Over the past decade, moving production to neighboring Central and Eastern European countries has been a logical move for many German companies due to lower costs, geographic proximity and shorter delivery times, according to German publication Wirtschaftswoche. However, a recent study by the consulting firm Strategy&, part of the global consulting giant PwC Group, shows that the era when production could simply be moved without major changes to the business model is over, writes the Slovenian financial publication Finance.si.
The cost advantage is rapidly disappearing
The main argument for non-shoringi.e. the transfer of activities to nearby countries with a labor cost advantage, is rapidly disappearing. According to the study, labor costs in Central and Eastern Europe are growing 3.5 times faster than productivity. As a result, the expected savings are often not achieved.
