MFGx Blog

Union To Further Raise Costs To Manufacture In China

aj — Mon, 15 Sep 2008 15:47:13 GMT

The opportunities that the rising costs to manufacture in China offer manufacturers in mature markets like Europe and the U.S. are real. The low valuation of the dollar, eliminated VAT rebates, and rising labor and fuel costs all are motivating enterprises to look at other countries - many closer to their base - to supply their products.

We'll say it again - this is a perfect time to engage former customers or new prospects to sell the attractiveness and adorability of your business as a viable alternative to China sources. As they explore new options to manage these rising costs, they're more likely to listen to options they wouldn't have thought about 2 years ago.

But it looks like things are getting even more "perfecter."

This past week, a story by David Barboza in the New York Times announced "China Tells Businesses to Unionize." The ramifications for businesses currently embedded in China may be even more dramatic than the rising costs of the past year and a half.

The gist of the article is that the Chinese government is strongly pressuring corporations in China - both foreign owned and domestic - to allow the state-approved unions in their businesses. Some of the largest companies like Wal-Mart and others have until September 30th to accept the union. Mr. Barboza writes:

Lawyers and analysts say that demands of the All China Federation of Trade Unions, the only union the Communist Party allows, could sharply alter business practices of foreign companies in China, including giving lower-level workers the power to bargain over anything from pay raises to whether a Chinese headquarters should be moved elsewhere in the country.
+ "This will dramatically change the landscape here," said Andreas Lauffs, a lawyer at Baker & McKenzie's Shanghai office who is an authority on China's labor laws. "At the very least, company management must now consult, and in many cases bargain, with employees and unions on a wide range of matters, whereas in the past they enjoyed almost unlimited autonomy."+
+ The union push is coming at a time when global corporations are already facing rising labor and commodity costs in China, which is struggling to contain inflation.+

Of course, there are definately direct costs to be concerned with as the union moves into an organization:

Forming unions could be costly, lawyers and labor experts say, because a union could fight for higher wages and benefits and because companies are required to pay 2 percent payroll dues. The dues could amount to millions of dollars in additional costs for big companies. Yum Brands, for instance, has about 160,000 employees in China.
Manufacturers are already coping with soaring labor costs, which have jumped by 30 to 40 percent in some coastal manufacturing zones over the last four years. Also, a new contract labor law and stricter enforcement of older labor rules means some companies can no longer avoid paying overtime costs, which can be substantial because many factories insist that some employees work six days a week.

And in case you think this only impacts the big boys:

Union officials say they are focusing on global companies, but Chinese companies make up the bulk of the manufacturing work force and they are also expected to face audits and pressure to unionize.

But the concern - from Fortune 500 corporations to SMB manufacturers with a Chinese manufacturing presence - should be over the intangibles that come with collective bargaining and a strong union: work stoppages, and leveraging for better pay, benefits and conditions. In other words, it's not the bill on the table, but what comes for desert.

"Some foreign companies in China haven't behaved well in dealing with their workers' interests and rights," Wang Ying, an official at the All China Federation of Trade Unions in Beijing, said in a telephone interview this week. "As the economy and society develops, China needs to improve workers' legal rights and interests, which is a demand of a civilized society."

China's resolve should not be questioned here. Its aggressive approach to reducing pollution and redirecting resources prior to the Olympics should offer all the proof you need. And the natural progression to a modern society has to include an emerging, powerful middle class that wields influence and power. Look at the U.S. 100 years ago for more proof of that.

The costs of progress are always significant. China and its people are beginning to discover its potential and invest to make it reality. But the insertion of the union into Chinese manufacturing will absolutely increase costs and the need to improve margins much more quickly.

Manufacturing Malaise in Britain, Europe

aj — Thu, 11 Sep 2008 20:40:32 GMT

It has been reported that Britain's GDP and its manufacturing output each dropped 0.02% in July. It's the 5th consecutive month of economic contraction, and a 6th month - which would official signal recession - is expected.

Also, the EU expects Germany and Spain to enter into economic recession this year (no numbers for their manufacturing output reported).

