Why there's no need to fear China
Sidney Hill, Jr., executive editor -- Manufacturing Business Technology, 3/1/2005 7:00:00 AM
Just hearing the word China strikes fear—and a certain amount of loathing—in some quarters of both the U.S. manufacturing and high-tech sectors.
Those emotions stem from the perception that China, with its giant pool of low-cost labor and what some believe are unfair trade practices, is pilfering American manufacturing and technology jobs. Last month, the U.S. Business & Industry Council (USBIC), a Washington-based organization representing small and medium-size domestic manufacturers, said offshoring jobs to China and elsewhere contributed to a record $617.7-billion U.S. trade deficit last year.
The group called for strong measures to address what it calls "a crisis in U.S. manufacturing." Its recommendations include a China trade bill with "broad focus and real teeth." Ultimately, USBIC wants the amount of goods and services exported to trading partner nations to at least approach the amount imported.
Dick Cook, a man with vast experience in both manufacturing and high-tech—and a frequent traveler to China over the past 15 years—believes U.S. companies can compete with their counterparts in China, without heavy government intervention.
Cook is president and CEO of MAPICS, a midmarket ERP company that recently agreed to be acquired by Infor Global Solutions. His trips to China have revolved around the establishment and management of MAPICS China, which recently was designated a wholly owned foreign enterprise—or WOFE.
Being named a WOFE (it's pronounced woofie) is significant, Cook says, because it means your company has passed muster with the Chinese government. In the process of earning that distinction, Cook says he learned some things about China that other U.S. companies might find helpful.
For instance, while China has an abundance of low-cost labor and currently is experiencing a 50-percent annual growth rate in its population of IT workers, it also has significant structural problems threatening long-term economic growth. Those problems include extensive air and water pollution, and unstable supplies of fuel and electricity.
U.S. manufacturers can exploit these weaknesses, Cook contends, with a bit of creativity. His first bit of advice: develop products and business processes that "help your customers beat their competitors."
Cook says reducing lead times is one of the easiest ways of competing with China. "They are halfway around the world," he says. "If you can consistently deliver the product before they can, customers probably won't mind paying a little more."
But the best thing U.S. companies can do to compete with China, Cook says, is to establish close customer relationships through processes like supply chain collaboration.
"It's part of the Chinese culture to believe it takes a long time to build relationships," he says. "They also hold data close. They are not very likely to let customers look into their inventory or production schedules."
Whatever approach you take to competing with China, move quickly: the country is changing rapidly. On his last trip, Cook stayed in a high-rise luxury hotel that sits on what just a few years ago was a rice field.
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