Bolaji , nice reviw about the current situation of the supply chain and their manufacturing. China has attracted many of the golbal investors, beacuse they supply the goods at the cheapest price. So the companies started moving towards china and making it as the gaint in the manufactuing sector. The rest of the world should start thinking to avoid the freezing by the china in manufacturing sector. Consider the case of US which is totally depedent on china for SCM goods. US should find alterrnative by moving towards latin american countries, which in turn brings a social and economic developemnt.
I really like what you have to say here.If we want to force High-tech manufacturers to move production back to America we need to be aggresive in our approach and hit them where it hurts the most-The Bottomline.
When they see conscious avoidance of Chinese products they will be left with no choice but to move production either to Mexico( Eric talks about Gualadajara,Mexico in great details on EBNOnline website) or America.
What makes this story even more idiotic is that Google was started with US Taxpayer funds.
Time to close the Tax noose,decisively around all these elite corporations...
Instead of hounding ordinary citizens for small-small infringements the IRS should go after these guys with a vengenance.
But then,we also have to deal with the fact that most of our Political elite has made substantial personal investments in China(& there is no way they will do anything to jeopardize that investment).So its time for Citizens to take things back into their own hands.The Best way is by stop buying Chinese products wherever possible.A lot of Americans are actually doing this today.Once greater Americans climb on this bandwagon,we will be able to force High-tech manufacturers to move production back to America.
Many great comments on a great article. First, I want to assure everyone I am an optimist. Everything will eventually work out for the best, but the US and other law abiding countries must start demanding fair trade, and encourage (and possibly whip) rogue states, the main offender being China, to take positive steps toward fair trade practices. The sooner the West demands truly fair trade, the sooner it will happen.
Here is a summary of the "sins" China and other rogue nations are committing, mainly based on two books:
Peter Navarro, PhD, "The Coming China Wars" (Upper Saddle River, New Jersey: FT Press, 2008 [Pearson Education, Inc.]).
Elizabeth C. Economy, "The River Runs Black" (Cornell University Press, 2010).
+ A main conclusion of Navarro's book, is rogue nations (not only China, but obviously China is probably the largest offender) have cost the US economy about 1 million jobs per year, and about 10 million jobs over the last ten years. My primary thought after reading Navarro's book is 'why does the United States have the worst trade negotiators on the planet?' Nearly all of the issues he raises are trade issues.
+ China and other rogue nations have little regard for their environment. Therefore, buying goods manufactured in rogue states is an implicit export of pollution. Law abiding nations should be allowed to put a "pollution tax" on goods coming from such countries, and keep the tax until the rogue state proves it no longer pollutes. If implemented, the tax revenue must be used to stimulate the US economy, preferably in areas such as manufacturing. Navarro points out, that when US companies are given a level playing field, they are among the most competitive companies in the world.
+ Quite a few nations engage in cyber-terrorism. Same solution as above, a "cyber-terrorism" tax (or tariff) should be implemented and used to improve computer / IT security in the US, and other law abiding countries. Some of the revenue from the tax might be used for intervention, but this might prove as difficult as drug intervention.
+ Many nations, especially China, engage in IP (Intellectual Property) theft. Slap another tariff on them! It has been estimated that if US companies were paid for all IP that is stolen annually, the US would not have a trade deficit.
+ CEO's should be aware that rogue states not only manufacture what is authorized, but also keep the factory running and ship "out the back door". In this way completely authentic products are manufactured illegally, and then sold to benefit the rogue company. It is estimated that between 5% and 10% of Cisco's networking gear manufactured in China is unauthorized. The same is probably true of many other products made in China, ranging from high end running shoes, pharmaceuticals, handbags and Polo shirts.
+ Human rights abuse: Rogue states treat workers and their citizens in general very poorly. So buying from rogue states is implicit support of human rights abuse. The only way, in my opinion, to stop the abuse is to put a tariff on goods from such countries. We need to be very clear that the tariff will be reduced as they improve their human rights record. The main "sins" are not allowing workers to organize (anti-union tactics), not allowing workers to voice complaints about working conditions, low wages and little or no health care benefits.
+ Support of corrupt regimes: Buying goods from rogue states is implicit support of tyrants. China and other rogue nations buy raw materials from nations run by tyrants. Navarro gives several examples, including Mugabe, President of Zimbabwe, and others.
+ Buying goods from rogue nations is implicit support of imperialism. Again, Navarro gives examples of specific countries. Imperialism is one of the tactics China uses to buy raw materials at a huge discount. They go to poor nations, and to nations run by corrupt leaders, and offer to build roads, ports, railroads and other infrastructure. The only problem is the roads go straight to areas where there are raw materials the rogue nation needs. The host country gets very little benefit, since the imperialist "infrastructure" provider staffs the mines with its own managers. The imperialist country's managers have been known to have complete disregard and disdain for the workers they employ. And the contract allows China and other rogue imperialists to buy the raw materials at 50% off the market price. Further impoverishing the poor country.