Frankly, I'm surprised that with the high costs of fuel and shipping, decimation of each country's base manufacturing demographic, and crises in the housing and financial markets (yeah, they're dealing with that, too) that they all hadn't entered into recessions already.

A Toolmaker's - And Man's - Life, Well Lived

aj — Tue, 09 Sep 2008 09:36:25 GMT

I did not know Jack Schron Sr. nearly as well as he made me feel like I did.

Jack was the patriarch of the Schron family that founded Jergens, Inc., of Cleveland, Ohio - a venerable tooling manufacturer with a long history and rich heritage. I had the great pleasure earlier in my career to work with the Schrons when they founded ToolingU in 2002.

I found out that Jack passed away the other day, and I found myself more touched by it than I would have expected. I haven't seen him for 2 years, and had only known him a little longer than that. But there were many things about him that affected me, and I expect if you know (or are) a toolmaker these qualities may resonate with you as I reflect on what I knew of the man.

Every single time that I saw him, he made me feel like the only person in the room - whether it was in his office at Jergens or in a cavernous hall at IMTS. I watched him do this with everyone he met. He was graceful in a way that only a life spent solving problems and finding solutions can make someone. His eyes were clear and sparkled, and his personality positively shined with confidence - but not arrogance. His humor was genuine and never forced, at least while I was around him. He commanded respect, but at the same time you just couldn't help but want to have a beer with the guy.

But what really set this man's life apart for me is his legacy. His offspring - running the business he founded - are solid, honest, studious and dependable. They are respectful of their community, altruistic and generous. Their company encourages a family and team atmosphere. They are creative and resourceful. And they give a ****.

Like farmers, most toolmakers develop an easiness that mastering the natural world brings. Jack passed these qualities onto his son, Jack, and his grandson, Chad. It's something that can't be faked.

I imagine Jack Schron, Sr., this week, like when I last saw him, in his 90's and riding the aisles of IMTS, greeting everyone with a smile and surveying the tools and technology with curiosity and eyes sparkling.

Just like a true toolmaker.

Will The Real Boeing Please Stand Up?

aj — Mon, 08 Sep 2008 15:07:27 GMT

OK, so we didn't pile on the Boeing vs. Northrop Grumman/EADS KC-X airborne tanker contract fiasco over the past few months. Sure, we covered it plenty (see here and here), but since the brouhaha over the awarding of the contract to - oh, horror - NG/EADS (a foreign company!) we've taken a wait-and-see tack. After all, everyone else seems to be asserting opinions, so why add to the excessive bloggage, right?

But now, Boeing is 3 days into a strike by The International Machinists and Aerospace Worker, which means they have no indigenous machinists to build their aircraft and parts. In the days leading up to the strike, Boeing had offered an 11% increase in wages, as well as improved bonus, pension and healthcare concessions. But that isn't what sent the machinists to the picket lines.

It was Boeing's intention to increase outsourcing of it's manufacturing overseas to improve its bottom line. The machinist's union wasn't having anymore of that, and they walked.

Wait a minute - just a few months ago, the Web was overrun with cyber-hooey from pundits and politicians, nearly all screaming bloody murder that the U.S. government was shooting itself (and citizenry) in the collective foot by giving work to NG/EADS. As the line went, that work would be best given to a U.S. company that would ensure U.S. workers - and the tax base - would get the benefits.

So isn't this a gross contradiction? Will Boeing getting the KC-X tanker contract be "good" because Boeing will use U.S. workers (as said a few months ago), or is Boeing planning on outsourcing like crazy (like, say, " ... 70 percent of all of the parts for its 787 aircraft ..."). Is Boeing American or unAmerican? Will they outsource or not outsource?

The fact is, if Boeing wants to outsource everything Katmandu to improve profits and efficiency they should be allowed to do it. And if the machinists want to challenge that, they should strike. This is democratic, like it or not.

But Boeing's portrayal as a patriotic protectionist on the one hand, and an outsourcing addict on the other is disingenuous and flat-out ridiculous.They can't be both at once, and only when it suits them.

It seems to me that between the tanker deal and the machinist strike, Boeing's in one heck of a PR pickle. It'll be interesting to see which Boeing emerges in the next few months.

