Does the service chain matter?

Filed in archive Point of view on May 19, 2006

I read an interesting article in Financial Times on Tuesday about the service side of manufacturing.

The author, Peter Marsh, provided really valuable insights about how this service chain is growing and how countries like India are playing an important role in this.

Based on the data in the article, the combined global sales of all manufacturing companies involved in making goods such as cars, computers and clothing are put at $ 15,000 bn a year. Of this, 10 to 20 percent comes from some kind of service function.

If we look at this service chain closer, we realize that India is rapidly becoming an essential link in the chain of factories and design centers that serve global manufacturers. Companies around the world are building up operations in the country to take the advantage of good technical skills and to get closer to potentially vast market. This is an area in which India has relative advantage over China.

Do you think this will be a threat for the Europe and U.S. based companies in the long-term? Does the service chain matter a lot?