Article Abstract:
Taking the Fast Boat to China
Machine Design; 9/2003
By Sherri Carmody, associate editor
North American companies are moving manufacturing and engineering operations to China in growing numbers. Sherri Carmody cites a report from the U.S. Congress China Security Review Commission, which states that over 80% of the world’s Fortune 500 companies are now heavily invested in China. “Eighty U.S. -based corporations have recently shifted production to China with an estimated job loss of 34,900” Sherri Carmody continued.
The primary motivation for North American companies to move their operations to China is money. China is enticing U.S. and Canadian manufacturers with low labor costs – a typical worker in China is paid approximately a dollar a day and forty-two cents in benefits. Lower taxes are also enticing North American manufacturers. The article reports that China, in accordance with its membership to the World Trade Organization, will lower taxes on automotive parts to 10% from 25% over five years.
Low labor costs are driving severe price competition that some companies cite as the reason they feel pushed to move to China. “For example, a load-cell manufacturer who declined to be named is transferring the bulk of its manufacturing to China, from the U.S.” Carmody writes. “To be competitive in the load-cell market, they say, the components must come from China, whether from a supplier or captive source. Because of lower costs and boosted profits, the company recently built its own manufacturing facility in China after outgrowing two leased factories.”
Despite the economic advantages and pressures that appear on the surface, moving manufacturing to China is costing North American companies more than they anticipated. The article reports of outdated manufacturing equipment and lack of experience in mass production is causing quality problems that turnoff their consumers. “One source reports this is such a concern that Ford is building receiving centers in the U.S. just to check part quality from China” Carmody reported.
Save Your Factory offers manufacturers’ resources for fully and objectively analyzing the total costs of offshoring, including the quality and productivity advantage found in North American factories. North American factories are using lean manufacturing practices, six sigma principles, and robotic automation to cut costs and gain the competitive advantage over offshore companies. North American factories can produce higher quality products, in less time and at a lower price. Read more of our articles to learn from companies who know about the more viable alternative to offshoring.
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