Another Energy Alternative

aj — Thu, 04 Sep 2008 18:54:42 GMT

The dialogue around alternative and renewable energy has reached a fever pitch, and that's nothin' but good. The airwaves around the world are rife with groups and individuals espousing their own plans (and often their own agendas) to remove the burden of fossil/foreign fuels from their countries and the world.

In the U.S., the natural gas industry is pushing - shockingly! - natural gas. The oil companies are advocating - surprise! - increased indigenous drilling for oil. Some, like T. Boone Pickens, actually seem 100% genuine.

So, I was surprised to stumble on a unique approach that's original, practical from someone without a dog in the fight.

J.C. Bell is the founder and CEO of Bell Bio-Energy, Inc. Mr. Bell, with a background in engineering and agriculture, has developed and patented a process that converts just about any biomass - any living thing, like a plant - into hydrocarbons that can in turn be converted to crude oil.

It's alledged that Mr. Bell first got the idea after observing cows - ahem - pass methane. Thinking of the process that took place in the cows stomach to convert food to gas inspired him to pursue his biomass project.

Before you laugh, know that Bell Bio-Energy is slated to open 7 initial plants at U.S. military instillations this month - all inconjunction with the U.S. Department of Defense.

Bell's plan is to use data collected from the DOD phase of this project to refine the full-scale process. Once that process is defined, he thinks it could produce up to 500,000 barrels of oil per day within the first 18 months. He also predicts that full-blown production would reach 5-million barrels per day in 3-4 years.

Still laughing?

Of course, the perfect solution isn't to produce more crude. If the pollution side of the equation isn't in the mix, we still have serious issues to deal with. But biomass is biomass - Bell's process converts any biological materials into crude. That includes plants, lawn clippings, human waste, and several kinds of refuse.

Personally, I like Picken's Plan. But when you add this as a bridge (along with natural gas) to fruition, it seems like an obvious alternative.

Your MFG.com Profile, The Web, And Your Prospects

aj — Tue, 02 Sep 2008 09:07:12 GMT

Recently over at MFG.com, a buyer in the manufacturing marketplace sent an interesting piece of feedback that all manufacturers should consider sage advice. The buyer - a prospect that uses MFG.com supplier profiles to conduct research to select suppliers - provided a list of "must haves" for their MFG.com profiles. He writes:

"... It would really behoove (you) to work very close with these new suppliers to make sure that the profile entered is as complete and detailed of as possible. I would think with the money that suppliers spend to participate in this fantastic program it would make them wise to the extreme benefits of having a detailed and complete profile. It should be (your) number one goal ... to help these suppliers develop there profiles."

The buyer's list shows what he looks for when comparing suppliers and choosing to initiate contact. It is based on deficiencies he's found with several profiles in the past:

Pictures of their shop, both inside and outside (if they are proud and it is presentable, common sense would apply).
Pictures of parts previously made that show their full capabilities.
Detailed equipment lists of everything in their shop, all the way down to overhead cranes and forklifts.
Links to their company’s website (if they have one, which they should invest in anyway).
Any ISO 9001 or other certifications they may have from distinguished buyers.
References from buyer

Not only does this list describe in detail what an active buying prospect looks for in an MFG.com profile, it also rings true for your own Web site. Your Web presence - all mentions of your company online - serve one primary purpose: to differentiate you from your competition. Thoroughness, accuracy and relevance are key to influencing these potential customers and partners that you are worth the time to investigate further.

If your MFG.com profile is incomplete, update it. If your Web site is incomplete, update it. If you don't, you're likely leaving money on the table and you won't even know it.

Open Source Everything, Indeed

aj — Thu, 28 Aug 2008 18:44:01 GMT

Here at MFGx, we've been living large on Open Source. From post after post in our forums, to a special community assigned to the MFG.com Open Source Machine Tool project, we're big believers in the power of crowdsourcing.

But even our Open Source exuberance is challenged by this:

Wanna build your own Subatomic Super Collider?

That's right - according to this tongue-in-cheek play on the Open Source model, you can build your own Hadron Collider. All you'll need to build it is "... €6-billion, enough real estate to hold your 17-mile-long ring, a staff of international geniuses, and ..." downloadable plans from the Institute of Physics in London.

