Material Handling In the Century of the Pacific

July 1, 2004
Chinas influence in all things manufacturing is making headlines in the business newspapers, but what does that influence mean to the material handling

China’s influence in all things manufacturing is making headlines in the business newspapers, but what does that influence mean to the material handling industry? Is there a brain drain of material handling innovation leaking out of the U.S.? We asked John Nofsinger, president of the Material Handling Industry of America, if China’s competitive young population of engineering talent will have an effect on state-of-the-art material handling in the U.S. Here’s that interview. — Tom Andel, chief editor, Material Handling Management

MHM: John, a recent Wall Street Journal article reported that German technology companies were increasingly outsourcing their engineering to China. Years ago this would have been unheard of. Engineering has always been Germany's lifeblood. What's your assessment of this situation?

Nofsinger: A lot of our members have been building Western-quality products in China for years. Those historically have been fairly narrow and tightly controlled relationships, where the U.S. partner was in the loop. The domestic industries have upgraded their global capabilities, both in the investments they're making in infrastructure, and also the investments they're making in people. They are every bit the caliber, as far as their skill sets, as engineers in other parts of the world. They've set an objective in three or four years to be exporting cars to Western standards. Even though Buick and others have big facilities in Shanghai, they're typically not product that would play well in the West. They're committed to overcoming that. In our businesses, a lot of the sophisticated companies still have origins in other countries. Some of the basic material handling companies that sell storage and racking are developing a fairly substantial internal industry, and some of the product is finding its way into North America. For all intents and purposes, most of their engineers graduated from UCLA.

MHM: Universities in China are starting to pump out high-quality engineers, as well.

Nofsinger: I've been in Wuhan and Suzhou, which are industrial cities in China, and they have spectacular technical universities that historically specialized in huge infrastructure projects, like dams and bridges. In recent years they've been addressing national logistics strategies. Their students are also being educated all over the world and taking that back to China. As a country they have so many internal issues to deal with — the same problems Japan has had with internal distribution. But they're designing everything to be competitive anywhere in the world. If the last century was the century of the Atlantic, this one will be the century of the Pacific.

MHM: That begs the question, with the U.S. having very few U.S.-based material handling equipment manufacturers, will America's material handling influence further degrade?

Nofsinger: I don't think so, as long as we have a $10 trillion economy. Our way of approaching things is a great deal more creative. The Chinese are much more Western than other Asian countries, particularly Japan. Their culture is not quite so insular or vertical. They show more emotion and are more curious, where the Japanese work within defined boundaries. The Chinese are more like us. As competitors they'll be much more formidable for new technology and applications that require quick thinking than other Asian countries where they don't teach thinking out-of-the-box.

I've said to some of our members, who've seen this as bad, that China's bringing these products in at less cost than our cost of doing business. U.S. manufacturers may need to revisit what differentiates them in the eyes of the customer. Maybe you'll reach the point where you should be buying your stuff from China. Then you should be the one out there saying who cares whether you make it or not, you're out there solving problems [in the U.S.] with the best products you can get.

MHM: If you can't beat them join them?

Nofsinger: Maybe. A lot of companies will come to that point. A lot of companies that are capable of it will physically be there, both to service the huge Asian markets and to protect their flanks a little bit. Most of the big systems groups are capable of deploying systems from virtually any part of the world because they have organizations in those places.

MHM: Should we be pumping more money into engineering education here in the States?

Nofsinger: When you look at the advance-level engineers coming out of our schools, there's been an exodus of foreign nationals. In the past they stayed here. Now they can go home and make a pretty good living, sitting at a computer and living in a hut. Our engineering communities have a lot of work to do to encourage young people to stay here and get into these fields.