automation, china, manufacturing, supply chain
Over the last few weeks, issues related to Chinese manufacturing have been all over the news. On one end, we have the continued pressure of the U.S. government for China to revalue its currency, and on the other end, we have the increasing discontent of Chinese workers, demonstrated by suicides at the Foxconn plant, and strikes at well-known brands such as Honda and Brother.
While the currency discussion continues with no end in sight, the RMB is unlikely to reduce in value in the near future. In addition, with the various strikes and labor disputes, the management of these companies is responding by raising wages and improving working conditions. With a 24% wage hike at the Honda plant being implemented, the costs will need to be allocated. Even with the parent company absorbing some, part of the cost will be passed on to end customers. Theoretically, Chinese manufactured products are going to get more expensive.
However, this is only true if there is no change to the manufacturing process within the factories. Recent research from IDC Manufacturing Insights shows that Chinese manufactures are increasingly interested in automation; for both manufacturing processes and the adoption of information technology to support information flow across the various support processes within the factory. However, implementing automation will require a detailed understanding of the underlying business processes.
I remember a discussion with a Chinese manufacturer a few years ago when I asked about automation and process efficiency. At that time, he said that he could not justify the investment in technology and would simply put additional people to work on a task when the need arises. With the recent changes in workforce behavior and currency issues, the mind-sets of Chinese manufacturers will have to change with times.
Currently rated 1.7 by 74 people
It is interesting to read on the Straits Times today that Toyota and KFC have also bowed to calls for wage hikes. A domino effect is happening and other foreign companies operating in China may soon face similar challenges. How long more will China have the low-cost advantage? If they want to remain as the factory of the world, I agree with you Chris that they need to start seriously looking at automation.