AFP: Costs driving US manufacturing firms out of China: AmCham
“Forcing” is a strange word to use. It’s really a business choice, one way or another. Chasing cheap labor… that’s a choice. Chasing it to the next state or country is also a choice companies make.
“For manufacturers, the seemingly endless supply of low-cost unskilled labour may be approaching its limits,” Norwell Coquillard, chairman of AmCham in Shanghai, told reporters at a briefing to launch their annual white paper.
It’s a shame that so many companies prize “unskilled” labor. It reminds me of when I worked at GM and employees lamented “they said they hired me for my back and my arms, not my brains.”
“…It added that 74 percent of companies were either profitable or very profitable in China”
So 26% can’t be profitable, even with low-cost labor. How are companies like that going to be successful anywhere?
I wonder if China will promote Lean thinking as a way of maintaining their manufacturing base? Live by cheap labor, die by cheap labor, otherwise.
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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.
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{ 4 comments… read them below or add one }
The Southern and coastal regions of China have been increasing in price for awhile, but they have also been increasing the skill set of their workers.
This will likely lead to a greater valuation of their services and the adoption of techniques designed to maximize value added.
In contrast, 300 to 500 million.
Last estimated size I saw of China’s non-hukou carrying class – the floaters.
For unskilled labor, you really can’t beat someone who isn’t a citizen of any nation.
As you point out, chasing cheap labor is a business decision that will keep corporations constantly shifting as areas develop.
I think that we may increasingly see interior (and poorer) areas of China developed into industrial, non-skilled factory settings.
There’s more to address here as well – like regulatory inconsistencies, increasing national investment, and infrastructure that would allow interior development.
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Yes, claiming things such as “forced” make it seem like managers don’t choose to sacrifice workers instead it is the only option. Very LAME.
And the people that parrot these claims of inevitability start to believe their own flawed statement. Obviously not all MBAs think this way but an awful lot seem to think there job is just look at spreadsheets and notice that the total on one calculation is lower so they have to now take x step. I can’t figure out how these same people that basically think managing is something a simple computer program could do think that they deserve huge salaries.
Of course the whole premise is just crazy. You need to understand they system. It is not just some spreadsheet…
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Sounds like J Thatcher works in China, as I do. I am a lean and six sigma consultant within my Hong Kong-based company. Like in the US and elsehwere, enlightened companies will not rest on their successes and will continually strive to improve themselves. For many years, China’s competitors were outside China moving here, then they moved next door, and now they are moving to Vietnam.
The point of this excellent blog is that all companies everywhere need to improve themselves (by whatever acronym or program they decide upon), and we see that so many G8-based companies do not yet. In China, Lean is nascent but picking up, like US in 1981.
Chasing lower labour costs is one solution, and I don’t dismiss it as much as other bloggers do here, but all operations should complement these decisions with corporate cultures that move towards excellence in each and every site.
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I guess this is another example of the ‘race to the bottom’. It’s all about seeking out new frontiers for ever decreasing labor costs and I imagine the options are decreasing geometrically.
I, too, am exhausted with be lectured about the inevitability of these matters- usually from some overly intense boomer who can not stomach the thought of losing the McMansion and the Cayenne.
I would rather twist sheet metal screws into my forehead that hear another thing about China.
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