In just a few weeks, the coronavirus has upended our daily routines and the global economy. In an interview with swissinfo.ch, Suzanne de Treville, a professor of management at the University of Lausanne specialized in competitive manufacturing in high-cost environments, shares what lessons can be learned from this unprecedented crisis.
“The consequences of the COVID-19 pandemic on people's lives and the economy are serious enough to trigger conversations that were unthinkable just a few weeks ago,” she explains. “From the mid-1990s, we started relocating everything to China and developing countries, without really thinking about the risks and dependencies that this would entail. Today, the awakening is brutal, with many business leaders questioning how such stupid decisions could have been taken at the time.”
Suzanne de Treville has developed the Cost Differential Frontier Calculator (CDF), a tool proving that offshoring can be much more expensive than expected. With the help of quantitative finance, the calculator performs a financial analysis of the hidden costs of relocations, including the lengthening of the supply chain and production lead times, as well as the costs associated with overproduction and storage.
Asked whether Switzerland can maintain a competitive industry despite high production costs and a strong national currency, the professor says: “It's clear that despite the strong franc, the Swiss economy is doing well. For many companies, this is a detail that is very easy to offset. Switzerland has a well-trained and motivated workforce because young people can work in modern, dynamic and attractive factories. Proximity to some of the world's best universities and research centers is also an important advantage. In my research, for example, I have calculated that Switzerland's flexibility offers technology companies an added value of 15 to 100%. And that's without factoring its top-notch infrastructure, whether in the area of transport or public administration. We have in our hands all the advantages needed to develop a strong and competitive industry in Switzerland.”