Industrialization goes through cycles from one stage to the next. The financial crisis of today and the collapse of the US/China export drive have generated a new thinking in supply and manufacturing management in China. To be nearer its US customers Chinese companies needs to buy or absorb engineering and design expertise, customer relationships and distribution channels. Customers like Caterpillar not only demand lower costs year after year. But they also want a supplier that can provide components “just in time” and respond quickly when it needs a special order of part which cannot be done 10,000 miles away in China.
There are alternative and opportunistic options for Chinese suppliers:
- Concentrations on non-assembly manufacturing operations in China.
- Build final assembly operations in Mexico or in the US by-passing the old costly employee/employer relationships in Mexico and USA.
- Launch a planned strategy for market penetration and forward jump into North and South America utilizing the time advantages for development arising from these crisis.
- Absorbing affordable engineering, design and quality experiences of weakened core companies in core businesses in the US which were previously too expensive.
Generally the quality of products made in China is still weak comparable to same products made in Japan, US, and Germany. Advantages of production costs aside, the key issue facing Chinese companies and other overseas suppliers is the question of competition inside their markets of choice. Chinese suppliers are still focused on low cost production in the first stage. The second stage of industrialization for reasons of market penetration and competition will require Chinese suppliers’ understanding that the major differences between “strong and weak, best and worst" is in a supplier’s commitment to “best practices” and focus on process excellence. Best Practices are implemented good management tools, business culture and business engagement. Technology is inserted to enhance and improve the process performance. Unfortunately, most Chinese suppliers inserted advanced technology without improving the fundamentals of production management.
AMREP Supplier Management through its AMREP Technological Centers in China and Mexico work aggressively with selective outsourced suppliers and customers on the sharing concepts of “collaborative product development, collaborative product design and design chain management”. Basically, the change in the economic and business environment has enhanced the need for creative competitive thinking beyond its current manufacturing model.
Contributed by Mike Jason, Supply Management Advisor, and AMREP Supplier Management Services.
For more information on his work, contact Isabel at 1 954 4430046 or email
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