China syndrome

It was billed as the premier summit for Europe's manufacturing elite. But most delegates at the NG Manufacturing Summit in Murcia, Spain last month had another continent on their minds. You just couldn't escape talk of Asia – or more specifically China – at the event that united manufacturing leaders from Sunderland to Stockholm to tackle common challenges. "Access to engineering competencies in China is just abundant," says Thomas Nielsen, VP manufacturing at The Lego Group in Denmark. "I know if you look historically in Europe we have a lot of people with solid education, but if you look in China they're really putting a lot of new engineers out there." Over 600,000 a year according to some figures. But Bloomsberg Businessweek research argues the statistic is misleading, with Chinese officials including in the tally mechanics and other courses with tenuous engineering links. Although pot, kettle and black come to mind in the UK where we allow people who fix satellite dishes or washing machines to claim engineer status. Whatever the final count, there is little doubt that a country with over a billion people is not going to struggle for manufacturing labour. Low production costs and the potential buying power of those billion or so people may mean Europe's days as a manufacturing superpower are numbered, adds Nielsen. "I think it's bound to happen – Europe will become a minority player, but probably primarily from a market perspective. By the time we retire, 80% of the world's population will be in Asia or Africa. The pure demographics of that will change the world economy." The shift has already begun, according to Mats Tharing, VP of manufacturing at Volvo in Gothenburg. "We are trying to grab that market, of course," he says. But the great migration East won't necessarily lead to the extinction of manufacturing in the West, stresses Tharing. "Europe is still a big market. The question for us is should we make global cars in China or just cars for the Chinese market?" And yet China isn't having things all its own way. Latest manufacturing PMI figures for the country fell below the 50 benchmark indicative of growth. Spiralling oil prices have triggered talk of manufacturers in the West withdrawing production from the country to avoid hefty shipping costs. China also faces more fundamental disadvantages, says Tharing. "In international comparisons, Chinese students often come top in maths. But the thing is they learn from books – in terms of being practical, flexible and taking the initiative, they are way behind." The same was falsely said of Japan and Korea, Tharing admits. However, China's communist system is a unique disadvantage, he adds. "You're talking to people, you agree something with them and then they do something different. If you want a plumber you get somebody who comes in and makes a bigger mess." The political system also deters creative thinking in favour of a "hierarchical" approach, he says. Meanwhile Europe has embraced lateral thinking as it seeks to hold on to some kind of competitive advantage. The NG Summit's keynote debate centred on the value of continuous improvement theories in maximising productivity. Delegates were urged to run factories with a dynamic and inclusive management mantra, seeking to engage their shopfloor at every opportunity. Tools like value stream mapping can help defend against productivity-sapping confusion over roles and responsibilities, the session on leadership heard. Yet those lean learnings and a traditional flair for innovation may not be enough to stem the tide on their own, says Chris Bassano, a conference delegate and EVP for manufacturing at Rolls-Royce Marine in Norway. Countries like the UK have been great at developing new products, but less impressive at using them to seed successful businesses, he says. "It's all about the product not about the 'how'. How you develop that product into a commercial profitable entity – that's boring to the engineers and creators, but that's what gets you the money and creates the entity of an organisation." And if Europe fails to hold on to enough of that core production we can expect our streak for innovation to desert us, too, adds Lego's Nielsen. "In the longer term if you don't have the core manufacturing you won't have the innovation," he says. The theories are set to play out at a macro level over the coming decades. Meanwhile as one senior manufacturing source told WM, our best bet at factory level may be simply to keep our eyes open to the changes. "Leaders have to become more pragmatic. It's great painting a strategy for five years' time, but real people engage in operations every day... you can't take them away from the reality and tell them it will all be great if we have a talk about continuous improvement every day. You need to stay agile and fluid to what's happening round you." Can European manufacturing survive the rise of China? Have your say: email your thoughts to mgosney@findlay.co.uk