As the credit crunch spreads across the globe, manufacturers will increasingly look for ways to bolster the bottom line through efficiency. Milwaukee-based Rockwell Automation helps manufacturers automate, monitor and control their manufacturing processes and thereby lower costs. The firm has annual revenues of around US$5 billion, roughly US$700 million of which come from the Asia-Pacific region, and has been in China for 20 years. Rockwell’s president for the region, Keiran Coulton, spoke to CHINA ECONOMIC REVIEW about the company’s outlook for the China market amid the current financial crisis and a new slate of product and food safety concerns.
Q: Has the recent series of product safety issues led to more interest in China for Rockwell’s products?
A: Of course we were very proactive in letting people know what we offer. Rockwell is a major supplier in China; 80% of our customer base in China is made up of domestic Chinese manufacturers. What the recent food and product safety concerns do point to is a need, no matter where you are in the world, to be in control of the supply chain – and at Rockwell we have the type of systems that will allow you to manage your supply chain from farm to mouth. One thing to bear in mind is that the types of products we supply rely on information. This isn’t something that is dramatically new, it’s more a matter of how one uses the data that’s already available.
Q: Supply chain control aside, what else do firms gain by installing these systems?
A: There are a number of benefits to having such a track and trace system in place. You have cost-avoidance in that you can narrow down any incident to specific batches. China is beginning to adopt these good business practices at a very fast pace for no other reason than they can’t afford the wastage that goes into other systems.
Q: Will the current financial crisis lead even more Chinese manufacturers to cut corners in the manufacturing process?
A: While there is a financial crisis going on, China is its own very large domestic market. I think we will see deflationary pressures through all parts of the supply chain, including the end result. There is a huge move from both multinationals and from domestic suppliers to get the cost base down. Will that lead to cutting of corners? It shouldn’t. One thing I see from the Chinese government is a very swift response to challenges, and I think if you continue to cut corners, you cut corners at your peril. There’s no reason people can’t meet the cost targets in other ways. For example, we’re seeing just a huge increase in inquiries in things that save money instantly by reducing operation costs. If you reduce energy costs, it’s basically cash because you no longer need to pay as much for energy. That can be used to bolster some of the other operations, which includes investing in manufacturing automation systems.
Q: How does China compare to the rest of Asia as a strategic market for Rockwell?
A: Our two fastest-growing businesses over the past five years have been in India and China. China has much more of an export market as well as a very large domestic marketplace. The GDP growth in China is projected to stay healthy for many years so we feel confident about our continuing investment here.
Q: How significant are the different levels of infrastructure between China and India?
A: India has some strong GDP growth but infrastructure gets in the way. It’s a little more difficult to build things and collaborate because the infrastructure across the country isn’t as good as China’s. The other big difference is that India doesn’t necessarily rely on exports because one of the tasks it has is to bring its people out of two-dollar-a-day poverty. But we see good growth in India as we go forward. As far as the rest of Asia goes, there’s more foreign direct investment going into Vietnam than in anywhere else in Asia, so clearly we see some future opportunities in Vietnam and in Indonesia. Nonetheless, in the big economies of China and India we see continued growth for a number of years.