Moving Manufacturing Operations From China Because…..

Podcast Series: Finish Strong® – Fulcrum ConsultingWorks Inc.

A number of manufacturers have announced plans to leave China, primarily due to the upheaval in Hong Kong and impacts of the government’s “zero covid” policy.

But what’s the destination?

If a leader does not completely understand why his operations strategy involves leaving one location for another, how will success be measured?

Vietnam, the Philippines, Indonesia, and other popular southeast Asian manufacturing locations may be little better than China. Government uncertainly? Port challenges? Distance from major markets?

Before moving operations from or to anywhere, begin with a clear understanding of “why?” What problems are you trying to overcome, or what benefits do you intend to gain? What risks become higher, and which become lower?

Manufacturers left the United States in search of cheap labor because they didn’t know how else to be cost competitive with new foreign competition. Standard accounting reports made direct labor an obvious target, and gave operations leadership an easy out. Why not hold them accountable for reducing costs without moving operations?

Most leadership thinks in terms of 5% improvements, not 50% improvement. That’s a leadership problem facilitated by accounting and by business schools.

As you consider leaving China, or Russia, or any other location, define the objectives of success.

When first moving to China, did you consider the obvious risk of the extended supply chain? Apparently not, or it was one you accepted.

Some decisions result in negative impacts that were acceptable risk. Decisions that result in negative impacts because obvious risks were ignored reflect poor leadership. Decisions that are defined by actions (e.g., “leave China”) without examining alternatives thoroughly are, except in case of true emergency, poor leadership.

If you plan to move your operations out of China, where will you move them to?

Why?

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