China Manufacturing, Etc.

Inside Foxconn: workers inspect fiber optical components.

Foxconn/Apple have responded to bad press by vowing to implement changes that benefit workers. That will necessarily mean it will reduce it’s operators’ overtime working hours and, presumable,  it will have to boost regular-time salaries to offset the operators’ loss of revenue. The result, of course, higher unit labor costs for Foxconn, and maybe for all of us manufacturing in China.

As the Washington Post reports:

Both Foxconn and Apple agreed with the report’s findings and said they would work to implement the Fair Labor Association’s suggestions. For Foxconn, that will mean hiring tens of thousands of new employees, and significantly raising wages while keeping working hours within acceptable norms. Such moves could ripple throughout the consumer electronics industry.

Just some random questions/comments:

I wonder if this was already the plan when, last year, Foxconn announced it would invest massively  in robotic production. Ramping up automation at that point would offset (and pre-empt) the effect of expected labor cost increases– they’ll be paying more dollars per hour but, through automation, consuming less labor hours per sales dollar earned. Also, since a much higher percentage of the labor hours consumed will be regular-time hours (as opposed to more expensive overtime hours), the costs of this move will be further offset. The “loss” will be in the number of labor hours Foxconn offers on the labor market.

It will be interesting to see what deal they come up with, and how it will affect the rest of us manufacturing in China. Many are saying that as goes Foxconn, so must we all go, and that radical overtime reduction coupled with more salary increases are in our near future. Is this another adjustment, or a game changer? If Foxconn gives it’s in-land factory workers a deal similar to the one it gives in Shenzhen (and if it extends to Foxconn’s in-land subcontractors as well), will that push up production costs in those areas, helping to closing the gap with Pearl River Delta costs? If so, what about all those Pearl River Delta factories that have moved inland to chase cheap labor just to survive? While Foxconn is, of course, the biggest employer in its industry, in no area does it have a high-enough share of the labor market to affect labor costs as a result of straight supply and demand. However, the disproportionate publicity surrounding their moves might make Foxconn’s deal the de facto standard. We will see.

I wonder if Foxconn, in addition to decreasing– and paying more for– working hours, will be doing more to decrease the monotony of those hours. As I’ve mentioned before, I suspect a large part of Foxconn’s labor/PR  issue stems from the way its processes are designed, where each worker is tasked with performing the narrowest possible range of actions and is pushed to perform those actions repetitively, as quickly  as possible, for hours and hours and hours. If this is indeed how Foxconn’s workflow is managed they could reduce stress by giving individual operators a greater range of work, thereby increasing the range of actions and reducing the number of workpeices that flow through each operator’s hands. Easier said than done, but potentially as rewarding as raising salaries.

Finally, allow me to indulge in naive fantasy. Let’s say Foxconn manages to use labor more productively, and then invests some percentage of that productivity into worker satisfaction. Let’s say, then, that the resulting improvement in turnover and loyalty then takes productivity at Foxconn to yet another level.  Maybe this would get enough publicity to teach other manufacturing executives here in China how to invest in their workforce in such a way as to show  bottom-line benefits.

Related posts:

• Foxconn not a bad place to work
• Should you automate your Chinese factory?
• PRD Labor Cost Rising: Run Away, Run Away!!! Not So Fast.

(Image above is used under a Creative Commons 2.0 license– view it here. Original link here.)