How To Develop Manufacturing Industry Under High Salary?

If China's manufacturing competitiveness decline is attributed to the logic of higher labor costs, Germany and Switzerland should not have large-scale industrial production in such a high labor cost country. The labor cost of these two countries is 20% to 30% higher than that of the United States, but precisely they are.

The top of Pyramid is flexible.

How Germany develops its manufacturing industry under high salaries

A year ago, an American scholar made a comparison and found that the wages of Chinese factories were less than 1/20 of American workers, while the cost of living was half that of the United States.

When American factory workers earn 23.32 dollars, plus employers have to pay 8.47 dollars per hour for health insurance, Chinese workers earn only 1.36 dollars, and social security costs are unknown.

How to pay the cost of living close to the 1/2 of the United States with the salary of 1/20 less than US workers? This serious imbalance of distribution makes Chinese workers' pay rise an inevitable trend.

By 2014, the gap between China's labor cost and the US has been almost negligible. In the United States, the cost of labor per US $1 is about 96 cents in China.

This does not take into account the cost of logistics.

What is very worrying is that with the help of highly automated and business mode changes, the European manufacturing will not only continue to control high-end precision technology, but also recover part of the labour intensive industry.

Labor price itself is no longer a decisive factor for the future manufacturing industry.

Who is fighting against China?

Some time ago, he talked with a Chinese entrepreneur. He bought a high-precision machinery enterprise in Germany, and built a factory in China, leveraging German technology and technicians.

Privately speaking of the future of China's manufacturing industry, his view is that many factories in China are highly automated, and even have realized the concept of "Internet of things" in "industrial 4".

But he asked rhetorical questions that if the quality of the machine started, it would not work.

Can the quality and performance get better? Plainly, "the mother machine of industry" is not good. What about downstream?

He said that in the past, China made exquisite "short flat fast". Chinese factories bought cheap machine tools made in China, invested 5 years in recycling equipment and made money, and equipment was scrapped directly.

But over the past few years, more and more Chinese manufacturers are willing to buy German machine tools. Although the price may be several times higher, the quality of the products has been improved.

The successful European manufacturing enterprises rely mainly on product quality and technological innovation while fighting against China's manufacturing. There is also a restless mentality.

The short board of this manufacturing industry is not only reflected in the top of Pyramid.

The continuous innovation in the business mode of manufacturing industry, highly automated industrial production and high value-added services have reduced the dependence of various types of manufacturing enterprises on cheap labor.

10 years from 1995 to 2005, the 190 year old shoe making industry in Britain.

Clarks closed all the factories in the UK, and all the production bases were pferred overseas, using third party factories.

At that time, the company claimed that pferring the production base to the Far East was the only way to survive.

Ten or twenty years ago, such examples were numerous.

The Adidas brand, founded in 1949 by Germany, closed its last factory in Germany in 1993 and made a radical switch to manufacturing in Asia, especially China and Vietnam.

In less than 30 years, automation and robotics have allowed ADI to move the product line back to Germany and return to "made in Germany".

Adidas is building a 4600 square meter "robot factory" in Germany, named Speed factory, and its technology partner is also a German technology company.

This factory has only 160 workers, but next year it can realize the annual production capacity of 1 million pairs of shoes.

They will soon build second robot factories in the United States and then build similar factories in Europe.

The price of ADI sports shoes produced by German robot shoe factories will not be higher than that of Chinese factories.

Indeed, Adidas has an annual capacity of 300 million pairs of shoes in Asia, compared with the current German factory output which is simply not enough to replace the manual of 1 million workers in Asia.

But it is only temporary.

Adidas's old rival, Nike, has also taken a similar route of migration.

Twenty or thirty years ago, Nike shoes factory was first built in Japan, Korea and Taiwan, China, then pferred to China, and soon became Thailand, Indonesia and Vietnam.

Now in Indonesia alone, Nike has more than 100 thousand workers and factories in poor and remote areas. These workers work for six days a week, with a salary of only about 21 dollars.

Even if labor is cheap enough, Nike is trying to build a robot factory.

Because there is no bottom line to simply spell labor costs.

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Zara changing garment enterprise mode

Pedro Nueno, director of the China Europe International Business School, told sina finance before: a high quality manufacturing enterprise should only account for about 20% of labor costs, and other costs include raw materials, logistics, technology and so on.

In China, labor costs may be lower, but the cost of logistics is very high.

