Thursday, February 24, 2011

Chinese Manufacturing in North America

By Al Norval,

Sounds strange but studies by the business press are showing that in 2011, China will invest more in North America than North American companies will invest in China. This is a real reverse of recent history whereas short a time as a few years ago in 2005, outside investment in China was seven times Chinese investment in other countries.

The reasons are many and I won’t try to admit that I have all of the answers but I have come across a few interesting facts. Sure the Yuan is appreciating against other currencies making Chinese products more expensive abroad but I believe there is more to it than that. As the world becomes more competitive, factors other than pure manufacturing costs become more important. Shipping costs are a key reason given by Chinese Manufacturers as to why they locate outside of China. Shorter Lead times and wanting to be closer to their markets and their customers particularly for emerging technologies are other key reasons.

Does this sound like a Lean strategy? It may not be called Lean but it sure has the basics of Lean. Get close to the markets you serve so that you can understand your customers better. Thus that knowledge to develop value streams that can deliver products and services faster, with shorter lead times and with a better value proposition than your competitors.

Lean or just good business sense? Or both?


  1. Al,

    Interesting post. There are a lot of comments made in the press that US Manufacturing is going to be higher tech where higher skills are needed and higher wages are expected. I think that there is a lot more to it. Wise companies will look at the total cost (Deming) including the cost of logistics. There are certainly manufacturers in the US who are not high tech and have mundane manufacturing roles but the shipping costs exceed the potential labor savings. It's beneficial to be Lean and to keep costs down. My recent blog post is on a related topic:


  2. Good discussion. Energy costs are another important factor. As oil prices resume their inevitable rise, Lean thinking will become an even greater asset. Twelve thousand mile supply chains won't cut it.

  3. Absoluely! Raw material costs including energy are going up and that trend should continue as the economy comes fully out of the recession. We can either fully or partially off-set these with Lean but the key to future success is not just cost reduction but value creation. By being closer to our customers, we can understand their needs, their problems and what they value as well as being more responsive to changes in their needs.