This article appeared in the December 2008 issue of Medical Design Technology
“Perspectives on Changes in China”
By: Rex Smith
Not too many years ago, if you were producing stampings in China they were low cost. Today, it is where in China you are manufacturing that determines whether it is low cost, and there are a number of factors that have contributed to this change. Some of these factors are obvious, but when you look at the dynamics of a stamping industry, some are not so obvious.
In stampings, the product being sold is basically “Press Hours”. For the global stamping industry there are X number of hours, and the factor that determines where the hours are utilized is based on a tried and true measure…who can best control their hourly cost.
When China first developed a capability for producing stampings it was geographically located in the Eastern Coastal regions. At that time, the basis for costing stampings included more labor content and less tools. As real estate costs in those coastal regions have skyrocketed and the demands from labor have increased, the stamping industry, as a result, has migrated westward within China. The prevailing opinion today, within China’s manufacturing circles, is that the increased costs for moving a stamping operation inland in China can be offset by the infinite amount of low cost real estate that is available there.
However, this thinking may no longer be valid as costs for logistics and the time-to-market are eroding the perceived labor savings. As a result, in order to continue lowering their cost for press hours, the Chinese stamping producers are looking for more western world stamping technology. These Chinese stamping companies are making a concerted effort to revamp and upgrade their processes to reflect more of the progressive, transfer and automated press-to-press tooling technology that is typical of what we do here in North America. China has realized that without improving their manufacturing technology, they risk losing business to other low cost Asian countries like Vietnam.
What is now happening for some established stamping producers here in North Americais that they have found new opportunities to globalize their operations as this industry is evolving. Many collaborative ventures and agreements with comparable stamping suppliers in China are now in place for a number of North American companies as they implement long range strategies to minimize Press Hour Cost as global costs for commodities and logistics keep increasing. With this kind of business strategy, North American stamping producers can continue to control the allocation of global press hours, even as China becomes more proficient with their stamping processes.
The globalization of the stamping industry is here to stay and the logistics cost increases will continue to make the regional stamping supplier a necessity. Those companies that succeed will be those that recognize those facts and globalize their capabilities to meet their served markets.