Thursday, May 26, 2011

Global Sticks Moves from China to Thunder Bay

Jeff Rubin -- "Why has Global Sticks, a manufacturer of wooden ice cream sticks, moving from Dalian, China to Thunder Bay, Ontario? It’s the kind of low margin manufacturing that is never supposed to come back after it leaves North America for cheaper labour abroad.

But wage costs are no longer everything they were cranked up to be. In today’s world of soaring energy costs, power rationing and export taxes on key commodities such as wood, wage gaps are less important. When the power goes off, it suddenly doesn’t matter if your labor is expensive.  Factories don’t run on sweat alone."


Thunder Bay -- "The Global Sticks factory will produce up to six billion food-grade wood sticks each year from northern white birch, a species that is underutilized by the forestry industry. The decision to relocate to North America came as a result of the recognition that manufacturing wooden sticks in China was going to become a much more difficult and expensive process given increasing fuel costs. With assistance from the province, Global Sticks will switch from sourcing products from China to manufacturing products at a new, state-of-the art facility in Thunder Bay that created 50 construction jobs. The new plant will employ 130 permanent workers and produce a variety of wooden sticks used for ice cream bars, corn dogs, tongue depressors for doctors and nurses, and paint paddles (see photo above)."

MP: We can probably expect a lot more of this type of shift in manufacturing production from China back to Canada and the U.S.  The Boston Consulting Group predicts that "Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America."  Important factors include rising wages and prices in China, an appreciating yuan, and rising energy costs both for production in China and for shipping goods to North America. 

HT: Brad Parkes

14 Comments:

At 5/26/2011 8:26 AM, Blogger Larry G said...

I think we can expect to see more of this as plants become more and more automated.

There will be less and less jobs for the un-skilled or marginally-skilled and more and more jobs for highly-educated TECHNICAL not college workers.

Our school systems in the US produce two products:

1. college-bound even if the major does not have a real-world job ...

2. - barely literate who are not job-ready for the world economy technical jobs ....and who.. will.. need more and more entitlements including the institutional variety.

Other countries are training the non-college bound for real-world technical jobs that require the same core academics plus critically thinking skills for using technology to solve real world problems.

Our education system was once a world leader - but it stunted itself and did not evolve it's core mission to adapt to the world economy.

All the industrialized countries have NATIONAL curriculums and NATIONAL standards and the PISA assessments show the results.

 
At 5/26/2011 9:02 AM, Blogger morganovich said...

wouldn't you expect this to have to do with being need the raw material?

my bet is this has to do with trees (and perhaps power), not labor.

 
At 5/26/2011 9:04 AM, Blogger morganovich said...

"With assistance from the province, Global Sticks will switch from sourcing products from China to manufacturing products at a new, state-of-the art facility in Thunder Bay that created 50 construction jobs"

the other key phrase here is "with assistance from the province".

i'd be very interested to hear what that means. engineering? cheap loans? tax holiday?

i don't see labor as the issue here.

this is a pretty highly automated plant.

 
At 5/26/2011 9:12 AM, Blogger Buddy R Pacifico said...

The other North American country, Mexico, is seeing big gains in manufacturing also.

Mexico is making big gains in manufacturing:

"
Average Chinese manufacturing wages at just under $2 an hour are only 14 percent less than Mexican salaries as of this year, according to estimates by Mexico's Finance Ministry. Salaries south of the border were more than three times higher in 2002."

 
At 5/26/2011 9:25 AM, Blogger Rufus II said...

Transportation costs, and Productivity. Transportation costs, and Productivity.

We will see this play out time, and time again, in the coming years.

 
At 5/26/2011 9:42 AM, Blogger Larry G said...

the raw material is a renewable resource.. trees... and while there are a ton of them in Canada...the geography in China is similarly abundant.

Transportation has to be part of it but now days.. it appears that container shipping has lessened that advantage.

If they move this to Canada.. is it a world wide export deal or just a Canada/US deal?

 
At 5/26/2011 10:37 AM, Blogger morganovich said...

"and while there are a ton of them in Canada...the geography in China is similarly abundant."

i do not think that is true at all.

china is a big importer of timber, canada an exporter.

i doubt you can back up your claim with any actual data.

 
At 5/26/2011 1:36 PM, Blogger Larry G said...

" i doubt you can back up your claim with any actual data."

you are correct. it was conjecture and I note that while the area of the two countries is about the same - the population is not.

and that is the extent of my knowledge... I bow to your superior data.

 
At 5/27/2011 4:04 AM, Blogger Ron H. said...

"and that is the extent of my knowledge... I bow to your superior data."

This a good start, and a step in the right direction. Keep up the good effort, Larry.

 
At 5/27/2011 4:15 AM, Blogger Ron H. said...

"If they move this to Canada.. is it a world wide export deal or just a Canada/US deal?"

I believe you can find the true facts you are seeking at this unbiased credible site.

 
At 5/28/2011 8:43 AM, Blogger Bernie Ecch said...

I thought that Canada's socialized medicine destroyed jobs. Isn't that what the Republicans told us during the Obamacare debates. How can anyone open a popsicle stick factory in such a country?

 
At 5/28/2011 8:52 AM, Blogger Larry G said...

small businesses and industries that compete for world export markets are at a disadvantage when competing against their counterparts that do not have health care costs embedded in the cost of their product.

Those companies are also more nimble in terms of adding and subtracting employees as their costs are fairly predictable.

Companies that utilize govt-sponsored universal health care do not have to worry, for example, if a potential new and talented employee comes with significant health care burdens that could impact their group insurance rates.

Germany has a successful Mittelstand economy that would never work without national universal health care.

" Germany's Mittelstand companies (SME) are a very important part of the country's economy. In 2003, these companies employed 70.2% of all employees in private business, according to the Institut für Mittelstandsforschung. Many Mittelstand companies are export-oriented. They focus on innovative and high value manufactured products and occupy worldwide niche market leadership positions in numerous B2B segments.[1] They are typically privately owned and based in small rural communities."

http://en.wikipedia.org/wiki/Mittelstand

 
At 5/28/2011 12:33 PM, Blogger Ron H. said...

"small businesses and industries that compete for world export markets are at a disadvantage when competing against their counterparts that do not have health care costs embedded in the cost of their product."

This is nonsense. You are just making this up. What is your reference for this? Do you have examples?

"Those companies are also more nimble in terms of adding and subtracting employees as their costs are fairly predictable."

More made up stuff. What supports this sweeping claim?

"Companies that utilize govt-sponsored universal health care do not have to worry, for example, if a potential new and talented employee comes with significant health care burdens that could impact their group insurance rates."

Neither does anyone else with group coverage.

"Germany has a successful Mittelstand economy that would never work without national universal health care."

More opinion. How can you write with such certainty, about things you don't know, and haven't supported?

 
At 6/07/2011 12:24 AM, Blogger Craig said...

It is interesting that there is discussion about Chinese manufacturing shifting to North America. This plant was formed largely by the closing of another North American plant. Global bought out Solon Manufacturing in the U.S. and moved the operation to Thunder Bay.

 

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