My friend Pete has decided to avoid (as much as possible) purchasing items made in "that bad place". He is jokingly referring to items made in China. It is becoming increasingly difficult to find items that are not made in China, from tools, to toys, to household appliances, exercise equipment and other day to day items. Lots of the items we purchase are coming from China. More and more it seems. Let me be perfectly clear in case any of you are having a bad day and are tempted to infer things that aren't here. I am not talking about "people" I am talking about "products" and business practices. China is the location of origin specified on the products under discussion. Ethnicity is not under discussion here.
Quality
My friend's objections to buying goods imported from China have to do with safety and quality. In his opinion there have been too many cases of low quality controls resulting in a measurable health hazzard. The list of problems includes deaths from bad pet food, melamine contamination in human food, and lead paint in toys. But clearly those examples don't mean every product is defective. Just because a product is from China doesn't mean it is poor quality. In many cases products we would consider to be of high quality are manufactured in China. Apple's "iphone" and "ipod" are manufactured in China. So while the design may be North American, the manufacture and assembly is handled by companies in China. Several dimensions of quality must be considered;
- Design (is it similar but inherently flawed?)
- Materials (are half the parts not galvanized to protect against rust?)
- Workmanship (is it slapped together or carefully built)
- Documentation (Are the instructions intelligible, well translated, useful?)
- Environmental (are toxic or banned materials used in the product or its manufacture?)
Comparison with Japan
There was a time when products from Japan (like the tin wind-up toys that were popular in Canada) were considered "junk". Now Japanese quality is considered among the top in the world. Following World War 2 Edward Demming and others introduced statistical process control. A number of Japanese manufacturers applied his techniques widely and experienced theretofore unheard of levels of quality and productivity. The improved quality combined with the lowered cost created new international demand for Japanese products. Japan even began exporting expertise with programs like the Toyota Production System. The point should be made that significant improvement of quality came through deliberate action, not a "natural" process of industrial maturation.
Cost
How can a product that is manufactured overseas, AND SHIPPED here cost less than a product built here with no shipping? I don't get it. I understand that shipping a 40ft container to the US from China costs about $8,000US. How could the production cost be so significantly lower that after shipping and import taxes the companies involved are actually saving money? Could it be that manufacturers in China understand how reducing margins a little wins them the contract over North American manufacturers who "can't be bothered" to make a product unless they make $x.xx per item?
Overpriced wall-tap example
At my local Home Depot store I found an orange plastic wall tap (a plug expander) for grounded plugs. Home Depot wants $6.98 + tax, but the Dollar(.25) store down the street wants $1.25. We are talking about a block of orange plastic with metal wires embedded in it. There is no way it is WORTH $6.98 + tax. Given my limited knowledge of how injection molded plastic objects are created, and my understanding of how the dollar store and their suppliers insist on making a profit (not a loss) on every sale, it is safe to bet that the cost of materials, manufacturing and shipping for the orange wall tap are less than $1.25. So if getting the wall tap made and shipped to the store is less than $1.25, why is Home Depot charging us an extra $5.73?
I have a theory and it has to do with markup. Assuming both stores want a 100% retail markup the cost for each becomes $2.88 and $0.625. Lets assume HD goes through an extra "distributor" who also has 100% markup. Now we're looking at $1.44 and $0.625. If the North American Manufacturer needs to make $1.00 per item and has a $0.44 "cost", we start to see how the manufacturer in China still has $0.185 of room per item for profit and shipping. So thats my theory, I'm sure you have your own which I welcome in the comments section.
Labour practices
Does the low cost for some products made in China necessarily mean that the people making them are being treated unfairly? Sometimes this is the case. In 2006, the Mail on Sunday alleged that sweatshop conditions existed in factories in China, where the contract manufacturers, Foxconn and Inventec operate the factories that produce the iPod. The article stated that one iPod factory, for instance, had over 200,000 workers that lived and worked in the factory, with workers regularly doing more than 60 hours of labor per week. The article also reported that workers made around $100 per month were required to live on the premises and pay for rent and food from the company. Living expenses (required to keep the job) generally took up a little over half of the worker's earnings.[154][155][156] Immediately after the allegations, Apple launched a full investigation and worked with their manufacturers to ensure that conditions were acceptable to Apple.[157]
The standard for "fair treatment" needs to be both acceptable to the people designing and purchasing the products. (Nothing to hide) as well as acceptable to the people performing the work and running the companies. Working for $x per day may sound awful in North America where the cost of a house is very high. Folks in other nations may be thankful for $x per day and could conceivably be raising their standard of living at those wages. So we can't have an overly paternal response where we need to control, nor an overly naive response where we leave the manufacturer to their own devices. The discussion of what is "fair treatment" is a larger discussion better handled separately, but I'd be cheating you if I didn't draw attention to the issue.
Assuming the question of "fair treatment" is defined reasonably. If an offshore manufacturer can offer better prices by "mistreating" their workers, they are being unethical. If a company contracting work out to the manufacturer knows this, or turns a blind eye, they are acting unethically. Respecting the people involved must always come first. The response by Apple to ensure that the people assembling their products are treated ethically is commendable whatever the motivations. This blog has discussed "Fair Trade" products in the past. There is no reason this model couldn't work for manufactured goods as well.
Outsourcing our Manufacturing BaseI've seen ships piled high with logs. Logs bound to go overseas where they will be milled and transformed into consumer goods. I've wondered why we wouldn't build those consumer goods here and take the associated jobs and the associated profits. Seems weird to me that someone can ship logs half way around the world because it is a better deal. Maybe companies overseas pay a bit more for logs to keep the jobs and profits for the finished goods. Here in British Columbia I keep hearing news about mills closing. I see a risk if North American corporations decide to continue this trend of "outsourcing" their manufacturing. We'll have fewer factories, fewer trained factory workers, less equipment, and less capacity for manufacturing. To think a dark thought for a moment. What happens in a widespread armed conflict that spans continents if North America has "outsourced" it's manufacturing capability. Before we could produce equipment, we'd need to first plan and construct factories, source and deliver raw materials. Maybe we're past that point and all the new wars will be fought with dollars. Lets hope we don't make shortsighted decisions that shoot our feet off.
Conclusion
I think in looking at this issue we need to fight our way through a lot of stereotypes like the arrogance of assuming North American design is superior. In a world where the true costs are not transparent its hard to know where the money is going or why choices are being made. The long and the short of it demands that we treat everyone with respect, and that we identify hidden costs that might not be apparent. I think there is the potential for a global community driven project that aims to divulge the "True Cost" of the products we purchase on a daily basis. As explored above some of the health and safety costs may not be worth paying even though the "sticker" (retail) price looks attractive.
Cheers,
Greg.