+ And as Obama and the US Congress have mentioned recently, the Chinese currency is about 20 to 40 percent under-valued. This makes Chinese goods artificially cheap, and is a blatant unfair trade practice. My opinion is law abiding nations must be allowed to put a tariff on goods from countries where it can easily be shown (via "equivalent baskets of goods" and other similar proven economic methods) that a nation is artificially undervaluing its currency. It baffles me that the G20 did not vote to allow such a tariff at their recent meeting (in Seoul, South Korea, Nov 11 - 12).
+ "The River Runs Black" is mainly about pollution in China, and I will leave it as 'an exercise for another reader' to summarize it!
So why doesn't Obama, Congress and the US trade representative mention all the other "sins" of rogue nations? And why don't they mention all the nations that engage in unfair trade practices? Why pick on China, and only for one issue?
My answer: We (the United States) have the worst government money can buy!
Again, I want to close by repeating that I am an optimist. We the people must rise up and demand a level playing field economically, and demand our governments encourage (and possibly whip) the rogue states to take positive steps toward fair trade practices.
I have come to this discussion late and found reading through the comments very interesting. I have also thought for a long time that China was very smart to play to western greed, to, as you put it, allow the west (and the rest) to gorge on china. As a nation they took a very long term view, provided state funding for ventures, designed practices to reduce costs and produced the environment to facilitate very competitive pricing - not quite a level playing field for the rest of the world. The Chinese however are also very smart with understanding balance and know that if there is too much "yin" the "yang" will work to find balance. I think we can try to learn from this understanding. I understand wages have gone up significantly in China due to their high demand for skilled labour, compliance with practices enforced elsewhere are being pushed, I believe such factors, factors and forces that go beyond the power of an individual company, will eventually drive towards balance.
It's evident that unemployment is increasing over the rest of the world as the investments are moving to china, if there is no competition there is always a chance for reduction of quality. It's time to divert the investments to rest of world by increasing the employment opportunities and product quality.
You're right - in fact, I am purchased a studded leather belt about three months ago and it's almost shot. I have about 5 belts so it only gets about 20% duty, or a couple days a week max.
Plating and tolerances are still problems there. And we've all read the horror stories about consumables. Hershey moving to China was not only sad but absolutely ridiculous. My guess is that most consumers don't know the standard Hershey chocolate is made there, if they did, I think Hershey would have to move back to PA or be gobbled up (NPI) by Nestle. I won't eat it any more, nor would I give my cat food made in China.
Some of that is the mfg learning curve. If you're old enough to remember, products out of Japan in the early 60s weren't very good, but look at them now. Some of it is cultural, certainly the Japanese have an almost cultural attention to detail and stalwart commitment to quality.
Our company has successfully relocated a portion of our production out of China into Japan in the last year, and quality concerns drove the decisions. Yes, your input is right-on.
Great questions. Who will volunteer to not move manufacturing to China? No executives who wants to keep their jobs will do this to help save the West. So, the decision cannot be based on altruistic reasons. It must have profit grounding. I don't believe this is impossible, though. Incentives lured companies to China. Some forms of incentives can keep what we have here. Additionally, companies are already having second thoughts about the shift to China. Some want to hedge their bets and others simply don't think it is completely cost-effective for them. Governments can help make sure the first companies to retain plants here get some benefits for doing so. It must become an objective for local and national governments as well as for corporations.
Tactically, the West must incorporate design for manufacturability strategies like the one you mentioned. This could eventually be our saving grace. If production requires fewer and fewer handling by humans then the competitive edge moves to the design function,which can happen anywhere. However, as some have noted, other countries are also becoming competitive in the design area. This means that as we move up the food chain, someone is also aggressively moving in the same direction. Fewer-touch production (built in at the design stage) can neutralize some of the low-wage advantage China has but will it be enough? Secondly, by the time we finally achieve this, won't the last manufacturing plant in the West be shutting its doors, never to return?
Excellent and accurate assessment, Bolaji! I agree with you down the line. Logic demonstrates that imbalance in any system ultimately results in a breakdown.
My greatest reservation is who will be first to risk losing their competitive position by exiting China? We are a competitive society and business is no exception. I loathe the thought of the government incurring upon yet another business issue, but I have just as little confidence in an 'honor system' where companies would voluntarily mitigate their production in China.
We are a very competitive society. We all want to win. But at what cost?
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.