I took the time over the weekend to key in highlights from the 7th and final chapter of the landmark book BEHEMOTH, A History of the Factory and the Making of the Modern World which follow. These are about 10% of my own highlights. I truly went to school in this book, and encourage you to do so also:
From Chapter 7, “Foxconn City”, in the book BEHEMOTH, A History of the Factory and the Making of the Modern World
In 1972, there were 13.5 million manufacturing workers in the US, 2,000,000 of them working in factories with 2,500 or more workers.
Between 1978 and 1982, employment in the auto industry fell by a third, with more than 3 dozen factories closing in the Detroit area alone.
The technology company in China Longhua had, by some accounts, 400,000 workers. “The scale is unimaginable”
Foxconn, in 2016, employed 1.4 million employees in 30 countries, over a million of whom worked in factories in China in size from 80,000 to several hundred thousand workers.
At its peak in 2016, an astounding 350,000 workers made iPhones at a Foxconn complex in Zhengzhou.
The Huafang Group, a leading Chinese textile producer, had one factory complex with more than 100 buildings and 30,000 employees
The Taiwanese firm You Chen had 110,000 workers in one factory in China, making it the largest shoe factory in history
Two factors led to the latest chapter in factory giantism – the opening of China and Vietnam in the 1980’a to private and foreign capital; second the revolution in retailing in the US and Europe where merchants rather than manufacturers became the key players in design, marketing and logistics.
At first HK-based businesses aimed their operations in China at the domestic market….export-oriented manufacturing became increasingly prevalent first in the garment industry, then in footwear and plastics, and finally in electronics.
In the mid-80’s, there were an estimated 50-60 million migrant Chinese workers. In 2008, 120 million. By 2014, 270 million, nearly double the number of employed in the US.
….every iPad is assembled in a single factory and most iPhone models in just one or two.
In contemporary global supply chains, it is retailers and brands who have the most power to establish the arrangements and terms of production, not factory owners.
The severe global recession of the 1970’s and a series of subsequent developments unraveled the ties. With profit rates declining as a result of increased global competition, rising energy and labor costs, tight credit, and inflation, many American corporations, under pressure from corporate raiders, sought to reduce costs and shed less profitable operations. To become leaner and more flexible and show a rapid drop in spending, they began outsourcing to other firms functions they had traditionally performed themselves.
During the same years, a revolution in selling took place as well. It had two facets, the rise of new giant low-cost retailers and the burgeoning of global brand companies that that did little or no manufacturing themselves. In the US, the new mass retailers had their origins in the 1960’s, when a series of discount store chains, including Walmart and Target, were founded. But it was not until the 1980’s that they really took off. Walmart using a combination of low wage labor, low prices, advanced technology and highly efficient logistics grew into the largest retailer in the world.
Faced with the possibility of the loss of massive orders, companies that made goods for mega-retailers were at their mercy and often restructured operations to meet their needs and desires
“The more sophisticated companies work on wealth creation and demand creation, and they let somebody else do everything in between”
Logistical and political change made it easier to locate manufacturing at great distances……container shipping and expanded airfreight capacity increased the speed and lowered the cost of shipping. Cheap international phone rates, satellite communications and the internet improved communications. Lower tariffs reduced the surcharges on manufacturing across borders, as (Walmart et al) relentlessly pressured suppliers to lower their prices firms toured the world looking for low-cost regions.
In the mid-2000’s, over 1/3 of the world’s socks – 9 billion pairs a year – were produced in Datang, China not by one company but many. Production of neckties began in Shengzhou China in 1985 by one HK company……..soon managers left to start their own factories until the city became the global leader able to meet orders of hundreds of thousands of units at a time.