The United States has long been a net exporter of industrial manufacturing, Morton says. In the ’90s, the hot topic was the North American Free Trade Agreement (NAFTA) and the movement of production to Mexico. As we fast forward, the region that has been the benefactor of production export — from all industrialised nations — has been Asia, specifically China. India has also done very well as an importer of jobs but primarily in service sectors.

Companies that have located factories in Mexico are currently reassessing their total cost structures and net movement appears to be outbound, says Morton. “The newest area of interest is Eastern Europe. Quite a few companies are assessing costs and capabilities within that region and moving business or parts of their business there,” he adds.

The key issues for companies interested in moving production capacity include management of the global supply chain and the co-ordination of material/components, scheduling, manufacturing and then shipping of products globally. Companies have gone to a total-cost model and have found that when all costs have been taken into account — material, labour, shipping and cost of storage — production in certain countries, for export back to domestic markets, does not make as much economic sense as once expected. China has recently changed their VAT tax structure, which has led to more analysis on true total cost.

These companies are now focusing — and sizing — their offshore production for that offshore marketplace and close surrounding countries. They are decentralising production — and limiting the associated risk — rather than packing up lock-stock-and barrel for what may or may not be a greener pasture.

One example of this new region-specific approach to offshoring is that growth-oriented Indian companies are developing and executing strategies to place operations in China and Eastern Europe. They are thinking globally and acting regionally.

The biggest change within senior management search for offshoring organisations is that they are moving away from placing expatriates into overseas assignments and moving very quickly to hiring country nationals for their key senior roles in offshore operations. This trend has been driven both by cost as well as cultural management issues.

Put simply, John Morton says, high-cost expatriates statistically come with a higher failure rate than lower-cost local hires. The local manager would speak both English and the language of workers on the production floor and can learn the corporate culture of his or her new employer far more quickly and effectively than an expat can learn to fit into the Czech Republic, Romania or China.

Besides, he notes, leading industrialised nations aren’t really in a strong position to export large numbers of senior people to overseas positions where their chances of success may be doubtful, at best.

The senior leadership pool is ageing in the Unites States and Western Europe and many executives are close to retirement. After the lean years of the ’80’s and ’90’s, when middle management was drastically reduced, the current depth of senior ranks is very thin.

Companies are relying on their search consultants as never before to patch holes in their domestic talent pools, as well as to provide very solid links into any number of offshore economies. At IIC Partners, we’ve seen this as a doubling of the pace of our trans border business, frequently when clients in leading industrialised nations ask us to find local managerial talent in countries where they’re setting up new production facilities.

Morton’s IIC colleagues, owners of executive search firms around the world, agree with his picture of richer nations moving production capacity to emerging nations, while individual companies constantly refine offshoring strategies.

Switzerland, long the recipient of offshore banking, is now a significant exporter of industrial production. More than half of 112 leading Swiss companies responding to a recent survey indicated they already have operations in Easter Europe, Latin America and Asia.

“We show the same pattern as all or most industrialised countries,” says Urs Wüthrich, the Zurich-based former chairman of IIC. “A lot of manufacturing has been moving eastward. A couple of years ago, this was to Eastern Europe and over the last two or three years, mainly to China”, he adds.

Surveys showed that 70 per cent of Swiss offshore ventures were successful. But success was rarely dependent on reducing wage rates alone. The authors of the survey said, Optimisation must encompass the whole value chain and not just wage costs.

In Vienna, IIC member Gottfried Dissauer says Austria is now an exporter of manufacturing capacity. A European manufacturing survey for May 2006, showed that 51 per cent of responding Austrian manufacturing companies have moved some part of their production to other countries, particularly Eastern Europe.

Manufacturing in Austria is decreasing because of relatively high loan costs. Multinational companies have been relocating their production facilities from Austria to Eastern European countries or to the Far East. Some still hold their competency centres in Austria, such as Siemens and Lafarge, due to high quality standards for technical education in our country.

Dissauer says that IIC colleagues in Bratislava discussed hiring needs around the expansion of their production facilities there and similar to Siemens and Lafarge, they’re keeping their competency centre in Vienna. Also, as more production moves into Eastern Europe, Vienna is emerging as a hub for this activity, with investments in roads and rail transport and increased flight connections both East and West.

Morton notes, however that the success of receiving countries is tending to have a leveling affect on their economies and particularly their wage rates, rapidly reducing their comparative advantage.

Spain, for instance, is transitioning from importing to exporting production and jobs, according to IIC member Luis de Ugarte.

The most relevant change in the manufacturing sector in Spain over the last 10 years is the increase of competitiveness. The profitability levels of Spain’s manufacturing enterprises have reached, if not surpassed, the EU average. There has been economic growth, due to a more qualified labour force, availability of capital and gradual specialisation in mid- to high-technology products.

As Spain picks up the pace of industrialised countries, its focus towards delocalisation (offshoring) follows the first-world trend. We are beginning to export production capacity eastward.

A recent study of the Spanish economy, by Professors Luis Torrens and Jordi Gual, shows the typical pattern of a maturing economy, with rising wages and peaking productivity. The study concludes that Spanish sectors most likely to pursue offshoring strategies include transportation equipment, followed by electronic equipment, plastics and rubber products.

Receivers of industrial capacity have two things in common — relatively cheap labour and large, underdeveloped markets or proximity to such markets.

In Romania, two additional factors have helped to make his nation a destination for manufacturers on the move. They have good technical schools and thus, plenty of good engineers. And the government offers incentives for industries to locate in areas of high unemployment.

But incentives are a double-edged sword.

Foreign direct investments (FDI) are seen as a benefit for the areas they go into — they have a reasonably good environmental record and they often build additional infrastructure or upgrade what is there. But building infrastructure is a cost for businesses and this lack of infrastructure speaks to another issue, which is the expatriate question.

The expat issue is one of the biggest factors. Companies sometimes send lots of people and if the area they are located in is poor, you can imagine — they come and go every Monday and Friday. It’s certainly an important benefit to airlines. But it’s a cost for the company.

The alternative is local talent but the very good Romanians are ‘rara avis.’ They are like diamonds and thus very expensive. Sometimes companies prefer to hire expats from France, Italy and Austria, because in some cases it’s cheaper than some local talents.

But the real issue behind all this is choosing the right location — or the wrong one. If a company is swayed too much by location incentives, the discrepancy in living standards may make it very difficult even to attract Romanians and of course the situation is worse for expats. Companies frequently find that after three to six months, a manager will leave them, rather than stay in a remote location.

Despite these difficulties, auto production in Romania tripled between 2003 and 2006 to reach 500,000 units and total FDI rose from $3.9 billion to $10 billion per year. During the same period gross domestic product nearly doubled to $121.9 billion.