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China low-ball pricingIn the early 1990s, China was merely a low cost place to make labor-intensive products. Now the country with the world's largest population has become the most powerful force in manufacturing.
Prices for Chinese manufactured goods are typically half of comparable U.S. and European products, which gives China a strong competitive advantage. But here's something most people don't realize - it's not low-cost labor - it's low-ball pricing. China simply accepts much lower profit margins.
U.S. businesses develop products with 50-60% gross profit margins and 10-15% net profit. Developing countries (other than China) look for 30-35% gross-profit, or 5-10% net-profit. China accepts gross-profit margins of only 5-7%, with 0-2% net-profit. Therefore, even with comparable manufacturing costs, Chinese products are the cheapest.
Here's a simple example to illustrate the point: Let's say a product costs $40 to manufacture. In the US the target selling price will be $80; in other countries, typically $60.
The Chinese would sell that product for just $45, maybe even $ 40 (zero margin). This astounds most outside observers-how can a profit making enterprise survive (capital and cash flow) with no profit?
The answer: In China, short- and medium-term operating deficits are acceptable since the government manipulates and controls capital. Chinese planners recognize the demand for short-term profit as the Achilles' heel of Capitalism. Their own primary strategic objective is long-term global market share. The tactics: a/ High volume; b/ Fast response; c/ Immediate local employment; d/ High investment in automation and quality to maintain price leadership.
For America, the remedies require significant attitude shifts. Our short-term financial mind-set must change. Business needs to realize continual quarter-to-quarter increases in revenue and profits cannot continue on and on with work that is done elsewhere in the world.
It must be recognized that manufacturing and job creation are not just political or business manipulations, but the building blocks of society. To be competitive in global markets, it's important to keep investing in jobs, to upgrade factories. Entrepreneurship and talent must be encouraged and stimulated to thrive in the manufacturing sector.
Whither Automation Skills?Many people think that the automation industry is quickly developing a "skills shortage" which will occur after the current generation of engineers retires. Where will the new engineers and technicians come from to operate future factories and process automation plants?
In the old days, instrumentation technicians and engineers were not really computer literate. And process engineering skills had to be acquired through a long "apprenticeship" - often years, and even decades. The problem today is that corporate administrators are simply extrapolating those old patterns of employment.
As industry transforms into a high-tech workplace, the new generation of automation engineers and technicians will be completely different. They will have grown up with computer games, the Internet, PDAs and cellphones. Some computer games are more complex than typical control or monitoring systems. By comparison, the software tools and smart equipment in today's control rooms should be a cakewalk.
Sadly, large end-user company policies are still measuring progress by obsolete learning standards. And this is why bright youngsters shun jobs in factories and plants, and go off looking for careers outside the automation business.
The Instrumentation, Systems and Automation Society (ISA) is working diligently to develop the image and value of "certified automation professionals". But progress is stymied by lack of recognition of the profession. Here's the key question: will automation professionals be recognized with higher base pay and faster advancement? Without that recognition, certification is worthless.
ISA's challenge is to convince employers of the merits of the CAP program. If there's a big pay differential that comes with CAP certification, engineers will want to achieve that status. Right now, it's just eyewash.
Dick Morley, father of the programmable logic controller (PLC), and co-author of the book, "The Technology Machine - how manufacturing will look in the year 2020", suggests that the remedies require significant social change, a modification of the mind-set.
Young people must "feel" that engineering is significant work. Pay scales must change, to encourage the brightest and best to become engineers and innovators. Manufacturing people must be considered and respected as professionals. Heroes of engineering and manufacturing must be recognized and lauded.
The Technology Machine How manufacturing will look in the year 2020
Religion in AmericaWhile religion is declining steeply in most European countries, America is still a stronghold of Christianity. So Pope Benedict's visit last week was a big event to revitalize the Roman Catholic church and prepare it for an uncertain future.
To get some perspective on the growth/decline of world religions, here are some numbers. There are 2.2 billion Christians in the world, and 1.1 billion Catholics (1 billion other Christian denominations).
While Catholicism is declining steadily, especially in Western countries, the number of American Catholics is steady because of the large immigrant (especially Mexicans) population. America is No. 3 in the world-ranking for the most Catholics, after Brazil and the Philippines.
Here is a summary of religions in America (Source Adherents.com):
Global get-together - Pangea DayOur world is becoming ever smaller/flatter/more inter-connected. All the issues that matter - war, terrorism, poverty, disease, human rights, environment, climate change - can only be tackled from a global perspective.
The people supposedly trying to solve them are almost all serving narrow mandates on behalf of their own nation, religion, business or community. There's a terrifying mismatch between the nature of the problems and the means the world is deploying to tackle them.