But wait - is this really Open Source, or is it €6-billion freeware?

Hat tip: Jonah.

Manufacturing As Art And Inspiration

aj — Tue, 19 Aug 2008 12:48:32 GMT

The more you try to shave the cat, the more the thing will bite and scratch. I think it's best to leave its fur, and listen to its silky pur. Some people try to make life a little tougher than it is. - Cake

Christopher Conte is the poster child for spreading the manufacturing gospel to the masses. He is to manufacturing hipness what Jerry Lewis is to MD, or what Jerry Lee Lewis is to rock: a potentially timeless, iconic figure that represents a vibe around which an audience can grab inspiration and act.

Christopher Conte is an artist with STRONG manufacturing chops. And he's a bad manufacturing cat daddy with STRONG artistic sensibilities. Born in Europe and migrated to the U.S. as a boy, he found these talents in himself early on and began a brilliant journey that led him to a wonderful place. He creates art, and he builds artificial limbs. The yin and the yang.

You can see the fruits of his "artgineering" pedigree at The Work & Sculpture of Christopher Conte.

It seems to me that Christopher's story and what he does offers something special that we shouldn't overlook. We've tried hard in the past to express that manufacturing in the 21st century is advanced, highly technical, rewarding, satisfying and modern. But we've sucked at it. Sites like Manufacturing Is Cool were launched with the best of intentions. They've tried desperately to convey those positives about manufacturing to a generation that doesn't believe it - and that's noble. But those efforts look tired and hackneyed. They look like your dad wearing a Slipknot t-shirt and telling you to eat your peas because they're good for you. Somehow - while their motives are pure - you just can't take them seriously.

Christopher Conte is what we should use as an example of modern manufacturing mojo and its vast potential. Manufacturing isn't just about making chips or welding anymore. Manufacturing is - because of the vast availability of inexpensive technology and communications channels - a blend of technology, business and expression. It doesn't - and shouldn't - have to carry the old, tired stigma.

You can't make someone see something they don't want to - they have to get it themselves, and on their own terms. The Christopher Contes of this world create a sphere of influence far more powerful than any other message we can come up with on our own. He's the ideal - perfectly expressed, and manifested in real life:

Manufacturing can, indeed, be cool.

Training Pays Off For Manufacturer

aj — Wed, 13 Aug 2008 21:58:08 GMT

"Business growth isn't random."

That's one of my favorite quotes, from manufacturing pundit overall bad cat-daddy Doug Hall. He was quoted this past March addressing a group of manufacturers in Rockford, Illinois - considered by many the cradle of the machine tool business in the U.S.

I was reminded of that quote when I read "Manufacturer Finds Certification Pays Off" from the Olympian. This story documents the investment in training personnel made by Wisconsin-based manufacturer Federal Tool & Engineering. So, what's the story in that?

Federal won work worth $1.5-million (US) directly due to its commitment to training.

What clinched the recent deal ... was that the customer could have confidence that Federal Tool has at least six employees certified by the American Welding Society to aptly weld a variety of materials of various thicknesses. "Anybody can buy the equipment," says Federal's owner. "We're willing to invest in the people and develop the training."

And what really caught my eye was where Federal is based.

Wisconsin.

It's a familiar theme for manufacturing SMBs in the U.S. Wisconsin just seems to "get it" in regards to growing and protecting its manufacturing base - at least, more than most other states.

"In many ways, Wisconsin is the leading state," Leo Reddy, chief executive officer of the Virginia-based Manufacturing Skills Standards Council, said before a recognition ceremony last month at Federal Tool. Reddy cited Gov. Jim Doyle's commitment to have 40 percent of Wisconsin's manufacturing work force complete at least one component of the certification by 2016. Thanks in part to state grants to technical colleges and workforce development boards, Wisconsin also has one of the best systems for assessing worker skills and providing standardized training, Reddy said.

But one thing that Wisconsin has in common with many other states is something not to be so proud of:

None of the four employees receiving their certificates for manufacturing skills training had received any such schooling before they began factory work. All agreed that what they learned is essential knowledge for manufacturing workers now.

