End the barbaric growth, where will China's manufacturing go?

Forty years of reform and opening up, Chinese manufacturing enterprises are transitioning from "youth" to "middle-age", and gradually from "barbaric growth" to "stable growth".

Looking back at the past development process, Chinese manufacturing enterprises have always achieved success under the premise of imperfect market rules and order, but this success is essentially an inefficient scale growth. In today's era, the environment that Chinese enterprises have to face is more complex and changeable. If the past growth momentum continues, sustainable development will become extremely difficult. Instead of relying on past success paths, it is better to change concepts in a timely manner, self-reform, master the ability to continue operations, and become an excellent enterprise that will grow steadily in the next ten years or even longer.

Entering a new stage

2018 marks the 40th anniversary of reform and opening up. Over the past 40 years, China has achieved sustained high-speed economic growth and industrial development, and the level of industrialization has greatly improved. China's manufacturing industry has achieved leapfrog development from small to large, and has experienced a competitive transformation from price advantage to scale advantage. China has thus become the world's largest manufacturing country. It can be said that these 40 years of rapid growth belong to the glorious 40 years of Chinese manufacturing.

At this stage, many Chinese manufacturing companies emerged as the market grew. Thanks to the low-cost advantage, many Chinese manufacturing companies have achieved scale growth through "price wars". However, under the circumstance of extensive management and lack of brand and core technology, the profitability of Chinese manufacturing enterprises is generally low, which has become synonymous with "low-end processing".

“The rapid development of Made in China is more reflected in quantity rather than quality. It is supported by China’s huge demand. Many enterprises are either small, scattered, chaotic, weak, or large. If it is not strong, the excessive pursuit of market opportunities makes it impossible for enterprises to settle down and form the spirit of craftsmanship." Ding Jianze, senior partner of Hejun Consulting and director of Hejun Intelligent Manufacturing Research Center, told "CEConline".

To this day, with the changes in the growth soil of Chinese manufacturing and the further increase in operating costs, the original problems have gradually become prominent. Facing the complicated economic environment, it is difficult for Chinese manufacturing enterprises to "revisit the old dream" and copy the successful path of the past. "Made in China, if the transformation and upgrading cannot be completed, many companies will die." Ding Jianze said.

According to the World Economic Outlook released by the International Monetary Fund, the global growth rate for 2018-2019 is expected to be 3.7%, and the two-year forecast is 0.2% lower than the forecast at the beginning of this year. Affected by anti-globalization and protectionism, the uncertainty of economic development has increased, and there is even a greater possibility of recession.

“From the perspective of the global economic situation, 2019 will be a year of faltering global economy. Due to the lack of core technologies and core products, China is highly dependent on the supply chain of Western countries, leading to trade wars. We are extremely passive; the big stick of intellectual property will further weaken the imitation ability of backward countries; the long-arm jurisdiction based on core products will make our foreign trade exports more restricted." Ding Jianze said.

On the other hand, from the perspective of China's economic situation, China's economy has bid farewell to high-speed growth, and the future GDP growth rate will continue to gradually slow down. As the growth of external market demand slows down, the overall operating cost of China's manufacturing industry has risen, and China's manufacturing industry is facing severe survival problems and development challenges. Transformation and upgrading have become an urgent issue.

Efficiency improvement

“The biggest feature of the 'stable growth' stage is the superposition of Industry 4.0. However, Chinese manufacturing is currently generally at the level of Industry 2.0, and the level of equipment is lagging behind.” Ding Jianze said. With the rising labor costs in China, the schedule of "machine substitution" for Chinese manufacturing companies is advancing, but the management thinking of many factories is still at the original stage.

"In order to meet challenges and grow steadily, Chinese manufacturing enterprises must cultivate their internal strength and start from the aspects of improving efficiency and effectiveness." Chen Zhaofeng, the managing partner of PwC China Industrial Management Consulting, told "CEConline" people" said.

Gu Chunyuan, Senior Vice President of ABB Group and Chairman of ABB Co., Ltd., said, "The manufacturing industry must constantly face new challenges. For the manufacturing industry, the eternal issue is how to improve quality and reduce our Cost. Improve production efficiency and achieve sustainable development. Such needs were the same a hundred years ago as today, and will be the same a hundred years later. The only difference is that in different times, due to the development of different technologies, the realization of The way is different."

He believes that to maintain China's status as a major manufacturing country, it is necessary to carry out industrial upgrading, and to use automation, intelligence, and information to upgrade the industry. A very important means of industrial upgrading is to use robot flexible automation technology.

The Haier central air-conditioning interconnection factory built in 2016 has built a flexible automated production line to provide users with personalized customization services. Since the factory was built one year ago, the production efficiency and inventory turnover rate have both increased by 300%, and the factory production capacity has also increased by 3 times.

