China Economic Net:

Even Chinese companies feel pressure from increased costs, whether from material or labor.

“To Chinese enterprises, price is determined by the supply-demand relation, so it seems clearly different for various industries in aspect of the influences they suffered from the material price rise as well as the speed and extent of transferring the influences to their downstream enterprises.”

Some western capitalist companies don’t want to recognize the Toyota model, where Profit = Price – Cost. Many western companies still believe in the Price = Cost + Profit model, where if one component of cost goes up, they must obviously be entitled to price increases, to keep their profit entitlement. In reality, if one component of cost goes up, you must be willing to reduce costs in other areas in order to maintain profits.

Here is an article about a company that is moving a China factory to the Philippines, mostly due to cost concerns.

About LeanBlog.org: Mark Graban is a consultant, author, and speaker in the “lean healthcare” methodology, focused on improving quality and patient safety, improving access, reducing costs, and fully engaging healthcare professionals. He is also the Chief Improvement Officer for KaiNexus.