The Incredible Chinese Contract Manufacturers
By David Henderson
Contract manufacturers make products for other companies that prefer to focus on product design and marketing. In China, “you can find a specialist in any product,” said Stephen Maurer, a Shanghai-based managing director at consulting firm AlixPartners. “You want a toaster oven? There are a dozen contract manufacturers that make toaster ovens. That kind of contract manufacturing just doesn’t exist anyplace else.”
This is from James R. Hagerty, “It’s No Fun Making Toys, Toasters in USA,” Wall Street Journal, February 10, 2015 (print edition.)
The article is interesting throughout. Because it’s gated, though, I’ll mention a surprising statistic, surprising to me at least:
Chad Bingo, a college student from Rochester, N.Y., came to the same conclusion after inventing his Gotta Go Button, a device that lets pets signal when they want to go outside. Of the two Rochester-area companies he approached, one could provide only plastic molds, not finished products. The other offered to find a manufacturer in China but needed a minimum order of 5,000 devices. Mr. Bingo didn’t want to risk ordering so many immediately.
Using Alibaba.com, Mr. Bingo found a company in Shenzhen, China, willing to make just 500 of the devices, which retail for $14.99.
Wow! He could actually find a manufacturer in China willing to make just 500!
Also, the article talks about Charles Heidenreich, head of Swift Manufacturing & Engineering in Madison, Wisconsin, who wants his firm to compete with Chinese contract manufacturers. The problem? He can’t, at a reasonable cost, commit to as low a production run as his Chinese competitors can. This comment of his, though, didn’t make obvious sense:
One problem, Mr. Heidenreich said, is that “there aren’t enough people like me,” fighting for orders from America’s product designers.
Doesn’t he mean that he wants more people demanding such orders, not supplying them?
One other interesting tidbit in the piece:
U.S. manufacturing production finally crawled above its pre-recession level in October, but manufacturing employment is still about 10% below the tally before the recession began in December 2007.
And I guarantee that it never will hit its December 2007 level. The reason? Not mainly foreign competition but mainly increases in manufacturing productivity. Every major manufacturing country in the world, including China, has lost manufacturing jobs.