APICS is the premier professional association for supply chain management.

In China, Labor Isn't What It Used to Be ... Cheap

by APICS CEO Abe Eshkenazi CSCP, CPA, CAE | N/A 2012 | 0 | 0
I imagine businesspeople around the world would be astonished by the sentiment expressed in an Economist headline the week: “The End of Cheap China.”

China is the world’s principal producer, accounting for one-fifth of global manufacturing. The country’s vast, cheap labor can be credited for this revolution. However, costs are rising in the country due to increasing land prices, environmental and safety regulations, taxes, and labor expenses. These days, work in other locations, such as Vietnam, can cost up to 30 percent less.  

Nevertheless, according to the Economist, China remains a very compelling manufacturing hub. “Contrary to conventional wisdom, [higher labor costs] will not mean that companies close their Chinese factories and stampede to somewhere poorer. China is still a terrific place to make things.”

First, it offers a lucrative domestic market__higher wages mean more consumers. Next, Chinese productivity is improving. Third, the Chinese labor pool is deep. “When demand surges for a particular product, the biggest firms in China can add thousands of extra workers to a production line in a matter of hours.”

Lastly, China’s supply chain is “sophisticated and supple.” It offers benefits for high-tech and low-tech industries, and experts predict this supply chain advantage will remain for the next 10 to 20 years.

“In time, of course, other places will build better roads and ports and supply chains. Eventually, they will challenge coastal China’s grip on basic manufacturing,” according to the Economist. “So if China is to flourish, its manufacturers must move up the value chain.” In short, manufacturers that operate in China must learn to compete on multiple levels.

Enriching processes

In the APICS Strategic Management of Resources courseware, students learn that key success factors include quality, manufacturing capability, cost position, and customer service. While China and its manufacturers have, up until now, relied mostly on wage competitiveness, they must now consider leveraging multiple factors. APICS can help.

For the first time, APICS is presenting a conference in Shanghai, China. APICS Asia Supply Chain & Operations 2012, April 5 and 6, will focus on maximizing supply chain and operations management performance. 

The conference program is carefully designed to build supply chain and operations management knowledge and demonstrate its application in setting strategic priorities for production, sourcing, sales and operations planning, supply chain rationalization, and more. The program will provide professionals with new ideas and enable them to connect with expert professionals in the field. Conference participants immediately will be able to apply their learning and networking experiences to improve company performance.  

It’s not too late to register. Visit apics.org/asiaevent for more information. I look forward to seeing some of you there. 

Idea exchange

Now, you can take the APICS Operations Management Now discussion to your social networks on LinkedIn, Facebook, Twitter, and the APICS Supply Chain Channel. Be sure to use the hashtag #OMNow and include @Tweet_APICS in any tweets to have your words featured on the APICS homepage.

  • Is this the end of cheap China?
  • What makes your organization thrive in an era of cheap global labor?
  • What is the key to China's success in manufacturing?
  • Is China less attractive to today's global corporations? 

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