Insights on Excellence | "Insights on Excellence" Archive

Make your Chinese factories lean

by Stephen Hawley Martin
for Virginia Business
June 19, 2007

When setting up a factory in China, duplicating the operation and processes you have in the U.S. is often not the smartest approach. You are no doubt moving production to China because labor is cheaper there.

There may be some functions or operations that require expensive, sophisticated equipment in the U.S. that could be done more economically by hand in China. Your industrial engineering staff needs to study this and conduct a cost-benefit analysis so that intelligent decisions can be made, rather than blindly duplicating an operation that makes sense in a high-cost labor market.

Two things seem certain to me. First, labor costs are likely to rise in China as time goes by. When they reach a predetermined point, it may make sense to incorporate sophisticated automation. But in the meantime, the highest return may be realized by using a low-tech approach.

Second, it isn't often you get to start an operation from scratch, so take advantage of the opportunity. Use the latest lean manufacturing techniques in your China operation. At first the labor cost-saving benefits may not be all that significant since it's doubtful you'll be paying production line workers much more than $300 or $400 per month, but someday you will be glad you incorporated lead manufacturing.

Why? Change is almost always traumatic and people tend to resist it, which is one reason it's very difficult to transform an existing mass manufacturer into a lean manufacturer. Yet lean manufacturing appears to be the way of the future no matter what country you happen to be in. It requires less labor, uses less space and frees capital that would otherwise be tied up in inventory.

Just about all the lean manufacturing experts say it's much easier to start a lean operation from scratch than to teach old dogs new tricks. So my advice is to take the opportunity to make your Chinese factory a lean operation from the outset.

The principles of lean will work well in your China factory. Products can be produced on a just-in-time basis and only to customer demand, rather than to predictions. You can set up continuous flow production lines, which are scheduled according to customer demand, using pull-scheduling techniques. Parts and components can come in one door, flow into production and ultimately arrive on the loading dock as finished products without missing a beat.

Starting out as a lean operation will mean that all that expensive, high-speed equipment your factory back home may have won't be needed. Equipment that outpaces customer pull or runs ahead of a continuous flow assembly line is one problem you don't want to have to deal with.

Since you are starting with a "green field," the highest quality possible (Six Sigma) can be built into products and processes. Equipment can be programmed to detect defects, and operators can be taught to shut down a production line for quality reasons. Mistake proofing can be used extensively and root cause problem solving skills developed and instituted from the outset. Your Chinese workers can be trained from the beginning to do these things and it will become second nature.

Suffice it to say, it makes sense to use the opportunity of a green field to start off on the right foot.

-----------------------------------------------------

Stephen Hawley Martin is a former principal of The Martin Agency in Richmond and the author of more than half a dozen books including his newest, Lean Enterprise Leader: How to Get Things Done Without Doing It All Yourself. He is editor and publisher of The Oaklea Press, a book publishing business dedicated primarily to helping business executives increase productivity.