China Manufacturing Slumps To 15-Month Low

China Manufacturing Slumps To 15-Month Low

Jul 27, 2015

By Kelvin Chan, Manufacturing Business Technology HONG KONG (AP) — China’s manufacturing slumped to a 15-month low in July in a fresh sign of deterioration in the world’s second biggest economy, a survey showed Friday. The manufacturing index based on a survey of factory purchasing managers fell to 48.2 this month from 49.4 in June. It uses a 100-point scale on which numbers above 50 indicate expansion. The monthly survey was previously sponsored by global bank HSBC. It is now sponsored by Chinese financial publication Caixin. The preliminary version released Friday is based on 85-90 percent of responses from factories. The final version is due August 3. The factory output sub-index decreased at a faster rate, falling to its lowest in 16 months. New export orders and overall new orders both contracted after expanding the previous month. Employment in China’s giant manufacturing industry, which employs tens of millions of people, continued to shrink, according to the survey. China posted 7 percent economic growth last quarter, the weakest performance since the global financial crisis. The latest numbers underscore the ruling Communist Party’s complicated task of keeping economic growth on track while reducing reliance on trade and investment that helped power the sizzling expansion of previous years. Instead they want to base growth on slower, more sustainable domestic consumption. The report shows that the economy is struggling to revive even after recent support measures. Beijing has cut interest rates four times since November and pumped money into construction spending after signs the economy was slowing too sharply. “We think that recent policy easing has yet to fully feed through into stronger economic activity and expect policymakers to respond to signs of weakness by stepping up support in order to prevent growth from slipping much further this year,” Julian Evans-Pritchard of Capital Economics said in a report....

U.S. Manufacturing costs are almost as low as China’s…

U.S. Manufacturing costs are almost as low as China’s…

Jun 30, 2015

“U.S. Manufacturing costs are almost as low as China’s, and that’s a very big deal” By Brian Dumaine, Fortune “Made in the U.S.A” is becoming more affordable. The reason? Fracking. You don’t need to a Nobel Prize in economics to know that the fracking revolution has been good for the U.S. What’s not so well known is just how competitive cheap oil and gas has made American manufacturing. BCG, the Boston consultancy, estimates the average cost to manufacture goods in the U.S. is now only 5% higher than in China and is actually 10% to 20% lower than in major European economies. Even more striking: BCG projects that by 2018 it will be 2% to 3% cheaper to make stuff here than in China. Part of the reason for the narrowing gap is that wages have been rising in China. And American companies have been boosting their productivity faster than many of their international competitors. But perhaps the single largest factor is that fracking has helped dramatically drive down the price of oil and gas that’s being used in energy intensive industries such as steel, aluminum, paper and petrochemicals. BCG calculates that U.S. industrial electricity prices are now 30% to 50% lower than those of other major exporters. “A 5% price discrepancy in manufacturing between China and the US doesn’t amount to much,” says BCG’s David Gee, “when you consider that US manufacturers face the risks of delay when shipping from China, the threat of port strikes, and the local investments and partnerships that Beijing often requires of foreign companies doing business there.” Lower energy prices can also open up new opportunities such as a using natural gas to power fleet vehicles and trucks, which would reduce American dependence on foreign oil and cut greenhouse gases. Natural gas can also be converted into hydrogen to power fuel cells like the ones in Toyota’s  TM 1.12%  Mirai passenger car. (The Japanese car giant will start taking orders for the Mirai in California this summer.) Over the last few years, cheap energy has encouraged players in various industries to earmark $138 billion for new U.S.-based investments. This spring, for example, the petrochemical giant Sasol  SSL 2.22%  started construction on an $8.1 billion...

China’s incredible shrinking factories – forced to downsize…

China’s incredible shrinking factories – forced to downsize…

Apr 22, 2015

“China’s incredible shrinking factories – forced to downsize just to survive” By South China Morning Post Rising labour costs, higher real estate prices, less favourable government policies and smaller order volumes are forcing Chinese plants to downsize – just to survive. Eight years ago, Pascal Lighting employed about 2,000 workers on a leafy campus in southern China. Today it has only 200. The Taiwanese light manufacturer has cut its workforce and leased most of its space to other companies: lamp workshops, a mobile phone maker, a logistics group, a liquor brand. “It used to be that as long as you had more orders, you could get everything you needed to expand your factory, and you could expand,” said Johnny Tsai, general manager of Pascal, in Huizhou , in central Guangdong province. That is no longer the case. The Chinese factory – an institution that was once so large that it was measured in sports fields – is shrinking. Rising labour costs, higher real estate prices, less favourable government policies and smaller order volumes are forcing Chinese plants to downsize just to survive. Their contraction suggests a new model of light manufacturing emerging from China’s economic slowdown: smaller plants are replacing the vertically integrated behemoths that defined Chinese manufacturing in the early 2000s. Cankun, a factory making kitchen and electrical in Foshan , southern China had more than 22,000 manufacturing employees in 2005, according to its annual report. Today, that number has shrunk to only 3,000, according to a senior executive. Some Hong Kong-owned factories in southern China have cut their staff numbers by between 50 per cent and 60 per cent, said Stanley Lau, chairman of the business lobby Federation of Hong Kong Industries. Certainly, the giant Chinese factory is hardly extinct. Taiwan’s Foxconn Technology Group still employs about 1.3 million people during peak production times – many of them piecing together Apple iPhones. Those factories that can afford to do so, including Foxconn, are increasing automation. However, for industries where the product design changes frequently, such as lighting, the use of robots adds little value. The contraction of Chinese factories illustrates how much the advantages they once enjoyed have eroded. In the 1990s...

