Could Someone Please Explain The "Production Problem" in China?

Folks Dave said it like it is.  Another 4 years of the current government will bring total economic failure.  We got what we deserve.

The answer, in part, was already posted on another area of this forum: https://ogrforum.com/d...740#2415514336624740

Thanks to Hancock52 for this link.

My original question was about train production. 

I do not think trade polcies of the last 35 years are a direct explanation.  It seems that Chinese production costs have soared, the Chinese gov't has a perculiar way of supporting manufacturing and utlimately companies come and go quickly becasue that is what happens in China.  It is maybe what happens when capitalisms tries to work in communism.   Many reasons, all of which are accurate to some degreee, no doubt.

I really would be curious to understand what MTH, Lionel and all the others that have production completed in China (and Korea) are expereiencing and why.  Perhaps I will ask at York.  I might get an answer, I may not.  But the information in the link above certainly provides significant insight from a person who has experienced this first hand.

Thanks to all for the input (and economics lessons!) 

The other factor in this large and complicated equation that I have brought up in other similar threads is the fact that labor is only a part of it, a IMO a greater factor is the EPA. The EPA is a non-elected group of government bureaucrats that dictate what can be made and who can make it in this country. I put them on a equal level with the IRS. Some of you have mentioned the bribes and back door deals that go on in this other countries, you think the EPA is any different, you pay their "fee" or "fine" and you can do what you want. For proof look at California, the local EPA and other state organisations have driven out virtually all manufacturing and look at their economy now (I know there are other factors, but this is a major one). The simple fact is it is cheaper to go over and pay a Chinese company to soil their own bed then it is to pay the "fees" here to keep manufacturing going.

Tim,

I would respectfully disagree with your posting.  Environment regulations add only pennies per dollar on the price of manufactured goods.  In my opinion, it is only fair that the folks who make the products incorporate these costs into their products rather than saddle the rest of us taxpapers with the clean-up/medical costs from the mess they make.

Bottom line is that the price of labor is still the greatest issue.  When one looks at labor intensive products (like the casting and assembly of model trains) its a no-brainer that production takes place in China where wages are about $8 a day.  When it reaches the point where labor costs are too expensive in China, production will shift to other less developed Asian or African countries.

Jim

My guess is that you will not get an answer at York or elsewhere.  Perhaps the best insight one can possibly glean is from the information provided earlier by Scott Mann (who spends a whole lot of time overseeing the China end of his supply chain).  Scott's accounts don't cover every possibility, of course, but they sure give a very good overall account of how things operate (or not) for this small industry in China.

My experiences with quite a few engines recently is that they insist on wrapping the darn things up before the paint is fully cured.  To me, that is the most recent production problem I have experienced multiple times in the last year (1st noticed ~ September 2011)or so.  At least 6 separate engines so far with varying degrees and symptoms of this problem.  (some exchanged for lesser offenders, some did not have  replacement available, so delivery was refused)  My luck can't be that bad to be the only one getting engines in this shape.

I cannot prove it, but I suspect it is strongly correlated to the time frame of the change in factories that took place.  (It's possible I did not have any engines on order for a little while prior to the start of my experiences, so I may be off by several months or close to a year earlier as to when this problem started)

While I support the notion of the made in USA boxcars (ordered all but the Coke one), I do realize that we are not likely to see significant production move back here.  Then again, no one thought boxcars would be made here again by Lionel either, so maybe some expansion of the program could happen if the USA items sell well. 

-Dave

Because of the EPA and the California Air Resources Board (CARB) and other governmental agencies, the air here in Southern Claifornia is noticeably cleaner than it was 20 or 30 years ago. You don't have to be a scientist to notice the difference, you just have to look up.

Without strong environmental enforcement, we would have the air quality of China, and that is just about the worst air quality in the world, with the attendant illnesses and reduced life spans it brings.

I really don't think America wants that, do any of you?

"But the melt value of a silver dime is $2.33."

Just one problem with your theory, there have been no silver US coins, except specially struck collector coins, since 1964.

I am glad that Weaver does US production, but not all of their production is made here. Most of their engines are made in China.

The plain facts are that the infrastructure for train manufacturing has been offshored, and anyone who has purchased a foreign produced item can complain all they want, but they are a part of the problem. Train production is just a small sliver of the world economy with most of the manufacturing done in Third World counties.

They are still found in circulation if you search in bulk, i also collect currency as another hobby and i order change for pick up at the bank twice a week.

We better take good care of the trains we have and rethink conventional. the outlook on the horizon is Gloomy and we hear at the forum seem not to have the definitive answer. I just ran my son in laws Williams GG1's he got for 150.00 each and it was fun, oh oh.. they are Chinese, darn. Maybe Obama could send the seals to liberate the molds.

I can vouch for that. I have a vending company so we collect a lot of coins from the machines. We still find quite a few quarters and dimes that are silver. We don't look for them you just notice them from color and mostly sound. I imagine if we took the time to look we would find quite a few. 

