This is part of a five part series on a recent McKinsey series of article on lean manufacturing. Other posts in the series: Introduction, Public Sector Lean, Lean in IT, Lean in China, Lean in Finance.
In this article James Hexter interviews a couple of manufacturing executives with Chinese operations, and explores how China is implementing lean methods. This aligns with one of the core concepts of the introductory post of this series: lean manufacturing is rapidly becoming a requirement for doing business, as opposed to a method to achieve competitive advantage over companies with offshore factories. As Chinese operations begin to embrace lean, the competitive landscape will become even more difficult.
Leading manufacturers in China—domestic and multinational alike—are beginning to adopt proven global-management techniques, such as lean manufacturing, to make their factories more efficient. With so many companies producing goods there today, low-cost labor isn’t the advantage it used to be. Global overcapacity in many sectors and intense competition in many domestic Chinese markets have prodded manufacturers to look for new ways to cut their costs and tackle other competitive issues, such as reducing lead times and boosting the quality of products.
Which is exactly what we’ve been saying for a long time: chasing low-cost labor will just lead to globetrotting. However implementing lean in China isn’t a slam-dunk.
But to apply lean techniques in China today, manufacturers must accept compromises or trade-offs that they may not have to make elsewhere. Suppliers in China, for example, typically are not as stable and reliable as those in other countries, and this has implications for the ability of manufacturers to adopt just-in-time assembly or to manage the quality of their products. What’s more, China’s workers don’t take to problem solving as readily as their counterparts in Japan and the United States have.
The recent quality problems with Mattel toys, toothpaste, etc are just one reflection of this environment. But don’t kid yourself that it will stay that way very long. Remember how the perception of Japanese quality changed… from methods developed internally. China has the luxury of an established and public lean knowledgebase that can be tapped. The cultural aspects of a lean transformation may prove to be the most difficult.
In lean, the supervisor’s role changes from being a monitor to being an active problem solver. This is very difficult in China. People here don’t like to be challenged. In the West, people speak up and suggest ways to solve problems. In China, they are less inclined to speak up and make a difference. They wait for the person above them to say what needs to be done. Supervisors like to say "Do this" rather than get workers to participate in solving problems. And workers don’t typically give ideas to managers.
What will your business situation be if your competitors had low labor costs… and highly-efficient manufacturing operations driven by lean methods?