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...

Becoming Jacks of All Trades

By: James D. Sawyer, Manufacturing Engineering Hoosier shop grows as a result of perseverance, determination and diversification The key thing we’ve learned from being in business,” said Brad Carney, a founder and owner of Carney-Echelbarger Machining (C-E; Kokomo, IN), “is that the more that we diversify, the better off we are.” Along with his mother and father, Carney in 2004 launched what was originally known as Carney Custom Machining (CCM) in a building behind his parents’ house in Sharpsville, IN. The intervening years have been a bit of a roller-coaster ride, but with perseverance, determination and diversification, the company now is on a gratifying upward swing. Carney expects that trajectory to continue. While he’s glad about that vertical trend, Carney is probably just as glad about a lateral trend his business has gone through. Before moving into its current 8400-ft² facility this past summer the company operated from the 1800-ft² building it started in. “It was packed to the max,” said Carney. “We were also using my parents’ attached garage to store material. We also were using the driveway, but under-roof we had only 1800 ft².” Within that space was an impressive arsenal of equipment for a startup operation. “We started out with a Fadal 4020 VMC that we bought new,” explained Carney. “We also bought a few pieces of used toolroom equipment: a Bridgeport, a Hardinge toolroom lathe, a new DoAll cutoff saw and a Harig surface grinder.” An Episode of Moonlighting He and his parents launched the company as a sideline to their full-time jobs at a local auto supplier. “We had a lot of contacts in racing and we thought we would have enough work from that to keep us in business,” said Carney. “That’s what led us to go ahead and start the company. We were completely wrong in our assumption that the racing contacts were going to be a good way to keep the business growing. You can probably make a fortune in racing, but it appears that they don’t want to pay very much for machined parts.” Fortunately, they had kept their jobs at the auto supplier and had not bet everything on the roll of the entrepreneurial...

Landing the Job and Keeping It

By: Rebecca Carnes, Design-2-Part Magazine Contract manufacturers and job shops weigh in on what OEMs value most in their suppliers Contract manufacturers (CMs) and job shops constantly find themselves under pressure to deliver outstanding price, quality, and on-time delivery to their OEM and product manufacturer customers. Handling tall orders from customers takes dedication and expertise. And delivering on promises with consistency is key to whether a customer returns for more business. What sets some contract manufacturers apart from the pack is not just offering quality, fair prices, and on-time delivery, but also having the flexibility to accommodate changes, an offering of up-front honesty, and a dedication to consistent follow-through. Respondents to an online D2P survey of contract manufacturers overwhelmingly noted that their customers are foremost interested in on-time delivery, competitive pricing, and quality. “Good communication and accountability to do what you commit to is the separator,” said Dan Young, marketing manager for Marik Spring, Inc., a manufacturer of springs and wire forms based in Tallmadge, Ohio (www.marikspring.com). He noted that OEMs assess Marik’s performance based on the company’s ability to respond to change, whether in design or schedule. Quality manufactured products that are delivered on time and within budget is what customers typically are looking for in a supplier, according to Dick Doyle, sales manager for Astro Craft, an Illinois-based company that provides CNC turning and milling of critical components (www.astrocraft.com). The company has been a silver level or better vendor for several key customers during a number of years, he said. Sonoco Protective Solutions, which has won several quality awards, delivers “what is promised, on time with no hassles on invoices,” said marketing specialist Jessica Irons. The South Carolina company produces molded-foam components and packaging across many industries, including automotive, medical, technology, HVAC, and consumer products, and Irons said that they are usually judged by customers on their on-time delivery and ability to deliver products within specification. The ability to hold tight tolerances on complex fabrications, as well as consistency and good service at a fair price, are important to customers of Acme Wire Products Co., Inc., a Mystic, Conn.-based CM that specializes in wire fabrications and wire forms (www.acmewire.com). Once they’ve been...

Foxconn, Makers, and the Future of U.S. Manufacturing

By: Stett Holbrock, Make Last week’s news that Foxconn will be moving some of its production to the US renewed discussion of the so-called “reshoring” of manufacturing back to the states. America’s manufacturing sector has been growing for years. According to new research from the Boston Consulting Group: “Manufactured exports—a bright spot of the US economy in recent years—are set to surge. Combined with jobs created as a result of reshoring, higher US exports could add 2.5 million to 5 million jobs by the end of the decade, as manufacturers shift production from leading European countries and Japan to take advantage of substantially lower costs in the U.S.” What reshoring means for makers entering the marketplace remains to be seen. Foxconn, manufacturer of the iPhone and other Apple products, is for big players, not small volume makers graduating from the garage. The conventional route for makers looking to scale up is to head to China where they can find an appropriately sized manufacturer that will make their products cheaper than they could in the US. But shouldn’t declining US production costs benefit makers and as well as the manufacturing heavies? Industry watcher and MAKE contributor Travis Good is skeptical. But, he says: “The true opportunity comes when pro makers can tap into the idle cycles of the US’s automated manufacturing capacity. As a small example, Ted Hall (ShopBot) is trying to make it possible for pro makers to slip their production needs into ShopBot fabricators’ shops with his 100,000 Garages. He’s doing it as a means of turning his customers’ idle capacity into opportunity but the notion can be generalized. We still produce more than anyone, but it’s automated and inaccessible via the Cloud.” Cloud-based manufacturing is a concept advocated by CloudFab founder Nick Pinkston. He, too, doesn’t see much impact from Foxconn’s move, but down the road, that could change if more production moves to the US. The long-term implications are more interesting: i.e. if the supply chain starts to migrate back to the states, then China’s advantage there is diminished as well. If you ever go to Shenzhen, there are electronics component places everywhere. That could happen here, too, and would cut...

Contract Manufactures are One Key to Innovation

By: Tucker Marion, EE Times Almost daily we hear depressing news reports regarding the economy, the loss of manufacturing, a crumbling infrastructure and seemingly impending decline of the U.S. While there are fundamental problems, of course, often ignored is the current reality that at no other time in our history has it been easier to innovate. That’s right, today is the Golden Age of innovation. And what makes that possible? Outsourced resources are available to entrepreneurs to provide high skill for low cost. At the heart of those resources are contract manufacturers that are U.S.-based, highly competent and as entrepreneurial as their clients. I recently visited two different companies that exemplify what is available for the innovator. The first is a contract electronic pc assembler located outside of Philadelphia. Their’s is a small facility, with two product lines and about 10,000 square feet of space. They are highly adaptable, easily moving from assembling medical device housings to rigorous testing of military electronics. The project manager works intimately with clients, often suggesting design solutions and doing anything it takes to meet tight deadlines. The benefit for the innovative entrepreneur is that by engaging with a firm like this, you instantly add expertise without adding fixed cost. Contract manufacturers can debug designs, develop pre-production prototypes and provide fulfillment – essentially filling in the latter half of the development process. And if the entrepreneur has cash flow problems, the project can be put on hold with no questions asked. Try doing that with a full-time staff that drains tens of thousands of dollars per month from cash reserves. The second company I visited is a Massachusetts-based firm focused on the design and development side of the innovation process. The company is a full-service design and prototyping firm, with graphic designers, industrial designers, engineers and machinists. The staff can go from sketch to 25-unit pre-production runs extremely quickly. Their work includes consumer products, medical devices, toys, baby equipment, and sporting goods. The speed of development and quality of the prototypes fabricated is truly world-class. And it’s all done within an unassuming, small office building in a neighborhood south of Boston. For the entrepreneur, adding design and engineering talent...