Cost of manufacturing in China

[Thad]

Re: Cost of manufacturing in China

My father-in-law worked for a large company that makes/made the 6'-20' valves for water and sewer lines. About six or seven years ago, they experimented with a Chinese company to make these same valves to "our" specs.

After a couple of years of going back and forth, dealing with valves that were not up to par, they figured something out.

What they found was, if one out of every ten valves shipped to them was good, they were $$$ ahead by sending the other nine back to be reworked.
If they were close to tolerance, they would have one of their own factories bring it into spec. The ones that did make it, were assembled and shipped out. All of the valves that were assembled here say "assembled in the USA" and all of the ones that were reworked here to meet specs say "made in the USA".
How is that for a kicker.

Now, present time, two factories have closed, others have down sized and many people are out of work.

 

[lowkee]

Re: Cost of manufacturing in China

You are using a heck of a lot of assumptions to make your argument.

This doesn't take a PhD to figure out. But a single dollar isn't worth a whole lot because everybody has one. A million dollar bills is worth more because not everybody has a million. And this is why every society has classes of people.

I would argue the opposite. A million people with one dollar are worth a whole lot more than one person with one million. After all, you get the million people to back those dollars. Those pieces of paper in one man's hands mean nothing if the other million don't follow along with the money game.

Throughout the history of civilization those with slaves/cheap labor have always prospered. Its sad, but its a fact of life. From the Egyptians to even our forefathers, those with slaves/cheap labor have always been in the upper class.

Brutality and theft are hardly facts of life. Facts of life are unchanging, slavery is a choice.

Now if you equate this to global markets/economies. The answer is so simple its dumb, but it gets so politicized it gets lost in the clouds.
Simply put not everybody can have a good economy. Its impossible. If every country on the planet had a good economy then an economy as a whole would be worthless. Just like classes of people, there are classes of economies. Good economies are built on the backs of weaker economies.

I'm a little confused who you consider strong/weak in your examples. China has a much stronger economy than the US. We are a nation of debt, China is not. Simply put, the US is mortgaged to the max and has become a slave country. We can't even afford to pay the interest on what we have already borrowed. In a line, we can't even pay our minimum monthly payments as a country. To call our economy 'strong' is analogous to calling a person going on a credit card spending spree 'rich'.

If everybody is demanding, and making, X amount of dollars, then that X amount becomes worthless, because there is no (or less) class difference.

I'm not sure what you're saying here. Are you saying class differences are a requirement? How so?

I hate to say it but there isn't another way, If the US economy wants to improve, another country's economy has to suffer. That's the way it is.

I don't see where it is a balancing act. Any country where the populace produces more goods and ideas than it consumes will always improve. There is no loser when you stay out of debt.

 

[HVAC Cruiser]

Re: Cost of manufacturing in China

Hate to say it but I'm one of the guilty, I used to buy bulk quantities, 40'containers of thermal solar collectors from China. The thing about this is that they are German units manufactured in China to keep the cost down. I would much rather be buying USA products for resale BUT bottom line is a factor and what I get for $400 each would cost $800 to manufacture here. And yes the quality is there they outperform and outlast everything other collector on the market today. With the going rate for a 3sq meter unit selling for about $800 - $1000 trade, factor in the sale turn around rate on the product, you would go broke, just can't compete.
I did look into manufacturing them or should I say an improved version that can be patented, even with our Govt. incentives for solar manufacturing it didn't pay
Incidentally, the govt caters to PV (elect. solar) because that actually helps the big utility company's unlike what your led to believe with the media hype "Stop paying the utility companies" LOL

 

[coolguy147]

Re: Cost of manufacturing in China

then there is that new manufacter of outboards out there. parsun outboards. i really dont like any foreign outboards. im sitcking to my evinrude johnsons merucrys and mercruisers.

 

[Huron Angler]

Re: Cost of manufacturing in China

Import tariffs have their place. Maybe the USA should start jacking up the import tarrif on select categories to give the small American manufacturer an opportunity to rebound.

