China has built a massive industrial base. And yet, when compared to their competitors in the US or Europe, most of their manufacturers are mediocre in terms of labor productivity, quality, on-time delivery, safety, and staff morale.

Why is this? I think 3 fundamental factors are at play for these common China manufacturing problems...

1. Lack of systematic thinking

Some cultures (Japanese, American...) tend to evaluate ideas and results based on their compatibility with the "system". Other cultures (Chinese, South European...) tend to think of people relationships and dynamics rather than the system.

Let's take an example. When quality issues appear, many Chinese manufacturers place inspectors at the end of the line and then focus their energy on finding a way to avoid "getting caught" by customers.

What they should do, instead, is trace the issues to their root causes and then find ways to fix the root causes permanently. But first they need to understand the interrelationships between their processes and the final product…

2. '5 whos', not '5 whys'

I remember a 55-year-old factory owner who played that game. His main customer arranged a meeting with him, explained that the factory needed better organization, and pushed him to work with consultants' help.

What did the factory owner respond? "Yes the factory is a mess but that's his fault [pointing to his son-in-law who manages the factory on a day-to-day basis and attended the meeting]. I was sick over the past year and I couldn't take care of the factory. It will be much better soon." Never mind the fact that the factory had never had any proper system.

Instead of looking for the root cause(s) of issues in the factory, he tried to dodge them, just like a child. Assigning a responsibility doesn't help much in finding good solutions and making progress. Without that kind of attitude, there would be a lot fewer China Manufacturing problems.

3. Lack of awareness of, and interest for, PROCESS best practices

As the world knows by now, Chinese engineers are good at acquiring and using foreign technologies. They look to the West for many innovations. But these innovations are usually technologies or products -- not production processes.

When it comes to best practices in setting up a labor-efficient, asset-light, low-lead-time process, 99% of Chinese managers are quite ignorant. They don't know how their most efficient competitors are set up, and they have no interest in ideas coming from other industries ("it won't work here").

I was discussing the 'China 2025' plan with Ben Simpfendorfer, a noted economist based in Hong Kong, and we agreed that it focuses mainly on technological innovations. We concluded that Beijing should set up model factories for each major industry and invite its domestic manufacturers to come and get inspiration. That would probably have a much stronger impact on productivity in China manufacturing.

To Sum Up...

To sum up, Chinese factory owners and their managers are too focused on short-term "deals" at the expense of building the fundamentals of a long-lasting, high-performing enterprise. As Set Godin would say, they look for shortcuts and are not interested in the "long cut". Hence the high proportion of China Manufacturing problems.

What has your experience been with Chinese factories? Have you found many factory owners who are focused on the right things? Let us know in the comments please.