According to the relevant person in charge, the automation rate of the factory's production is very high, reaching 72%, of which 7 smart devices are in a leading position in the industry. In addition to the use of robots, the intelligence of connected factories is also reflected in the intelligence and visualization of the entire process. With the overall industry facing high inventory pressure, serious product homogeneity, and declining profits, Haier's smart factories have taken the lead in improving efficiency and effectiveness.

“In fact, no matter what a company wants to do, in the final analysis, it still has to return to its most basic purpose—higher performance. Then this may require companies to use information and digital tools and means.” Chen Zhaofeng said.

Management innovation

China's manufacturing industry needs to change from "big" to "strong", not just a simple "machine substitution" problem, but requires the entire management system of the enterprise. Change.

Compared with the "barbaric growth" period, the current stage of laws and regulations is becoming more and more perfect, and the cost of non-compliance is getting higher and higher. Therefore, it is more important to regulate the operation.

“Chinese manufacturing enterprises that have already deployed in the international market need to understand the current laws and regulations to avoid legal risks. At the same time, they also need to carry out standardized construction within the enterprise. Although this will increase the cost of the enterprise, in the long run, This is a worthwhile investment." Ding Jianze said.

Under standardized operation, in order to regain the cost advantage, Chinese manufacturing enterprises urgently need to make up for their own management shortcomings, change the extensive management methods in the past, and form a set of effective scientific management systems.

Guangzhou Minshi Digital Technology Co., Ltd. is a manufacturer of automotive rearview products, focusing on the research and development and sales of electronic products. Under the multiple challenges of rising labor costs and surging production costs in China's manufacturing industry, Sensix Digital has embarked on an innovative management optimization path with its process optimization management.

It is understood that the functions and operations of each department and position of Sensix Digital strictly abide by the TS16949 management system of the automotive industry, and the process-based thinking of "where there is input, there must be output". From the customer's project negotiation, to development and design, project trial production, quality inspection, mass production, shipment inspection, and finally to user investigation, Sharps Digital has achieved strict connection and precise supervision of the process in every link.

This process-oriented optimization management effectively achieves the goals of accurate data, proficient skills, and high-end quality, and has been widely recognized by partners.

"The era of 'steady growth' puts forward new requirements for the management system, and an effective corporate governance system is more conducive to the transformation of Chinese manufacturing enterprises." Ding Jianze suggested, "Many manufacturing enterprises' decision-making relies heavily on Some people, such a decision-making mechanism is often fast, but with the advent of the era of 'steady growth', we hope that corporate decision-making will be more stable and effective, so we need to restructure the corporate governance of the enterprise."

Quality change

At present, on the whole, China's manufacturing industry is at the low end of the international industrial division of labor, the added value of products is low, and the industrial profits and business performance are at a low level.

“Many traditional manufacturing companies are in a low position in the value chain and are still in the OEM process. On the whole, because their own industrial chain is not sound enough, they rely too much on some upstream suppliers in the industry, while their own The innovation power of the company is also insufficient; looking downstream, many companies have not formed their own brands, channels and markets. Now the market is more open, and competition is more globalized. It is difficult for Chinese manufacturing companies to deploy globally and not transform in the value chain. It is deeply cultivated in the international market." Chen Zhaofeng said.

As the economic environment changes, if China's traditional manufacturing industry wants to grow steadily, it must move towards the mid-to-high end of the value chain and enhance its competitiveness in the international market.

As a leading brand of kitchen appliances, Fangtai has successfully jumped out of the "price war" thinking, adhered to high-end innovation, focused on quality growth, and has been adhering to the "artisan spirit" since its development.

In order to create high-quality products, Fangtai has built a strong technical research and development team, which consists of 300 top industry experts; more than 5% of operating income is used as research and development investment every year; advanced production equipment is adopted And international industrial manufacturing advanced technology for product development, design and manufacturing. It is understood that the quality of Fangtai's products even exceeds the standards of German and Japanese brands, thus improving its own voice in market competition.

"It should be seen that some leading Chinese manufacturing companies are either based on market-based technology replacement, or based on independent technology research and development, and are catching up with the world's advanced level. We believe that Chinese manufacturing will be the same as the original one. Like made in Germany, it has become a symbol of quality." Ding Jianze said.

Conclusion

Although the current economic environment and market conditions faced by Chinese manufacturing enterprises are not as good as before, Chinese manufacturing still has the advantage of its growth and counterattack.

“On the one hand, Chinese manufacturing companies are in a large-scale local market. Compared with other international markets, the growth rate of China’s local market is relatively optimistic. The second aspect is that in the past 40 years of reform and opening up, Chinese manufacturing enterprises have gradually formed their own competitive advantages in the process of development, that is, they have a relatively complete industrial value chain and industrial clusters, thus making Chinese manufacturing enterprises. Faster and more sensitive." Chen Zhaofeng said. In the future, Chinese manufacturing enterprises that grasp the keywords of efficiency, innovation and quality will take the lead in moving towards the mid-to-high end of the global value chain and achieve sustainable growth in a more stable manner.

Picture / Dapeng