Given that we owe China trillions of dollars and they have the ability to cause the US dollar to crash in a heartbeat by not only discontinuing buying our debt(ie dollars) but also by selling all of the US gov't treasuries they hold...we really aren't in a position to poke the red bear by slapping tariffs on their goods.

The real problem would begin where the Chinese start buying their own goods and we are left out of the economy all together with no one to borrow from.

If you think the housing crisis was a problem then you don't want to see a currency crisis. Google "weimar republic" and check out the pics of the lady shoveling paper fiat currency into her wood stove for an example.

That said...I think we should try to buy American as well and I do try to avoid the cheap plastic Chinese crap at wally mart, but protectionism hasn't succeeded in the past and is not likely to be any more successful in the future.

 

[DECK SWABBER 58]

Re: Cost of manufacturing in China

then there is that new manufacter of outboards out there. parsun outboards. i really dont like any foreign outboards. im sitcking to my evinrude johnsons merucrys and mercruisers.

A merc. outboard under 50hp is made by nissan/tohatsu.
omc under 50 is a yamaha

 

[JustJason]

Re: Cost of manufacturing in China

Has China's economy really improved for the average citizen

Yes it has. The 2 key words being "improved" and "average" though. Keep in mind most chinese people life a life very reminicent of our own (US) history of the late 1800's to early 1900's. Alot of the population outside of the major cities are very rural, farmland, where alot of chinese folks own horses and not automobiles. Many without electricity and modern plumbing. Farmers are encouraged to send their young, and work themselves in factories. And even though the conditions are nothing compared to what we have here in the US for standards, the average farmer does make more money at a factory than he does tending a farm.
The other thing you have to consider is how many "average" citizens china has. The US has roughly 300 million men, women and children. China has 1.3 billion, or 1 billion more, men, women, and children than the US has.

Another thing you have to think about is this. Numbers and percentages.

Lets say that if in the US right now there were 300 million paying jobs available (which there obviously is not). That would be 1 job for every person in the US. Now using my population stats stated above (which are accurate). Lets say there are 300 million paying jobs in China. China has 1.3 billion people. That would mean for every 1 job in China there are 4.3 people raising their hands to take that job that pays more than farming. Like Henry Ford said, if you can build an assembly line, all you need are able bodies with minimal skill. And that's exactly what China has.

Now there is a difference between "jobs" and "good jobs". Here a job is McDonanalds, and a good job doesn't start until you hit middle management at "XYZ" company that operates at a profit every year and not a loss. Keep this relative, Because this is for us, here in the US. In China a "job" is a farmer or horse "pooper scooper". A "good job" is at a factory making $1.99 folding knives.
Don't take my word for it though... do your own research. I would much rather be a factory worker in China than I would be a construction laborer in Dubai.
In fact in todays world... If I could have 100 acres in a temperate zone of weather that I could have to run a personal farm, even if i didn't have electricity or plumbing... goodbye iboats.com but it doesn't sound like a bad life at the moment.

I would argue the opposite. A million people with one dollar are worth a whole lot more than one person with one million. After all, you get the million people to back those dollars. Those pieces of paper in one man's hands mean nothing if the other million don't follow along with the money game.

I disagree, the 1 person with the million clearly dictates. Unless he is trying to dictate a union. And your statement makes you sound like a union worker. If I have a million bucks, and 1 million people have 1 dollar each. What do I need the million people for, as I have the most money per person.

Brutality and theft are hardly facts of life. Facts of life are unchanging, slavery is a choice.

Tell that to the last eon of slaves and the still living folks that at 50 years ago were at the back of the bus sipping from different water fountains.... it's not a choice when you are the minority.

I'm a little confused who you consider strong/weak in your examples. China has a much stronger economy than the US. We are a nation of debt, China is not. Simply put, the US is mortgaged to the max and has become a slave country. We can't even afford to pay the interest on what we have already borrowed. In a line, we can't even pay our minimum monthly payments as a country. To call our economy 'strong' is analogous to calling a person going on a credit card spending spree 'rich'.

