Thursday, February 21, 2013

China Holiday Roils Factories

[image]Getty Images

Migrant workers arrive at the Beijing Railway Station at the end of January. Every year, millions of China's migrant workers leave their factories to visit their families at home, but fewer workers are returning to the factories when the break is over.

For toymaker The Bridge Direct, Easter now begins in August.

That is when the Boca Raton, Fla., producer of Inkoos stuffed monsters and Justin Bieber dolls has to file orders with its Chinese suppliers to ensure delivery by the spring holiday. It used to place orders closer to the key selling period, which allowed it to get a sharper sense of demand and better manage its cash. But now the greater concern is making sure it doesn't get left shorthanded because of China's New Year holiday.

Associated Press

Migrant workers seek jobs at a labor market in Qingdao, in east China's Shandong province. Many Chinese start looking for jobs after returning from their family reunion in their hometowns during a week long holiday of the Lunar New Year.

The company is one of many from the U.S. and other countries that are closely watching China as factory workers slowly return this week from the country's long Lunar New Year holiday. Every year, millions of China's 250 million migrant workers leave their factories and travel across the country to visit their families at home. The problem for toy and apparel makers in particular is that fewer and fewer workers are returning to the factories when the break is over.

For the world's manufacturers, post-holiday no-shows are an increasingly frustrating part of China's tightening labor market. The trend reflects rising expectations among China's workers, who are seeking out higher pay even as they show less inclination to work in factories. Many workers use the break to look for new jobs or start families.

Demographics are exacerbating the problem. China's one-child policy, implemented in 1980, has already started to erode the labor supply. In 2005, there were 120.7 million Chinese people between the ages of 15 and 19, according to estimates from the United Nations. By 2010, the number had fallen to 105.3 million. By 2015, it is expected to drop to 94.9 million.

Another factor is workers at toy and apparel factories are shifting to more lucrative industries like electronics. Underscoring the draw of that industry, Foxconn Technology Group, which makes products for Apple Inc. and others, Wednesday said it is freezing hiring of assembly-line workers in China due to high employee return rates after the holiday. A spokesman for the company, formally called Hon Hai Precision Industry Co., said more than 90% of workers returned to the company.

Retention has historically been a problem for many manufacturers in China, which rely on the country's vast migrant labor pool. In 2010, 34% of rural migrant workers left their factory jobs to move back home, according to the most recent data available from the Rural-Urban Migration in China and Indonesia project at Australian National University.

The exodus is putting a kink in a long supply relationship that has reduced costs for American consumers while helping China flourish. For years, American companies have worked closely with Chinese factory owners to improve production times and reduce error rates. Now, changes in China's labor patterns are setting back that progress and forcing business partners to rework arrangements they thought had been nailed down.

The New Year exodus typically forces factories to rush to hire new employees, which often creates quality-control issues. Following the holiday last year, fewer people than usual returned to work at the factory Jordache Ltd. uses to make outerwear and activewear. Jordache CEO Cliff Lelonek said his team caught loose seams, holes and other problems after the break, which meant goods had to be resewn or made over.

The developments have American apparel companies scouring other countries for factory sites and have raised concerns in China. Officials in the province of Guangdong, a manufacturing hub in southern China, warned factories early this month to begin recruiting and urged local companies to help employees make sure they can come back to factories, for example by arranging return tickets.

The Human Resources and Social Security Department of Guangdong estimated that 10 million workers, or 61% of the province's migrant-labor pool, would head home to see their families for the New Year Holiday, with a return rate of around 90%, leaving a labor shortfall of up to 1.2 million workers after the holiday. The human-resources department said the shortage could be compounded by higher demand for factory workers, which it said climbed 15.2% in 2012 from a year earlier.

Jay Foreman, CEO of The Bridge Direct, said 15% to 30% of the workers at the factory he uses don't show up after the holiday. "We get delayed shipments because not enough workers return to the factory," he said.

The company has changed tactics as a result. In 2006, The Bridge Direct had committed to deliver 100,000 Care Bears dolls to a major retailer ahead of Easter. Issues with workers returning to the factory where the Care Bears were made caused heavy delays. In the end, the company had to send the toys by air instead of by boat, spending $7 apiece to ship toys it sold for $8 apiece.

Now, Mr. Foreman places his Easter orders in August, which protects him from dealing with delays related to the New Year because the orders get filled and shipped before the holiday break, but it also has its downside. Vendors used to be able to place Easter orders as late as November, giving them a better understanding of what might sell well. Earlier ordering also means vendors have to pay for their orders well before they can sell them to retailers, which can create cash constraints.

"Now, we have to make our bets so far in advance that it really creates a risk," Mr. Foreman said.

On the other side of that equation are workers like Yan Changsheng, who planned to celebrate this Chinese New Year by quitting his factory job, which paid him 2,200 yuan a month, or $352, to make pipes.

The 29-year-old native of central Hubei province has been working in the southern city of Shenzhen for the past five years. He is one of the many workers using the long break to cut ties with employers in hopes of finding higher pay in factories that produce televisions, mobile phones and other gadgets.

Mr. Yan, said the No. 1 factor in his departure is his salary. The factory where he has been working, Hua Han Technology Co., doesn't pay for food and has no dormitory. "There's almost nothing left by the end of the month," Mr. Yan said.

Shen Hongliang, a manager at Hua Han, said it offers competitive salaries and sufficient working conditions. Mr. Shen also said most Hua Han employees have returned to work from the holiday.

Toy maker LaserPeg Ventures, of Sarasota, Fla., works with three different factories in China. Each year, about 25% of the workers there don't return after the New Year holiday, LaserPeg Chief Executive Jon Capriola said.

Last year, the company received its orders 45 days late because of the New Year holiday. The delay meant hundreds of thousands of dollars in missed revenue for the company, which had sales of $17 million last year, the CEO said.

This year, Mr. Capriola didn't risk it. He doubled his order ahead of the New Year so that his toys were on the water and headed to Florida before the holiday even started.

"If you don't do that," he said, "you won't see anything until late April or the middle of May, and you can miss part of a season."

?Olivia Geng contributed to this article.

Write to Dana Mattioli at dana.mattioli@wsj.com and Laurie Burkitt at laurie.burkitt@wsj.com

A version of this article appeared February 21, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: China Holiday Roils Factories.

Source: http://online.wsj.com/article/SB10001424127887323864304578315872427597756.html?mod=rss_about_china

hunger games movie review bats hunger games review jeff saturday jason smith jon corzine austin rivers

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.