Managing Automation - November 2008 - (Page 62)

robert malone NEXT Manufacturing on the Move robomalone@aol.com China aims to move up the manufacturing chain to higher-return products and fewer low-cost items. What does this mean for the United States? If the Olympics taught us anything, it is that China is changing fast. Of course, the Chinese love gold medals and are very good at winning them. And they can put together 2008 drummers who play in unison. But let’s look beyond the Olympics at China’s influence on world manufacturing. For about a thousand years, China was the dominant world manufacturer. In 1750, China was responsible for an estimated 32.8% of the world’s manufacturing; Britain, 21.3%; and America, Britain’s unhappy colony, a meager 0.1%. Around 1850, Britain, with its industrial revolution, overtook China and kept the manufacturing gold medals until the early 20th century, when the United States became the largest goods manufacturer. The U.S. is now about to lose its gold medals. China is expected to surpass the U.S. in production of manufactured goods in 2009. Yet, China has lost more manufacturing jobs in the last decade or so than the U.S. has. Between 1995 and 2002, the U.S. lost 2 million manufacturing jobs while China lost 15 million, according to the Conference Board. U.S. News & World Report reports that China is downsizing the number of its manufacturing establishments at a rapid rate. In the past year, 10,000 factories have closed in the Guangdong Province. And the rate is accelerating, according to the report. These establishments are closing because the type of manufacturing they specialize in accumulates no profit as costs rise for sourced goods, logistics and transportation, and labor. The Chinese economic margins in many companies have gone from slim to none. Given that the Chinese government made clear recently that it no longer wishes to be the world’s low-cost producer, these establishments get no favors from government. 2008 maonline managingautomation.com For more of Robert Malone’s views, visit: ❑ The Start of Automation www.managingautomation .com/next54 ❑ The Avalanche Point www.managingautomation .com/next53 ❑ Think of the Head, Ramón www.managingautomation .com/next52 Robert Malone, based in New York, is principal of Robert Malone Associates and former editor-in-chief of Managing Automation. ma 62 November Photo: Dirk Kikstra The Chinese economy is moving intelligently, like most others, toward more service jobs and businesses. Yet, the move to more sophisticated products won’t be easy with a lack of managers, management skills, and tools for many of the types of businesses it wishes to pursue. However, few people believe the Chinese won’t be capable of moving up, and fast. China, don’t forget, is also deep in the process of supplying the largest single market for goods in the world: China. Is there a disconnection here? China downsizes thousands of manufacturing businesses and increases its goods production for home and global consumption. Where will the U.S. outsource to, if not to China? India, other Asian nations, African or South American nations? Who wants to make low-cost products? The world will not suddenly stop having a need for such goods. If we can guess, China will still make some of those goods, and India and other far Eastern countries will make others. Africa may attempt to fill the gap. But part of the problem in sourcing to these other nations is the state of the infrastructure. Toys, shoes, furniture, and other house wares require a logistics capability and container ports ready to handle large volumes. India’s infrastructure is overtaxed, and Africa’s infrastructure is backward and under-funded for the most part. Stay tuned: The changes in China will alter global business and a new era in outsourcing may be at hand. ■ http://www.managingautomation.com http://www.managingautomation.com/next54 http://www.managingautomation.com/next54 http://www.managingautomation.com/next53 http://www.managingautomation.com/next53 http://www.managingautomation.com/next52 http://www.managingautomation.com/next52

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Managing Automation - November 2008 Contents Take 1 At One-Year Mark, Wonderware President Focuses on Empowering Plant Operators Oracle Demos Fusio Apps, Reveals Delays Baan Founder Says BPM Will Replace ERP Emerson Talks Wireless at Annual User Group Event Merger Complete, Intercim Focuses on Collaboration Notes Cover Story: The New Supply Chain Reality Special Report: Keep Out Integration: The On-Demand Interchange Industries: Ending the Endless Waves of Paper Product Scan Advertiser Index Next

Managing Automation - November 2008

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