As with most states, "essential training" isn't readily available. What a shame. Add to that the fact that the Federal employees who were certified represented the training they received as high-end in important categories - process/production, puality, computers, communications, math and science, to name a few.

Hmmmmm. Maybe training your people can pay off.

Go figure.

HAT TIP: Kid Rock

Pickens Plan Good For Manufacturing?

aj — Tue, 12 Aug 2008 16:01:20 GMT

Have you heard of T. Boone Pickens' plan? Pickens, the successful U.S.-based investor, has proposed a plan to influence the incoming presidential administration to wean the U.S. off of foreign oil by migrating to wind power for electricity and natural gas for automobiles.

Building new wind generation facilities and better utilizing our natural gas resources can replace more than one-third of our foreign oil imports in 10 years.

The plan is, in a word, perfect. It's clearly enunciated, easy to understand, the right thing to do, and - what really caught my eye - a potential boon to manufacturing. From the Pickens Plan site:

Developing wind power is an investment in rural America.

To witness the economic promise of wind energy, look no further than Sweetwater, Texas.

Sweetwater was typical of many small towns in middle-America. With a shortage of good jobs, the youth of Sweetwater were leaving in search of greater opportunities. And the town's population dropped from 12,000 to under 10,000.

When a large wind power facility was built outside of town, Sweetwater experienced a revival. New economic opportunity brought the town back to life and the population has grown back up to 12,000.

In the Texas panhandle, just north of Sweetwater, is the town of Pampa, where T. Boone Pickens' Mesa Power is currently building the largest wind farm in the world.

In addition to creating new construction and maintenance jobs, thousands of Americans will be employed to manufacture the turbines and blades. These are high skill jobs that pay on a scale comparable to aerospace jobs.

Plus, wind turbines don't interfere with farming and grazing, so they don't threaten food production or existing local economies.

Now, to be sure, there's enough hot air coming out of Washington these days about what we should or could do to solve the energy dilemma. An election year makes it all the more depressing. Especially when we all know how serious this problem is to us all.

But the value to manufacturing makes this a slam-dunk, and worthy of our attention.

Visit Pickens' site. Regardless of what country you call home, this plan represents an acceptable solution for us all.

Who Has It As Bad As We Do?

aj — Fri, 01 Aug 2008 20:05:19 GMT

I recently had the great privilege of visit from my friend James, who came in from his home in Shanghai. James is one of the smartest, funniest, most dignified people I know.

As we were catching up, talk turned to the upcoming Olympics. I asked James if the steps taken by the Chinese government to reduce pollution have had any noticeable affect.

His response:

"Oh, yes! For the past few weeks, the air in Shanghai has been as clear and clean as Los Angeles. It has been beautiful."

Now certainly, we have a lot of work in the U.S. to get our house in order – fiscally, governmentally, and environmentally.

But isn't this the right perspective? We complain about much in this country, but overlook the fact that others might like to have it as bad as we do.

At least in some respects.

Dockworkers, West Coast Ports Reach Tentative Agreement

aj — Wed, 30 Jul 2008 20:37:29 GMT

I had lunch with Chris Norek today. Among other things, we discussed the West Coast dockworkers contract disputes that have been hanging around for months.

Chris turned me onto a Wall Street Journal article (West Coast Port Pact Arrives Ahead of Rush that today announced a tentative agreement that may forestall another shutdown like the one back in 2002 that basically shutdown the U.S. west coast ports.

Assuming each side ratifies the deal, shippers will "have some assurance that there will be no major stumbling blocks for the Christmas season," said Chris Norek, a senior partner at Chain Connectors, Inc., a supply-chain consulting firm. "Shippers can now breathe a sigh of relief."

The agreement came after weeks of intense negotiation that took on an added sense of urgency after the old contract expired on July 1. In recent weeks, dockworkers began to flex their muscle by slowing down operations at the ports of Los Angeles, Long Beach and Oakland, resulting in what port operators said were significant productivity drops at the three ports.

As Chris correctly pointed out, this agreement comes in the nick of time for buyers.

