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Don’t sacrifice best practices for low labor costs
October 8, 2007
I recently read an article from a McKinsey newsletter which hit home for Asia sourcing and manufacturing. It simply stated, in so many words, that because Asia offers low-cost labor, companies should not sacrifice good Lean practices in Asia that they use in other areas, just because labor costs are so low. As in Taiwan and Singapore, the labor costs will not remain low as we see in eastern areas of China and a long term strategy should be to bring in the normal efficient, Lean, SPC etc, tools to save time, cost, and improve quality. More labor insures lower direct cost, but unless you have really good training, and re-training, more labor may result in more errors, reflecting in overall quality reductions. A smaller quality work force with higher wages will go much further to do the work than a lower paid massive workforce.
Overall don’t sacrifice tried and true practices when sourcing or building in China or other parts of Asia. The business culture is not that different so as to require changes to proven systems and methods.
Posted by Walter E. Buczynski, CPSM (Certified Professional in Supply Management) on October 8, 2007 | Comments (1)
In response to: Don’t sacrifice best practices for low labor costs
Etienne Charlier commented:
I read this article also. It is so true. There are many ways to leverage low labor cost, but lowering your business practices and forget about your operation expertise is not one of them. I alway say that to be sucessful in China, you need to keep you Western standards (end results) but you have to adapt the path to get there. You should not just build a copycat operation because it will end up almost as expensive as what you could reach in the West. But you set the goal/standard of quality and efficiency and adapt the way people and organization is managed to get there in the Chinese context.