Do we really need govt. control over everything? I think the EPA along with several other govt. agencies need to be gone. No wonder nobody wants to have a mfg. company in the states. Time to let loose of all the regulations that is strangling business. 

We all know that big companies won't pollute the air that we breathe or the water that we drink.

Lar1944:  Or you could thank a previous Republican president who opened up Communist China to our trade in the first place!  No good or bad guys here.

Moderator, will you please lock up this thread?  It has gone political, and strayed totally away from the OP's question.

Yup we all get the idea.

In keeping politics out of this interesting discussion, and to try to address John's original question, allow me my two-cents worth.

I was involved in Quality in the manufacturing industry for most of my career until I retired last December. I held the position of Quality Control Manager at three companies, and was the ISO management representative at two companies. I have also been involved in mutually sponsored projects with American and Japanese manufacturers with the aim to improve American manufacturing Quality.

About five years ago I was hired as a Quality Consultant (moonlighting) to do an intensive, three-day evaluation of a problem an American company was having with their microwave ovens, which were being manufactured in China.

To make a 36+ hour long story short, the biggest problem they had was turnover of skilled labor, and hence training. All the practices for Quality were in place, all the tools were available, the designs were faultless, and so on. However, all too frequently their skilled workers would either not show up, or quit altogether without notice. We discussed the reasons why this happened, but regardless – the fact remained that this condition was the primary cause for the Quality problems. It took several days or longer for a competent worker to learn the necessary skills, and sometimes production demands could not wait for the training to be complete. So you can surmise the rest of the story yourself.

I strongly suspect that finding candidates with the basic talents needed to learn the necessary skills can be difficult and very time consuming in China. And then, being able to keep those employees after they are trained may be even more daunting. I suspect that toy manufacturers are faced with the same challenges.

Many Chinese companies do try to have Quality manufacturing, but the problem is that there are so many companies overall that even if the exceptions are but a fraction of the overall, that number may still be a very large number.

Consider that in 2010 China had by far the greatest number of ISO 9001 certified companies in the world – close to 300,000. But what good does that do if there are well over a million entities that ‘do’ manufacturing? By the way, that same year, the USA had close to 25,000 ISO certified companies, and ranked 9^th in the world.

Alex

You are 100% spot on with that observation.  I have heard from a number of manufacturers in this industry and others that this labor force situation ranks among the main reasons for quality control issues as well as other production-related problems.

Alex's assessment is spot on. 

I can attest to that, guys, if from the perspective on another industry (assembly of small and medium size electrical equipment). 

In addition, to be blunt, a person grows risk averse when dealing with Chinese suppliers. 

I am not casting aspersions on the Chinese themselves -- I feel the same about doing business in Thailand, Indonesia, and to only a slightly lesser extent in India or Brazil or Mexico: when you do business half way around the world, with people who grew up in another culture, who speak a different language whose nuances and subtleties, even if translated well, may escape you, where customs and courts are different and probably not entirely balanced with regard to the definitions of justice that you use, you become very risk averse and careful, only slowly growing your business with a manufacturer who says they can do the job,  and never putting all, or even enough, or your eggs in any one basket.

I'm sure Lionel and MTH feel the same way.

Actually not political at all. No one thus far has argued voting for any specific candidate or party. The debate thus far has been mostly economic and toy train business specific (which was the OP's original focus):

It has been about protectionism, or as it was called in the 17th Century: mercantilism.  It's been about Adam Smith/Ayn Rand vs Karl Marx & New Deal. Its been about  the consequences of allowing Smith/Rand free market dynamics run their natural course vs the obscenity of the Wall Street & bank bailouts by both political parties . It has been about wanton printing of money now almost worldwide, which has driven up food, fuel & commodity prices for everyone (including young Chinese labor & their need to support themselves & generations in their families).  Anybody for a little Malthus?

Trainwise? It's about giving your kid a toy train for Christmas and then both of you finding it DOA out of the box that morning. It's about importers raising prices in 2009 claiming rising labor, fuel and commodity prices & then never adjusting those prices after those inputs collapse in 2010. It's about using those expanded profit margins instead to expand into other gauges (S Helper Service) or new markets (Europe-1:45 scale) while cutting back here in the U.S. That's basic capitalism growth needs ... but growth where & subsidized by whom?

It's about blaming consumers (us) for being "part of the industry problems" because we insist on responsibility, reliability & value with new purchases, at a time when family wages are mostly declining and most of us are living with constant threats of givebacks, cutbacks, rising daily living expenses, and other financial threats. The absurdity of an importer/manufacturer whining about "having to do more' to turn a buck.  Anyone ever heard of the expression "what goes around, comes around?" The new one today is called (economic/political) "moral hazard."

Noise? Redundancy? You bet! There are only two appropriate messages here: you vote with your wallet & take it to the polls in November. Those words & expressions matter. Both are family economic  & toy train related!

