Improving efficiency priority in China

A Lastest News about Business Practices in China

Last updated: 15 Oct 2011

China makers are investing in various measures to boost productivity. This step aims to manage costs better and address labor shortage problems.

With manufacturing costs not likely to stabilize soon, improving production efficiency is a top priority for China manufacturers.

The cost of major raw materials, including cotton and steel, has been fluctuating heavily, often on the high side. While quotes may sometimes dip, they do not fall low enough for companies to reap significant cost savings.

The persistent labor shortage only adds to suppliers' woes. Efforts to ensure there is a sufficient workforce especially during peak manufacturing months have resulted in a substantial increase in labor-related expenses. These range from basic salaries, overtime pay and training, to better dormitories and recreational facilities.

While makers cannot control market and inflationary forces, they can manage their production processes more efficiently. In the past, only well-established enterprises took serious steps to improve and streamline their manufacturing. Now, even those that have been in the industry for four to six years are hiring industrial engineers and implementing ERP systems to raise productivity. By doing so, many have been able to cut costs by 10 to 15 percent.


Industrial engineers, ERP systems boost efficiency



The industrial engineers study each manufacturing process, noting down how long each step takes. Based on the best practices observed, they come up with a standard guide that all workers need to follow. At apparel and footwear factories, such guides have been able to improve efficiency 30 to 50 percent. Industrial engineers have also been able to reduce assembly time at electronics factories by 10 percent, resulting in 10 to 25 percent annual cost savings.

The ERP system, meanwhile, makes it easier to determine when materials and components need to be ordered and how much should be procured. Most purchasers and warehouse managers create their own bill of materials, where different models, colors and quantities are listed. The ERP system standardizes the BOM, ranks the components and materials based on the frequency with which they are used, and audits inventory. This minimizes unnecessary repeat procurements and overstocking.

Tracking and monitoring is done in real time, which facilitates interdepartmental communication.

LED maker Del Optoelectronics (Shenzhen) Co. Ltd, for instance, calculates the usage rate of each component. Those that are used more than 30 percent of the time are classified as special stock. General manager Lee Zhong Ming said the company orders more than required for such components to ensure there is sufficient inventory for urgent orders.



Read the full report at Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.


Posted: 14 April 2011, last updated 15 October 2011

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