How Made in China 2025 may require a back-to-basics approach

Informed by Germany’s Industry 4.0 programme, Made in China 2025 is seen by many as a panacea to China’s current manufacturing woes, with its ambition to transform China from the world’s low-cost factory into a leading manufacturing heavyweight in just 10 years. Justin Tao and Tim McLean from TXM Lean Solutions take a slightly different view. They suggest that before most manufacturers in China consider the kind of costly investments in information technology, robots and other forms of automation typically associated with Industry 4.0, they need to consider upgrading their management practices.

Ever since Made in China 2025 was unveiled in 2015, many Chinese manufacturers have viewed it, or its slightly more mature cousin, Industry 4.0, as something that can turn junk into gold with just a touch. A common assumption is that the numerous problems that they currently face can solved through embarking on pilgrimages to global smart factories and by adopting robotics, 3D printing and other advanced technologies.

Early in 2015, the Ministry of Industry and Information Technology (MIIT) released the Smart Manufacturing Projects, which identified a number of archetype projects and symbolised the official launch of the smart manufacturing segment within the overall Made in China 2025 plan. Some companies scrambled to receive government funds in order to assist with upgrading their factories. However, poor basic operational management and a lack of understanding of the technological revolution means that a number of these will not in fact produce gold, but instead rack up costs that they did not expect and cannot sustain.

Made in China 2025 focuses on five major projects, including establishing manufacturing innovation centres and boosting intelligent manufacturing. But it doesn’t feature much language that focuses on manufacturing excellence or leadership. Modern manufacturing thinking, such as Lean, Agile or Six Sigma, has been neglected. This is something of an oversight: if your bill of materials is not accurate, your process is broken or your equipment maintenance procedures are lacking, then your Big Data or robots will be completely ineffective and may actually become a liability to your business.

In China Manufacturing 2025 (as in Industry 4.0), machines and systems will independently exchange information, trigger actions or control each other. So you might be thinking, do we even need manpower as a part of the workforce anymore? The answer is an emphatic ‘yes’! Perhaps now more than ever, manufacturing businesses need highly skilled leaders and teams.

As a benchmark, German manufacturing never neglects people development. Academy Cube was introduced in Germany, which connects students, graduates and professionals with companies. The aim is to provide qualified and motivated people with skills that have actual relevance to companies and fit the new challenges that they face. However, people development does not appear to be a major focus in the China Manufacturing 2025 plan. Over the years, many manufacturers in China find that their biggest challenge is first identifying and then successfully recruiting and retaining the talent that they need. If this issue is not properly addressed, and existing management skills in Chinese manufacturers are not upgraded, much of the proposed investment in new technology will be wasted.

Manufacturing efficiency and quality remain major challenges for Chinese producers and obviously need to be overcome quickly if Chinese manufacturing is not to be squeezed by both emerging low-cost producers and advanced industrialised economies. This means that before the focus can be shifted to the magic of intelligent manufacturing there is much work do to in addressing the basics of manufacturing management. Globally proven techniques such as lean manufacturing can deliver huge gains in productivity and quality without the need for substantial capital investment. Most Chinese factories still hold great potential for improvements that can be gained in this way.

Before manufacturers can make the leap to Industry 4.0, they should consider each phase:

• Industry 1.0 was based on the introduction of mechanical production equipment driven by water and steam power.
• Industry 2.0 was based on mass production achieved by a division of labour and the use of electrical energy.
• Industry 3.0 was based on the use of electronics and IT to further automate production.
• Industry 4.0 will be based on the use of cyber-physical systems.

It is safe to say that many manufacturers in China still are in the Industry 2.0 stage, some remain in Industry 1.0, while some even occupy the realm of Industry 0.0 (i.e. handcraft workshops). The well-known seven wastes in lean manufacturing of transportation, inventory, excess motion, waiting, over-production, over-processing and defects, are easy to find in almost every Chinese company. It is important to note that in most cases eliminating the seven wastes costs almost nothing. Without improving processes and eliminating these wastes, any upgrade to Industry 4.0 will present a major burden.

If China truly wants to learn from the success stories of Japan and Germany, it needs to follow the same path that they travelled. This means starting with improving quality and employing lean manufacturing to deliver better products and increase productivity. It needs to develop high-quality manufacturing talent, particularly leaders, who can lead the transformation of China’s manufacturing industry. There are no shortcuts to manufacturing excellence, so it is essential that Chinese manufacturers first improve their Industry 1.0 or 2.0 before making the leap to the dizzying heights of Industry 4.0.

TXM is a leading Australian Lean Manufacturing and Project Management Company, with offices in China, the UK and the USA. TXM adapt and create profit-building processes to fit each customer’s industry and culture. With decades of manufacturing expertise and outstanding lean coaching skills, TXM achieves real lasting results for our clients across every aspect of operations. We develop the people, the processes and the culture to achieve sustainable positive change and provide a platform for ongoing continuous improvement within your business. Using proven world-class Lean Manufacturing practices, our broad industry backgrounds and practical ‘hands-on’ coaching approach means that TXM can work with your team, to develop tailored long-term sustainable solutions to achieve breakthrough improvements in business performance.