Every time I read an article about rising Chinese labor costs, it seems there are only two solutions: moving to inland provinces or automating production. I do not really buy into these proposals, and I want to focus on the myth of automation.
Automating a process allows a reduction of headcount (lots of operators are replaced by a few technicians who set up the machines) and an acceleration of cycles. But there several drawbacks.
First, it is a large upfront investment. Does it make sense to make 200,000RMB molds rather than 20,000 RMB ones, when every customer insists on making his own designs and on renewing them every year? No, except for very large and predictable volumes.
Second, automating a poor production system does not make it better. It improves some efficiency measures (e.g. direct labor cost), but it does not address the most important opportunity for savings–the optimization of the whole system.
This second argument is backed up in a VERY interesting article on Evolving excellence that describes the most profitable Toyota factory:
There was not a computer visible on the floor. Anywhere. A large electronic sign that showed the status of each line, but everything else was manual. Individual parts bins were manual kanbans (but with bar codes so the paper cards themselves didn’t transfer). When empty they were replenished by guys driving trains of carts up and down the aisles between the lines. As a bin of parts was emptied, another was put in its place. For thousands of bins, parts ranging in size from washers all the way up to engines and doors, across acres of factory floor.
Toyota automates only what is dangerous (welding) or too heavy for humans. Everything else is done by humans… because humans can create ideas for improvement. And that ongoing improvement is one of the truly impressive aspects of this operation.
From my observations, 99%+ of Chinese factories can easily shave 10% of their costs, simply by applying some good manufacturing common sense / best practices. No need to invest millions in new toys.
What do you think?