This long supply chain production mode can no longer meet the needs of many industries today, from fashion industry to automobile industry.

Represented by Zara's fast fashion brand, which is popular around the world, they only need 15 days to design their own products, mass production and shop.

Even Harvard Business Week questioned whether the model was too crazy, because the industry's previous supply chain could be stretched for a long time, and designers usually had months to design new models for the next season.

Despite being questioned, Zara is still one of the most profitable clothing companies in the world, and the gross profit margin can even be several times that of the same kind of enterprises.

More importantly, Zara has changed the business model of the apparel industry, with innovation and supply chain management as the key to success. Cheap production is of course important, but not as important as before.

This has a great impact on Chinese manufacturing.

"Zara" chose to locate factories near the terminal, rather than the cheapest places.

Because assuming that a global clothing brand production base is located in Asia, the supply chain is too long, and the cost of inventory is much higher than the cost saved on labor.

Now, more and more local brands in Europe are beginning to regain the concept of "made in Europe".

I saw a French dress brand called "Caroll", which even put a notable folder on each skirt trademark, indicating that this dress was made in France and added "we chose to make this skirt in France, support the French textile industry and provide employment".

In real operation, 25% of the brand's products are manufactured in Europe, and 11% are produced in France.

The national complex of the French is not ignored. In terms of business logic, modern textile production technology in Europe also has a history of nearly 100 years. It is very mature and the product quality is guaranteed.

And Caroll is also choosing to narrow the gap between the factory and the terminal market - most of the products sold in Europe are made in Europe.

This is in line with Zara's business logic.

How to develop manufacturing industry under high salary

According to the world bank's statistics, in the past 10 years, the proportion of industrial added value to GDP in Europe and Germany has not declined: Switzerland's industrial added value has accounted for GDP, which has been stable between 18% and 20% in the past 20 years.

Germany is 23%, more than two times the value added of GDP in Britain and France.

The concept of "de industrialization" does not exist in Germany, Switzerland, Sweden and Austria.

In Europe, 40% of the manufacturing sector is related to the service industry. The prosperity of manufacturing industry has greatly stimulated the service industry.

BMW Munich factory has introduced a human mechanics invisible bench, which is a creation of a two or three year old company in Zurich.

Germany and Switzerland are the two countries with the highest salary in the world. Among them, Swiss Corporation has greater challenges. They have strong currency, labor shortage and strict supervision.

But the winning magic of occupying the Highlands in the industrial field has not changed: innovation, productivity and high value-added services.

There is a Swiss pipe manufacturer whose factory and headquarters are in Switzerland, and its main business is plastic pipes.

The industry is not very skilled, and the most powerful competitors are in China.

But the Swiss pipeline plant has a higher price than China made, ensuring a net profit margin of 5% per year.

Where is the secret? First of all, the quality of the product. They even promise that the pipeline will not leak for 50 years. Secondly, they will introduce the low tech product of the pipeline as a "solution". For different types of factories and factories, they are tailored to meet the industrial needs of the pipeline installation program, and install sensors in the pipeline to achieve central control of the pipeline.

This allows ordinary plastic pipes to turn into high-tech products with high added value.

Even the most thorough Britain of "de industrialization" is striving to win back the lost territory with the "quality" in the manufacturing sector.

London has a decades old handmade bicycle workshop Brompton. In the past decades, by the impact of Chinese mainland and Taiwan bicycle manufacturers, only two bicycle factories survived in Britain.

This is one of the survivors, specializing in the production of high-end folding bicycles.

So far, they still use the traditional "brazing technology" and "apprenticeship", but the technology is very advanced, which is the flywheel energy storage technology of F1.

If the output of bicycles starts at a price of 785, until one thousand or two thousand pounds, or even achieve the "customized production" of bicycles, customers can choose the color and design scheme of each component.

Before their folding bicycles 80% exported to 44 markets, the best market for development is Germany and South Korea.

The cost of labor in this factory is not low at all, and the annual salary of each welder starts at about 30 thousand pounds, which requires training for at least 18 months.

The factory's 250 employees, creating annual sales of 27 million 500 thousand pounds, made a profit of 2 million pounds last year.

They are ready to mass produce "electric" folding bicycles next year, and China is listed as one of the important export target markets.

As Nueno said, "as a high quality manufacturing enterprise, with their own design innovation, they are fully capable of leaving the factory in Europe."