In May 2010, through Professor Greg Stoller’s International Management Experience – Asia class, I had the opportunity to visit three factories in China: a US furniture manufacturer’s company-owned factory in the Free Trade Zone right outside of Shanghai, an independent, third-party watch strap manufacturer’s factory in Shenzhen and another independent, third-party female boot manufacturer’s factory in Dongguan. Through these three visits, I was able to gain a glimpse of manufacturing in China.
In terms of production efficiency and innovation, the company-owned furniture factory was far superior to the other two factories. This factory employed Just In Time Manufacturing, had efficient, reliable and cost-effective supply chains, outsourced production of their smaller ticket items and employed methodologies to ensure that they had enough inventory on hand to ensure uninterrupted production. One neat thing they had was a sign next to each stack of inventory noting when inventory levels had gotten low and detailing the precise number of boxes that needed to be ordered. In addition, as this factory strongly believed in environmental sustainability, they even had an environmentally preferable purchasing program (which they referred to as “Green Supply Chain”), whereby they would only work with suppliers that exceeded their baseline requirements on environmental sustainability. The other two factories were, lamentably, far less efficient and innovative. Their production schedules seemed to be based upon customer orders (which can sometimes be erratic) and they did not engage in thorough forecasting. Their quality control processes was abysmal (one of the factories had a 5% failure rate!) and they hadn’t automated many processes that were being done manually.
In terms of cleanliness and order, there was definitely a sharp contrast between the company-owned factory and the other two factories. The company-owned factory had a reputation to maintain and thus, kept things in pristine order. Similar to US factories I had visited, they also had stringent safety procedures in place to protect the staff’s safety. While the conditions at the other two independent factories were not inhumane, they were definitely not on par with the company-owned factory. The workers were working too close to comfort and were wearing minimal protection (very low quality gloves, aprons and goggles!). In particular, the female boot factory had a tanning smell that permeated throughout the factory which made me feel uncomfortable.
The one challenge that all three of the factories faced was reducing turnover in the face of a shortage of workers. The company-owned furniture factory mentioned that their employee turnover rates were then about 10% because they did not offer overtime. The Operations Director (who gave us the de-brief and tour) also mentioned that they faced stiff competition from many Shanghai-based factories. The managers at the other two factories lamented that they too were facing a shortage of labor (one manager estimated that the labor shortage was about 4 million workers in the Shenzhen area alone!) and that there was no long term commitment on workers’ part. One manager explained how a group of employees had recently left his factory to go to another one for a marginal increase in benefits. Factories throughout China’s manufacturing regions are facing these challenges.
Overall, these were worthwhile and insightful visits. Getting a first-hand experience of Chinese factories and comparing them to US factories that I had previously visited is a priceless experience. It is one thing to read about such factories in The Financial Times—another to actually visit them and walk on the factory floor among the workers.