1. I never said our (US) economy was strong, infact I inferred just the opposite.
2. I agree, the US is clearly broke. The US has built the biggest national infrascructrure in the history of the world(and more quickly), and did 99% of it on a "credit card".
3. I personally believe the best thing the US could do for itself right now, is to officially declare bankrupcy. The dollar would become worthless globally. But the dollar would still have value in the US (albeit substantially less). There is, and still would be, a consumer demand in the US. Because of bankrupcy other countrys would not trade with us, or trade very little. But because of existing and continuing demand, this would force the US to bring back jobs. It would also force the dollar converting back to a standard, wether it's the gold standard or the Marthas Vinyard beach sand standard. A standard is the way it was for 200+ years before it was on the debt/oil standard the dollar is based off of now. Its a scary thing in the short run, but I believe it to be necessary and inevitable in the long run.
4. Powers would shift as well, which isn't necessarily a bad thing. White collar managment, bean counters, essentially ghost shell jobs would cease to pay the high wages they are paying now. Wall street bigwigs, the madoffs, bank executives, would not have the million of dollars per year salaries that they draw. On the flip side, people with tangabile skills, people who are blue collar guys. Men and women who can wrench, build, pull wires, people who can create, aritisans and true craftsmen will draw command of higher salaries... it will take a few years, but things will balance out. It will force a return of a majority middle class, which is what not only the US, but the world needs.

I don't see where it is a balancing act. Any country where the populace produces more goods and ideas than it consumes will always improve. There is no loser when you stay out of debt.

Its always a balancing act... and that is the problem. Untill labor is universally free... there will always be executives hedging profits against projected labor costs.
Look at the cost of oil. 2 years ago the news networks were crying supply and demand is to why it is so expensive. It has nothing to do with supply and demand. It has nothing to do with "percieved" supply and demand. It's about how oil is traded by the dollar, and until we can make the dollar worth more by tangible standards, or until oil goes to the euro or some hybrid currency, the oil markets will always be volitaile and innacurrate to it's true "value". It is not the market that controlls the price of oil or anything else, it is not the "percieved" market that controlls the price, it is the betting that goes on behind close doors that controll prices.......

....I'm done ranting for now... I don't have it in me to type anymore. I really need to pick a month to write a book.

Mods~ I put a bit of time into this post so if it is deemed "controversial" please do not delete this if you choose to lock it down. If you do choose to lock it down please send me a PM of this transcript so I can keep it for myself.
Best,
JJ

 

[lowkee]

Re: Cost of manufacturing in China

Jason, next time we're in the same state, I'll buy you a beer. Good post.

 

[v1_0]

Re: Cost of manufacturing in China

He's not making as much as you think... After eBay listing fee's, selling fee's, and Paypal fee's... the seller will be lucky to make $2. Don't forget about the gas running to the Post Office too.

Uh... $2 EACH.

 

[ezmobee]

Re: Cost of manufacturing in China

Some great posts and an interesting thread. As has been previously mentioned, something really needs to be done to bring manufacturing back to the US. We really don't make anything here anymore. My dad sells corrugated boxes. His business is terrible because we don't produce anything here to put in those boxes. Years ago his major account would be something like Black & Decker, now he's in price wars fighting for a local potato chip company's business.

I believe it's the stock market and today's way of doing business that is killing us. It is no longer enough for a company to be merely sustainable. Everything has to be growing growing growing. You can't simple employ a bunch of people, produce a product, and sell that product for a modest profit year after year. To satisfy the "shareholders" you have to constantly be squeezing every last dime out of everything which is what lead to all this outsourcing and overseas manufacturing. Sure competition also causes this but the stock market causes companies to also be in constant competition with themselves.