One question I have:

Germany has:

1.  Very heavy "EPA" rules.
2.  Social Medical Care
3.  High Taxes
4.  High Wages

Yet, they have a strong ecomonic system, even to proping up the euro.  (They might have a stronger system if they were still on the Mark.)  Amazing even after unification.

What are they are doing right?

I do know their big business help by going tino the schools and have non-college students ready to go to work in plants.

They're making us more dependent on them!!!!!

Ralph-RJL

One question I have:

Germany has:

1.  Very heavy "EPA" rules.
2.  Social Medical Care
3.  High Taxes
4.  High Wages

Yet, they have a strong ecomonic system, even to proping up the euro.  (They might have a stronger system if they were still on the Mark.)  Amazing even after unification.

What are they are doing right?

As someone who lived in Germany for 4.5 years, the answer is simple:  Protection, hard-work ethic and an industrial policy which helps manufacturers instead of kills them.

Did you know that if you send a made in USA product to Germany,"Import Turnover Tax" of 19% is immediately placed on top?  19%!  Plus they have steep duties (tariffs).

According to "Export.gov",

"Germany's regulations and bureaucratic procedures can be a difficult hurdle for companies wishing to enter the market and require close attention by U.S. exporters. Complex safety standards, not normally discriminatory but sometimes zealously applied, complicate access to the market for many U.S. products. U.S. suppliers are well advised to do their homework thoroughly and make sure they know precisely which standards apply to their product and that they obtain timely testing and certification."

Wonder who'll have to pay for the cleanup & health problems after the EPA is abolished? If MSHA were also abolished, you could go back to the Good Ol' Days when if a miner died, the company's responsibility was to drop the corpse -- or what was left of it -- on the widow's porch with a eviction notice attached.  

Companies decided that "training" be eliminated and replaced with "education" paid for by taxpayers.

I have a feeling the original poster wanted to hear specifics like: the factory that makes everyone’s eunits burned down, toy assembly workers went on strike, there was a shortage of track pins, the box company can’t get decent cardboard, there’s no reliable internet service in one town or another, there was a flood, etc. This forum went right to the issue of world economics and politics. Unfortunately while you all are sitting here divided and flinging theories at each other, your kids and grand kids just went back to school to be educated cookie cutter / assembly line style in ways that promote further expansion of all the things being railed against. I___________________________________________________. When the present generation of students gets to voting age educated the way they are, and adds themselves to those already graduated of the past decade or two - then there will be no more division ....

[Edited to exclude blatant political comment]

Many will hypothesize, none of whom will be correct.

Pete

What I don’t understand is why Lionel seems to have less apparent problems getting out the product than other importers. I remember after the out of court settlement with MTH in 2007 and the realignment of companies in China people were saying that Lionel was going to have difficulty in finding producers for their product. Granting that QC has been spotty at best but they now producing the most advanced trains. Maybe it is because Lionel is the 300 pound gorilla in the third rail field they managed to find new producers in China . Be willing to bet their market share has risen since 2007 and nobody else comes close to making a full range of products.

Six of my 37 Army years were spent in Germany.  To answer some of your ??s

Germans have a HIGH work ethic.  They have a high play ethic.  They are social welfare conscious.  They take resposibility for THEIR actions.  Very few lawsuits/lawyers.  You're injured in an auto accident and you weren't buckled up - you are responsible for a high percentage of your injuries.  No tobacco laws.  Almost no alcohol laws.  Nudity is NOT public indecency.  They drink gallons of beer and eat miles of wurst but they walk, run, bike, and otherwise exercise the calories off.  Very few 'couch potatoes'.

They take evertything seriously - even their hobbies.

****, we all almost ended up speaking German.

Fewer lawyers, I think that is the answer to a lot of our problems.

And Cameries are asembled here and exported to Japan.

One other thing has canges than I was in school.  When I grew up, you purchased stock not on its "value", but if gave a "dividend", a share or of the profit.

Now, all you hear about is the stock "value", but who determines its value.

Now, to produce a "dividend", you have to produce a profit, and besides production cost, you have to satisfy the customer.  Seems today you NEVER hear about the customer.  No customer, no profits. 

Funny how far having high work ethics and a high level of personal responsibility will take a society...

Of course, Germany also had another thing going for it... someone else to provide for the bulk of their national defense over the last 67 or so years.

Andy

But it's not a simple, little, or isolated problem.  Those with real information certainly have posted on this forum describing at least some of the difficulties.  And it most definitely is a problem that has to do with Globalism and International Affairs, like it or not.

Very intersting thread. And thanks to Between A and B for a spot-on explanation of the difference between political and economic discussions. Let's not be so quick to tattle tale to sister Mary Margaret to shut down a good conversation.

I wonder if any of the train producing factories are/were in the region that has just been hit by earthquakes?

I do remember from my time in London lots of signs warning "Mind the Gap," "Mind the Step," etc.  The attitude was "Watch where you're going!" rather then "Blame somebody else."

Okay, we've now strayed far enough off the original topic so it's time to lock this thread.

Please don't sue me for doing so.