Ironically, U.S. suppliers might have actually gained from another shutdown. Coupled with the falling dollar, rising taxes and costs to manufacture in China, and astronomic fuel and transport costs, a shutdown might have added to the overall impression that "insourcing" locally offers not only lower costs to buyers in the Americas and Europe, but may also provide them with logistical stability within a pan-pacific supply chain.

Robojackets Return From China

aj — Wed, 30 Jul 2008 19:17:08 GMT

Perhaps you remember reading about the mighty Robojackets on MFGx a few months back.

The Robojackets, you'll recall, are the group from Georgia Tech University that aim to spread the robotics and automation word. They participate in several robotics competitions throughout the year in many different locations.

Well, they're just now back from the RoboCup 2008 competition in Suzhuo, China. They competed in events against teams from all over the world - Germany, The Netherlands, Japan, Iran, and many others.

The Robojackets team (seen below, at the MFG.com Shanghai offices) were sponsored by Caterpillar, General Motors, MFG.com, and multiple groups at Georgia Tech.

How NOT To Blog

aj — Tue, 29 Jul 2008 14:36:20 GMT

I recently wrote about why manufacturers (and businesses, for the most part) don't blog.

I stumbled on and article this morning titled "12 Common Blogging Mistakes To Avoid" that gives some pretty good advice on do's and don'ts for the beginning bloggist.

Of course, that's you - if you want to be. Just register on MFGx, and you get your own blog for the manufacturing world to see.

The list of 12 mistakes deserves a read. Here are the titles of each item (with my comments in parenthesis):

Thinking (more) people will actually read (a) post [they won't)
Using full paragraph format (be brief)
Not using or numbering lists (see previous)
Trying to sell something in a blog post (the more commercial you are, the less credibility you earn)
Not including facts (support your findings)
Using improper titles (don't get cute - say what it's about)
Writing for pHds (keep it simple, when you can ... tough for manufacturers sometimes - it's the nature of the beast)
Making the post too long (again, be brief)
Repackaging existing information (and be sure to give proper credit)
No use of headings and subheadings
Highlight or bold important terms and concepts (helps readers scan - perfect for the Web)
Not using supporting images (a picture's worth a 1000 posts)

One other point from me: find your own voice. Following these nuggets of advice can get you started blogging on the right foot.

Why Don't You Blog?

aj — Fri, 25 Jul 2008 20:11:37 GMT

I found an interesting blog post this morning about the Common Excuses Companies Use For Not Having a Blog. It presents 4 of the most commonly heard excuses and some arguments in favor of companies blogging to their customer base.

The author, David Wallace, had discovered results from a survey conducted by Burson-Marsteller that found less than 15% of Fortune 500 companies communicate with customers via blogs.

The excuses David has heard from companies?

We Cannot Afford To Install a Blog
We Have Nothing To Say
We Have No One To Write For Us
We Are Afraid!

Both the survey and David conclude that there should be more. They're right.

And the survey found that the smaller the company, the less likely it is to blog. From the survey analysis:

Larger companies tend to control blogs in greater numbers than their smaller counterparts, according to the Burson study. Nearly one-third (32%) of the Fortune 50 maintain blogs, while 16% of the Fortune 201 through 250 have blogs. Only 2% of the Fortune 451 to 500 maintain blogs.

And here's what I know - in manufacturing, it's much worse. I'd venture to say that among manufacturing SMBs, you're about as likely to find a blog as oil for 19 Euros a barrel.

Blogs can be a brilliant channel for inspiration, to influence a company's strategies and products by drawing insight from its customers and prospects. But manufacturers don't see it, and I think there is one main reason why:

Manufacturers Aren't Communicators - It's not that manufacturers have nothing to say, it's that you're not often very good at saying it. It's just not how you're wired. It's the rarest of breeds that has great writing chops and strong programming, machining, or engineering skills. It's nothing to be ashamed of - it's just as unlikely that a marketing executive can program and run a Hardinge.

The answer? Practice. Writing a blog doesn't have to be long-winded - it can be brief. It doesn't have to be written to every day - just regularly. It should portray your organization as competent and allow for your prospects and customers to talk back to you.

All members of MFGx get a blog. It's free. Try it. Get your hands dirty. Have a little fun.

Who knows? This whole Internet thing just might take off.