Main savings came from lower overhead costs for plan, maintenance, electricity, payroll and the ability to get out from the soaring costs of providing health benefits to US manufacturing employees.
December 2003 The NY Times painted a dismal picture of working conditions at the Kin Ki factory that manufactured the EAS. According to official Kin Ki publications : “ workers at Kinki make a decent salary, rarely work nights or weekends and often hang out along the streets, playing Ping Pong and watching TV. They all have work contracts, pensions and medical benefits. Canteen offers tasty food and the dormitories are comfortable.”
According to Joseph Kahn the Times reporter; Kahn alleged that the employees were mostly teenage migrants from internal Chinese provinces, work long hours for 40 percent less than the company claims. They are paid 24 cents per hour, below the minimum wage of 33 cents a hour.
Most do not have pension or medical benefits. Productions tarts at 7:30 am and continues until 10 pm
With breaks only for lunch and dinner.
Saturdays and Sundays are treated as normal workdays. This translates into a work week of 7 12 hour days or 84 hours a week. Well above the standard 40 hour work week. Set by authorities in Shenzhen. Workers sleep head to toe in tiny rooms with windows that are covered with chicken wires. To get into and out of the factories which are surrounded by high walls, workers must enter and leave through a guarded gate. As for the tasty food it is apparently a mix of boiled vegetables beans and rice with meat or fish served only twice a month.
The workers at Kin Ki have apparently become restless. They went on strike twice in 2003 demanding higher wages and better conditions. The company responded by raising wages a few cents and allotting an extra dish of food to each worker per day. Senior executives deny that organizers of the strike were fired for voicing out their concerns.
Ohio’s CEO stated to the Times reporter that he considered KinKi’s executives to be honest and that he had no knowledge of labor problems there. But he said that he intended to make a visit to China soon to make sure that they “ understood what was expected”
One memo preparing workers and supervisors for an inspection in September 2001, urged workers to help the factory "cope with clients."
"Foreign clients made unattainable demands during previous inspections, including on limiting overtime," the memo said. "But when you think about it, you come from all over the country to make money, not to rest."
A more recent memo, issued to prepare for an inspection that took place on Nov. 26, urged workers to memorize false numbers for wages and working hours to reflect Shenzhen's regulations. The memo promised bonuses to workers who responded as directed when approached by inspectors.
Workers said the elaborate ruse had one happy result. Because few of the employees have legal work contracts on file, the factory must pretend that its work force is smaller than it is when inspectors visit. On such days most of the factory's 850 workers get a rare treat: a day off.
On Nov. 26, with an inspection under way inside the plant, workers congregated in their rented homes or food stalls to eat, chat, smoke and gossip.
"I thank the inspectors for one thing," said a Kin Ki worker from rural Sichuan. She was crouching over a bucket of cold water in the warm afternoon sun, washing her hair. "I needed a rest," she said.
According to Porter’s Five Forces Model; a heightened Bargaining power of Buyer’s can limit the profitability of suppliers. In this case, Wal-Mart can dictate to its suppliers just about anything it wants. Some suppliers devote 70 to 80 percent of their production to Wal-Mart, and are particularly vulnerable.
Wal-Mart wants to bargain a lower wholesale price, the supplier is forced to accept it. Suppliers are then forced to pay their workers less, cut benefits, and if there is a union involved, “get tough” at the bargaining table. Suppliers eventually are forced to go to Mexico, China, or Sri Lanka if they wish to continue to produce the goods for large buyers such as Wal-Mart.
In this event, Ohio Art, was pressured by Wal-Mart to produce a product that could sell for under $10. In 1960, Etch A Sketch sold for $3.99, and with inflation would sell for $23.99 in today’s prices. Ohio Art moved production to Shenzhen as a survival tactic to keep the business.
Ohio Art Company seems disoriented from their overseas operations. They have lost control of the operation in order to sustain profitability. The total savings in labor and overhead costs can be altered to build adequate facilities abroad with excellent working conditions and benefits for the workers while maintaining cost savings. Ohio Art Company should be in better contact with their manufacturer abroad. There should be direct supervision of conditions. A mission statement should be written and posted for all employees to see when going to work. There should be a clearly professed level of standards and expectations with a full support from the upper hierarchy to ensure conditions and standards are met. Compensation does not necessarily need to be increased but the overall environment would raise the level of morale for the workers.
Offering bonus incentives for management to comply with local laws and regulations will prevent management from deceiving officials about working conditions’ facts and figures. This would encourage a positive atmosphere from the top downward creating a leadership dedicated to ethical conduct and treatment of employees and compliance with local code. Instilling a stronger international awareness in Ohio will also help their effort. A need for a stronger awareness was sensed in the articles about Bryan, Ohio. They should send executives to China more often to improve the operations by instilling a sense of corporate culture and establishing an expectation upon the local management.
Germanson, Ken People's Weekly World Newspaper, 12/11/03
New York Times: “Ruse in Toyland: Chinese Workers' Hidden Woe”, December 7, 2003