“This is excruciating!” one of our production consultants said to me last week. She’s been managing a prototyping process, in another region in which we are looking to manufacture. With the majority of our bag production in China, it makes sense to diversify, especially with new pressures on Chinese manufacturing (not just trade tariffs). The facility has been making a prototype bag to test and it’s taken almost three months. If this had been at our facility in China, it would’ve been finished by the time we’d had our lunch. I agreed with her.
It’s a story I felt compelled to share. Sure, it’s my limited point of view in the bag making sector. This microscopic example can’t represent all factories and all manufacturing regions in the world (established and emerging) but for me it reinforced why – with over 30 years of the country’s evolution as a manufacturing powerhouse, many brands are returning their production to China (after stints in South East Asia). The country seems to be the number one choice for making anything, still. Even with the pressures of politics clashing with economics and the very real repercussions on us all, from factories to end users, I wanted to note down some key positives. This is by no means China propaganda, just an observation after taking a realistic look at various manufacturing landscapes I have encountered.
The business ecosystem
People (over)use this term a lot when referring to China, and it’s entirely justified. It’s all about the big picture. The world’s biggest brands offer highly complex products, and they certainly don’t manufacture in China because of ‘cheap labour’ (which it’s not). Buying and procurement departments understand that it’s all about the three decades of the evolution of supplying raw materials, third party makers, services, distributors and government legislations, all networked. It’s different now from when I moved to China nearly 15 years ago – big centres like Xiamen have been cultivated and these ecosystems developed through competition, cooperation and legislation. I don’t live there anymore but each time I visit I am amazed how different the city looks today.
There are almost one and a half billion people in China. Even with the rise of the middle class and the consequent rise in the cost of labour, there’s still unmatched manpower to run the factories. Sure, staff retention can be tricky, but like most challenges in China, they’re overcome with clever adaptation. Plus there is no scarcity of workers to fill their places (back to the point about a billion people). Compare this to countries like Myanmar, Cambodia, Vietnam and even South Africa (where I would love to set up a facility as Cape Town is my hometown) where the populations are barely 5% of China’s. While significant production has indeed moved there, they’re finding it difficult to recruit enough workers. The cycle is well-known – wages hike, and so companies return to China. Sure, India’s population is comparable. But looking at the big picture again, and carefully compare the nation’s logistical capabilities, China has more than just an edge.
China is home to seven of the world’s busiest deep sea ports in the world. This should tell us enough about the vast logistics engine and support structure in China, much of which was subsidised by the government in order to establish them as the world’s number one manufacturer. Airports, warehousing, roads, railways, efficient customs house… for any other nation to try catch up is a near impossible task.
Many had had difficulties in Myanmar, ourselves included, and Vietnam has seen spikes in social unrest. Manufacturing partners and supply chain is the lifeblood of any company and when a large proportion of that is tied to one region, companies are exposed to substantial risks if commercial sectors are wiped out by a politically motivated change in legislature at best, or civil war at worst. While the human cost is beyond tragic, the economic impact can ruin a hundred million dollar company (which in turn has a human cost).
When working across continents in high pressure business environments, it’s only natural that there’d be issues with business nuances, cultural differences and lost-in-translations. Now there are highly established businesses in China that are so well-versed in dealing with western companies, they’re practically manufacturing extensions of the companies themselves. This is in no small way thanks to the work ethic and can-do attitude of the Chinese, this combined with the go-between ex-pats who have relocated to become facilitators between west and east, bridging the business divide. I have been such a person, and I can personally vouch for the fact that it’s taken years to get to grips with the complexities of it all, and every week I learn something new.
As I said, this is written from my limited perspective, and if you have anything to add, please add a note in the comments section. This is my first article on Linkedin and I’ll be posting more soon, based on my experience in manufacturing – they’re by no means complete canons of academic works, just my point of view. Next up is my take on sustainability in manufacturing, at the coal face. Keep an eye out for it in a couple of weeks.
If you’d like to know more about how we at Ason Bags collaborate with companies in manufacturing bags, send me a direct message and we’ll talk more.