"Pangea" defines the supercontinent consisting of the whole land area of the globe before it was split by continental drift. Pangea Day plans to use the power of film to bring the divided world closer together. On Saturday, May 10, 2008 many locations around the globe will be linked to produce a 4-hour program of films, music and speakers, broadcast live at the same time across the world. This is a powerful, first-of-its-kind experience.
Gathered in homes, movie theaters and larger venues, a marathon Pangea Day session will feature a remarkable program of films and talks celebrating our common humanity. If you consider yourself a global soul, this could be one of your year's highlights.
While you can watch Pangea Day alone, it should be watched as a community event, to get the sense of the great global village gathering around a campfire. There are already thousands of self-organized screenings taking place in homes, clubs, and movie theaters.
Today's media has the power to humanize, to help people make the mental switch from "them" to "us". Telling stories through film is especially powerful. At the start of a film, you may see some strange-looking people in many parts of the world. At the end you'll feel kinship. It's just a natural mental repositioning.
Pangea Day - Saturday, May 10th (11am-3pm US West Coast, 2-6pm US East Coast, 7-11pm in UK, 8pm-midnight in Europe and Africa, 9pm-1am in the Mideast, 11.30pm-3.30am India, etc.
Please help spread awareness of Pangea Day.
Eckhart Tolle's New Book: "The New Earth"I'd like to share with you a different and enlightening experience. Millions of people from around the globe have been watching a webcast which features Oprah Winfrey and Eckhart Tolle discussing his recent book, "A New Earth - Awakening to your life's purpose".
I had read Eckhart Tolle's previous best-seller, "The Power of Now" and felt it was significant. So, I bought his new book and enjoyed it immensely. And then I caught one of the webcasts on a Monday night, 6-7:30 PM. Evidently more than 700,000 people were connected, around the world - this gave me an amazing feeling of inter-connectedness.
The book has 10 chapters; each week, people would read a chapter and discuss it together with Oprah and Eckhart Tolle, connected via Skype audio and video hookup from other places around the world. I was hooked.
Not aligned with any particular religion, Eckhart Tolle describes how transcending our ego-based state of consciousness is the key to ending conflict and suffering. He shows how to awaken to a new state of consciousness and follow the path to a truly fulfilling existence.
Hey, it's working for me - read the book yourself. There are only two more chapters (9 & 10) remaining for the live webcast - Monday April 28 and May 5, 2008. But, you can download past videos from Oprah's website.
Spiritual awakening is not an option anymore, but a necessity if humanity and our planet are to survive the madness, the collective egoic dysfunction. Read this book (and watch the webcasts) to understand and initiate the awakening of your own consciousness.
You know what? I made my own guru-debut. Watch my YouTube video, "Living in the Present Moment, Here and Now". This is a 10 minute meditation which you can do anytime to help you focus and refresh your mind. Please let me know what you think of it.
eFeedbackEldon Ault [email@example.com] reflects on how low-price attitudes corrupt quality in controls and automation systems:
"Reflecting on my career I realized (too late!) that my job in instrument engineering a plant was in conflict with how most project managers and engineers were evaluated; i.e. they were in large part evaluated on how much under budget they completed a particular project. The greater under budget the bigger the 'atta boys'. We instrument engineers were constantly badgered about the cost of the instrumentation.
"Now I admit that I could have cut the costs of many of my projects by huge percentages by purchasing low quality instruments. But this was not in the best long term interest of the company. Why buy something cheap when it would need replacing within a year while a more reliable piece of equipment, although more expensive initially, would last for years?
"I don't think this conflict of interest is often recognized by most management types and the constant pressure put on the I&C personnel is not appreciated."
"While, the initial goals of the invasion does not seem to pass even a modest cost/benefit analysis, the truth is that dramatic events are judged in history, 10-15 years from now. I am circumspect about measuring them in the passions of the current political heat.
"I feel this view about political discourse is consistent with my reaction to the weekly, monthly, and quarterly pressure on good companies to make the 'numbers', at the expense of looking out for the honest, long-term health of the business.
"We remain in your debt for advancing the discussion of industry, in the context of the social, moral, and environmental issues we share."
"However, the Yuan was decoupled from the dollar in mid 2005. It is still controlled, but has been allowed to appreciate gradually. (Maybe that is what you meant by pegged.)
"When I first came to China it was at 8.3 to the dollar and it just reached 7.0. It has been on a steady march in one direction. If it was not so difficult to get money into China, and more difficult to get it back out, I would have moved a bunch of it here long ago.
"The U.S. electorate on average is as dumb as a box of rocks and our politicians cater to them perfectly. I yearn for a politician who talks to us like grown-ups. It is sad to watch the decline of the United States and feel so helpless to do anything about it. While democracy is wonderful, China's corporate style government is accomplishing amazing things. I do not know if will take 20 or 50 years but China is going to run all over the U.S."
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