June, 2013 Continued from page 51
www.us-tech.com
labor rates. The minimum wage has increased dra- matically in China this year, rising between 18 and 22 percent, depending upon the specific loca- tion in China. One US manufacturer with a plant that had opened in Tianjin over eight years ago estimated that the labor rate had risen a total of 200 percent over that time. Transportation costs also continue to rise,
with special fees and surcharges, at times unan- nounced, being added to those transportation costs. The rules for shipping batteries and other hazardous materials can sometimes seem arbi- trary, depending on where they are being shipped from and what port they are using to leave China. Another “danger” in doing business in China is that some factories may close — not because a firm was sold or had gone bankrupt, but simply because the plant was closed. Fortunately, adequate notice is usually given and even assistance in finding and developing another supplier for a particular component or part is usually provided. An important element in devel-
oping production success in China is patience; it will not occur as an “overnight success.” In spite of the increases in labor costs, China still represents one of the world’s best bar- gains in terms of a skilled and educat- ed workforce. Good managers in China are readily available and the work ethic is one of the world’s best. China should remain one of the world’s best places to buy components and to per- form electronic manufacturing for at least the next five to ten years.
Paying for Quality Communicating and establish-
ing expectations with a production facility in China is also important to establishing a lasting, mutually ben- eficial relationship. During a trip to China with an aggressive purchasing
In spite of the increases in labor costs, China still represents one of the world’s best bargains in terms of a skilled and edu- cated workforce. Good managers in China are readily available and the work ethic is one of the world’s best.
manager for a top tier US company, the purchasing manager chose to renegotiate a price with a local Chinese tailor for shirts. The tailor had supplied high-quality shirts for some time at a certain price, but the purchasing manager wanted to lower that price, even after the tailor had explained that the cost of materials was going up and his labor rate had gone up 20 percent. The price increase the tailor sought would help maintain the quality levels estab- lished for those shirts. Still, the pur- chasing manager insisted on a price reduction and finally managed to get the tailor to agree to his lower price. When the two sets of shirts
arrived from the tailor, one for the higher price and the other for the lower price negotiated by the pur- chasing manager, they at first appeared identical. But over time, the differences in quality between the two sets of shirts became appar- ent. For the lower-cost shirts, but- tons were coming off and stitching where the sleeves attached to the body of the shirt was coming unrav- eled. It was clear that the tailor had
the shirts made in two different factories, and the quality of the factory used for the lower-cost shirts
Page 53 Production in China Still Provides Great Benefits
was far inferior to that of the other factory, where the long-term quality of the shirts had been main- tained. The lesson was clear: that no one works for free, and it is vital to precisely communicate expec- tations and then hold a supplier accountable for those expectations. As noted earlier, the Chinese symbols for cri-
sis denote both danger and opportunity. Establishing production facilities or working with production facilities in China can have its pitfalls, but the opportunities for success in China far exceed the dangers. A key to success in China is to continuously move forward, communicating effec- tively and remaining agile to keep pace with any changes that might occur. Contact: Peter Parts Electronics, 6285 Dean
An IC wire bonding line in China.
Parkway, Ontario, NY 14519 % 585-265-2000 fax: 585-265-2542 E-mail:
sales@peterparts.com Web:
www.peterparts.com r
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