Our Blog

Lean Enterprise - China Set To Become Manufacturing Leader

Tweet

 

A number of news services have reported this week that China will overtake the United States as the leader in production of manufactured goods.

As Lean Manufacturing Consultants to worldwide companies we are not so naive or xenophobic to believe that every product should be made in the US or even North America.   There are many valid reasons for worldwide manufacturing including:

• Products with substantial foreign markets are often most efficiently served by local or regional production facilities. 
• Certain parts of the world have unique economic advantages due to the proximity of raw materials, specialized skills and developed infrastructure.
• Products with short shelf lives or some that are make to order cannot tolerate long lead times that result from complicated transportation networks.
• Sometimes other countries just plain out-produce the United States.   (Despite all the structural problems with the French economic system, they still manage to set the standard for fine wine.)
• There is a moral argument that companies which want to sell products in a country have some level of responsibility to provide jobs so the population can afford to buy.   This is not unlike Henry Ford's approach that if he was going to build a car for the middle class, there needed to be a middle class able to afford them.   As a result, he paid rather generous wages for his era.
• And, of course there is the 300 pound gorilla in the room: Whether we like it or not, the substantial difference in wages makes it uneconomical to manufacture many labor intensive products in the US.   Although wage rates in developing countries such as China are growing quickly, it will take many years or decades to equalize with the west.

As a result, we encourage world-wide operations when they are established for valid reasons.   Certainly, as Lean consultants we have seen outstanding manufacturing facilities in many countries and we respect well run operations wherever they are found.

But there are also many poor reasons for manufacturing to leave North America.    Read the Full Article