 

[DavidW2009]

Re: Cost of manufacturing in China

I believe it's the stock market and today's way of doing business that is killing us. It is no longer enough for a company to be merely sustainable. Everything has to be growing growing growing. You can't simple employ a bunch of people, produce a product, and sell that product for a modest profit year after year. To satisfy the "shareholders" you have to constantly be squeezing every last dime out of everything which is what lead to all this outsourcing and overseas manufacturing. Sure competition also causes this but the stock market causes companies to also be in constant competition with themselves.

Great observation.

IMO, this constant need for "growth" (which is not sustainable) is driven directly by usury and the unnatural, unsustainable pressure it exerts on companies, as well as individuals.

Our entire monetary system is based on the economic sands of usury (Federal Reserve) and the false economy it produces.

The Fed and Wall Street banksters view America only as a market, not a nation that has people, and families, and kith and kin.

The "change" we got has only enriched the bankers, who seem to think they are entitled to it at our expense.

This "growth" has brought the death of the America many of us grew up in.

 

[DECK SWABBER 58]

Re: Cost of manufacturing in China

Some great posts and an interesting thread. As has been previously mentioned, something really needs to be done to bring manufacturing back to the US. We really don't make anything here anymore. My dad sells corrugated boxes. His business is terrible because we don't produce anything here to put in those boxes. Years ago his major account would be something like Black & Decker, now he's in price wars fighting for a local potato chip company's business.

I believe it's the stock market and today's way of doing business that is killing us. It is no longer enough for a company to be merely sustainable. Everything has to be growing growing growing. You can't simple employ a bunch of people, produce a product, and sell that product for a modest profit year after year. To satisfy the "shareholders" you have to constantly be squeezing every last dime out of everything which is what lead to all this outsourcing and overseas manufacturing. Sure competition also causes this but the stock market causes companies to also be in constant competition with themselves.

Before wall st. was overtaken by a bunch of greedy crooks the average joe could buy stock in a company and help it expand which provided jobs for US workers. Then when the company made a profit the shareholders were paid dividends. My grandparents generation used these dividends for retirement income. And the ceo's were not paid 100 times what their workers made! I think things really changed in the late 70's, early 80's when "hostile takeovers" started, profitable companies were taken over and liquidated solely for the profit of a few people.

 

[ezmobee]

Re: Cost of manufacturing in China

Absolutely. That's back when you used to buy a stock and hold on to it.

 

[DECK SWABBER 58]

Re: Cost of manufacturing in China

I built my own PC last year, out of parts I ordered via the internet or bought in store. I was amazed at the lack of electronic equipment that is no longer made in the U.S.

The Intel Core 2 Duo processor was made in Costa Rica; the motherboard was made in Taiwan; the DVD drive from S. Korea; the hard disk drive from Malaysia; power supply, from China. Out of all the parts I bought, I managed to find one (DDR2 system memory) that was made in the U.S.A (Patriot memory, of all things). The U.S. made memory was $5 more than the equivalent foreign made memory, but then I figured I was already paying over $400 for all of this stuff; what's another $5 to support an American company???.

Today I bought a OTC Genisys automotive computer scan tool. The sticker on the case says made in the USA with globally sourced components.

 

[Huron Angler]

Re: Cost of manufacturing in China

The everyday workings of the stock markets haven't changed much in the last hundred years...what has changed is the fact that the members of the board/executives have been able to concentrate their power...their ability to engage in paying lobbyists to further consolidate power, open new markets of cheap labor, and exploit them accordingly.

I agree that the short-term outlook hasn't gotten us very far in recent decades. It may have something to do with the fact that the bonuses are so exorbitantly huge for the guys at the top that the only thing they plan on doing long-term is spending all their own money

A "free trade agreement" is an oxymoron...what are we agreeing to if it's free of regulation?

The fact that executive pay has skyrocketed right along with the concentration of wealth ratios indicates that the exploitation is benefiting the ultra wealthy disproportionately more than the middle management or blue-collar/clerical workers.

This leads to diminished buying power(inflation) and increased debt to maintain our lifestyles we've become accustomed to(nothing wrong with that BTW ).

So I attribute many of our problems to the fact that the wealthy elite are able to buy legislation at the highest bid and gain control over the masses of workers and consumers.

