You Need a Lean China Strategy

A lean strategy may be one of the few ways in which you can compete effectively with China, at least for now – because few Chinese plants are becoming lean.

            That seems to me to be one of the more striking findings announced in a new report from Research and Markets. The report compares manufacturing performance data from the MPI/Industry Week US Benchmarking Survey and first-ever China Benchmarking Survey.

            Among the findings:

• China plants are not adopting lean methodologies at the same rate as their U.S. competitors, and therefore miss significant improvement opportunities compared to U.S. plants, particularly regarding inventory management.
  
• U.S. plants with a well-defined, thoroughly implemented improvement methodology – such as lean manufacturing, Six Sigma or others – outperform U.S. plants that do not follow a methodology. This generally is not true among China Study plants, where improvement approaches are primarily based on Total Quality Management and where ownership structures influence the ability to leverage improvement programs.
  
• Even without lean and other improvement tools, China’s manufacturers still recorded many performances comparable to or better than their U.S. counterparts, in part due to more attractive cost structures.

            One of the more interesting statements in the Research and Markets news release is one that suggests Chinese manufacturers fall into what I think of as the “good-times trap:”

·        China’s manufacturers face an interesting dilemma: When the world is beating a path to your door, is it really necessary to invest time and money into an improvement program?

            Culture change is perhaps the most difficult part of lean, and the report notes that this is particularly true in China:

·        Communist China is still a difficult place to instill empowerment in workforces, and until that occurs, peak human performance – comparable to U.S. achievements – will not be attained.

            However, you shouldn’t stop worrying. Chinese manufacturing still has a lot of strengths and will undoubtedly improve. Consider these statements from the study:

• China plants are adopting many Western human resource processes and practices (with a few notable exceptions) to get greater productivity from their employees and to more effectively compete with plants around the globe.
  
• A surprisingly large percentage of China’s manufacturers are focused on quality and innovation – not low cost.
  
• Although China’s manufacturers often beat their U.S. competitors on price, they generally do so while maintaining strong gross margins and not, as many believe, by dumping products to gain market share.
  
• China plants of all types are investing in equipment and planning for additional capital investments at a pace that far outstrips that of U.S. plants.
  
• China plants are grabbing at new information technologies, far more so than U.S. plants, and appear to be getting profitable returns from their much higher investment levels.

            You know where your competition is located. What are you going to do about it?