Resolving Problems in the Modern Supply Chain

Resolving Problems in the Modern Supply Chain

Mar 19, 2015

By Bolaji Ojo, Electronic Purchasing Strategies As companies rushed to embrace globalization, the lean, complex and highly intertwined supply chains that they created over the past decade took on another, unexpected characteristic: fragility. Practices such as just-in-time manufacturing stripped cost and time out of supply chains, while globalization created highly extended supply and demand networks. The combination of these and other practices creates a perfect environment for disruption. A seemingly small event or outage in one region can and does quickly escalate into full-blown business interruption halfway across the world. Supply chain volatility can also carry a hefty price tag. More than 60 percent of respondents to a PricewaterhouseCoopers (PwC) survey reported that their performance indicators had dropped by three percent or more because of supply chain disruptions in the past year.However, few companies can afford to devote the capital and other resources needed to build the supply chain infrastructure and capacity to accommodate large surges, dips and disruptions in their supply chains. Even fewer maintain constant vigilance over operational, socio-political, regulatory, natural disaster and other risks that can compromise a company’s ability to deliver on its value proposition, whether that is defined by low cost, innovation, quality or outstanding customer service. These challenges are prompting world-class supply chain operators to look for alternative solutions with which to re-wire their networks for efficiency and resilience. One such solution is the lead logistics provider (LLP) outsourcing model. But not the traditional transaction-focused LLP solution, rather a “next-gen” LLP that operates as a strategic partner to deliver competitive advantage, ensure business continuity and drive growth. Today’s long, lean, interdependent, cost-aware and service-focused supply chains have grown more vulnerable at a time when the potential for interruption is unprecedented. Greater vulnerability is driven by a myriad of factors, including globalized sourcing and production, lean inventory practices, shifting demand and growth geographies, complex interdependencies between industries (e.g. automotive and high tech), shrinking product lifecycles, and rapidly changing consumer behaviors. This twin dynamic of complexity and interdependency makes supply chains brittle – and open to buffeting or disruption caused by developments occurring anywhere in the world. At the same time, supply chains have assumed a more strategic role in...

U.S. Manufacturing No More Expensive Than Outsourcing to China By 2015: Study

By: Phil LeBeau, CNBC Walk onto the shop floor at Prince Industries in Shanghai, China and it looks like most other manufacturing plants in this country. It’s busy running two shifts, cranking out components that will be shipped to major manufacturers like Caterpillar, Siemens, and Honeywell. But change is in the air. The cost of manufacturing in China is going up and rising quickly. “It’s something that we anticipated when we went to China, we just didn’t know how quick it would happen,” said Mark Miller, CEO of Prince Industries. China and US Costs Even by ’15 China is no longer a slam dunk for manufacturers looking for the lowest cost for operations. In fact, a new study by the consulting firm AlixPartners estimates by 2015 the cost of outsourcing manufacturing to China will be equal to the cost of manufacturing in the U.S. “The Chinese manufacturing cost advantage has eroded dramatically in the last few years,” said Steve Maurer, AlixPartners managing director. “If you go back to 2005, it was pretty common for landed cost from China to be 25 to 30 percent less than the cost of manufacturing in the United States. Based on our analysis, two-thirds of that gap has closed.” Maurer said higher labor wages, the rising value of China’s currency, and the cost of shipping goods from China to points around the world have made manufacturing in China more expensive. “If trends continue, the China cost is going to be on par with U.S. cost in the next four to five years,” said Maurer. Higher Wages, Rising Currency Since Prince Industries opened its plant in Shanghai a decade ago, wages have increased an average of 12 percent annually, while China’s currency, the RMB, has appreciated 25 percent vs. the U.S. dollar. The rising value of the RMB was expected and has made it more costly to ship goods built in China around the world. Meanwhile, hourly wages have been going up steadily due to China raising minimum wages, while competition for labor has forced manufacturers to pay more to attract skilled workers and keep them. Pulling Out of China or Moving Further Inland? As the cost of manufacturing in...