Couple all of that with a federal reserve system that determines the monetary policy with no apparent regard for unintended consequences and we've got a real mess on our hands

Also, as mentioned previously...if China's currency would be allowed(by their gov't) to gain strength relative to other currencies then it would be cheaper for them to buy goods from us and more expensive for us to buy from them...effectively creating more manufacturing here due to relative price equilibrium.

It also seems to me that China is engaging is what's known as "predatory pricing"...AT&T used to do that to shut down upstart companies using artificially low prices...only to raise prices artificially once the competition has been eliminated.

Of course...if China does that we'll start manufacturing goods here again hopefully

 

[puddleboater]

Re: Cost of manufacturing in China

Another thing that needs to be remembered is that China pegs it's currency at a certain level well below that of the dollar. No matter how much the U.S. dollar appreciates or depreciates, the yuan will be less than the dollar. This makes chinese labor, and chinese products, always substantially cheaper.

I view this as protectionism on their part, whether they admit to it or not. And it works for them too!

 

[HVAC Cruiser]

Re: Cost of manufacturing in China

Wow Huron, your very astute. I agree whole hardily.
I do with one exception, executive pay, there are some instances not all mind you where in law firms, brokerage firms etc... the executive barely gets a salary all year, his so called "bonus" is based solely on the deals he has brokered and trades he has made in short performance. Based on the profits he has turned for his company he receives his "annual bonus" which he basically supports his family with for the year till the next bonus comes around.

Now I'm not saying this is true in all cases, we all know there is plenty of abuse, but sometimes the media does get slanted and only reports what they know will get a rise out of the general population.

I know some might want to jump all over what I have written, BUT I am actually speaking from personal knowledge. I have a family member that works no less than 80 hrs per week spends countless hrs breaking his tail and affecting his health to make the best deals he can so he can feed and provide for his family in the upcoming year. So if he makes a 200 mil profit for the company and its shareholders why shouldn't he take home 1 mil for his hard work.
Sorry if I went on a rant, you hit a sore spot

 

[captharv]

Re: Cost of manufacturing in China

"Cheap junk from China"
I worked for a company which was in consumer electronics.
We ordered all the assemblies and finished goods from 2 houses in China. The quality of the goods is exactly what you order and pay for. We had some simple assemblies, such as stereo cables, and they were sample size tested over here. The manufacturer did not test at all, they just assembled. This was necessary to get the price into the ballpark of the competitor. The adage of a better mousetrap and higher price dont cut it in todays society. The consumer sees two products on the rack. One is 20% more than the other. Both say the same thing on the box. He buys the cheaper one.
If you want high quality, there are quality houses which will go into whatever manufacturer you want and bring the quality up to whatever level you are willing to pay for. However, then you may not be competitive anymore.

After all, Sony, RCA, LG,etc all have their stuff made over there and its high quality.

Thank the consumers for buying the low quality stuff. This keeps the import houses ordering them.

 

[kenmyfam]

Re: Cost of manufacturing in China

We have had tooling built in China, Korea and Japan (stamping dies for automotive) If you let them loose then you get absolute junk shipped in to you. I have made and still make many trips to the toolshops to review the tooling and make sure that it is built to our standards. If you do that then the quality and performance is generally good but the toolshop has always incurred additional costs to make it that way. When they quote again the price has gone up.
Locally our toolshops have seen the days of making 50% on a set of tools disappear and have sharpened their pencils somewhat when quoting. Less profit but more work is now the key.
The price gap is closing slowly and in my opinion when accounting for the shipping and any warranty costs incurred will make overseas tooling a lot less attractive in this particular industry in the next few years.
As a side note. Korean tool and die makers are currently going to the highest bidding employer. The wage and benefit war is on for them. This has driven their pricing up already.

Just my observations though.

 

[Capt'n Chris]

Re: Cost of manufacturing in China

I read Friday, in Reuters I believe, that the world consumers, for the first time in many years, look to the USA for the highest quality goods of any nation.