-national corporations go well beyond the selection of manufacturing locations, and include decisions about where to locate corporate headquarters, research and development centers, production centers and distribution networks. Four have a varying impact on when, where and why companies select and locate facilities:

  • Corporate Income Tax Policies
  • Research and Development Policy
  • Export Policy
  • Environmental Policy

According to the report, key to retaining competitiveness and attractiveness in the United States are business policies that focus on corporate taxes, research and development taxes and consistent application of policy regulations. This is vital to ensure that companies based in the United States can exist is an environment where investment is seen as less risky in the United States than in other countries.

Containerized Trade

Containerized trade is the engine that drives warehouse and distribution space. According to the report, there are two barometers related to trade that must be watched and understood going forward. The first indicator is global trade in general; the second is related to global trade with the United States. In the context of trade growth, the second indicator will provide insight into when ports and inland ports will begin to reach capacity and when new capacity will be required. Currently, the United States is operating well below the current combined capacity of the ports and there is plenty of capacity available which will make competition a reality between ports on either or both coasts.