China’s weaknesses create opportunity for R.I. firms

“Good warriors … position themselves where they will surely win, prevailing over those who have already lost.” More

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China’s weaknesses create opportunity for R.I. firms

Posted 5/14/12

“Good warriors … position themselves where they will surely win, prevailing over those who have already lost.”

– Sun Tzu “The Art of War”

In the effort to compete with Chinese manufacturers, economic-development initiatives typically target what conventional wisdom believes to be the up-and-coming industries, hence the emphasis on attracting and retaining high-tech or high-innovation companies to the state. Local cases in point are the 38 Studios LLC deal and the current obsession with the “Knowledge District.”

This might be a fine strategy in the very long term, but it would be a mistake to throw traditional manufacturing under the bus when it comes to economic-development initiatives. Although the emphasis on recruiting and retaining high-tech jobs is understandable, it is likely that every state in the country is pursuing the same companies in the same industries to bolster their high-tech manufacturing sector. This is a daunting competitive challenge for a state of our size with limited resources.

For Rhode Island, the smarter bet is to focus less on specific industries and more on a specific business model.

I have a small Rhode Island client that is competing against and beating China, even though it manufactures an old-school product. How does it make it work? By utilizing three simple principles – Fewer, Faster, Finer – to exploit the weaknesses in China’s manufacturing model.

• Fewer means drastically reducing minimum-order size to take advantage of China’s bias toward long production runs. If a product requires some form of customization, better still.

Small to mid-size Rhode Island companies will rarely be successful going against China’s bedrock strength, manufacturing long runs of commodity products, whether the industry is high or low tech. But if they find and exploit channels that demand shorter, more customized production runs, they can exploit a key weakness of China manufacturers.

Faster means slashing production lead times to a level that exploits China’s geographic distance from U.S. customers. When business conditions favor low inventory levels and short production lead times, the physical proximity of supply-chain partners becomes more critical. Especially for short runs of customized product, delivering precisely when the customer wants is essential to maintaining customer loyalty. If a Rhode Island manufacturer’s production lead time is “whenever the customer wants it,” China manufacturers can, at best, only equal that performance, they cannot surpass it.

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