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[h=2]The S’poreans-first CEO: My labour cost is only 8% of total manufacturing cost[/h]
April 23rd, 2013 |
Author: Editorial
Dr Moh Chong Tau (2nd from right) with his Singaporean staff. (Photo ST).
It was reported in mainstream media that the CEO of precision engineering company Makino Asia, Dr Moh Chong Tau, said that his direct labour cost is only about 8% of his total manufacturing cost, despite hiring mostly Singaporeans. Makino Asia is Japanese-owned but locally managed by Singaporeans.
Dr Moh said, “Some companies want to take the easy way out. They hire foreign workers because they want to get people easily, are not willing to train them and want to pay less. In our case, we don’t look at salary as key. My direct labour cost is only about 8 per cent of my total manufacturing cost. So what if I get a foreign worker who is 30 per cent cheaper, it will only affect me 1 per cent net, but I lack the stability, quality and reliability. And he will occupy the time of my supervisors, human resource people and trainers. He is here to stay for two to three years and only interested in making money. Whereas (when) you have a local, their life is with you. If we do well, they do well, it’s reciprocal.”
A decade ago, Dr Moh started doing away with foreign workers and replacing them with older Singaporeans. He in fact, even increased his revenue five times. Back in 2002, there was a downturn and it made it hard for the company to renew work permits. At that time, he had 220 production workers of which 40% are foreigners, mostly from China and India. Once their contracts were due, he sent them home.
About a quarter of his foreign workers were skilled enough to apply for permanent residency (PR), so he kept them and coaxed them to become Singapore citizens eventually. In fact, his condition for staff who want to make it to general manager is that they need to hold a ‘chilli-red’ Singapore passport.
He took the opportunity of the downturn to increase automation in the factory. He also instituted a four-day week, and aggressively recruited older Singaporean workers who were laid off in droves during the 2002 downturn. He paid them 50% more than what a fresh recruit would earn. He re-engineered the production process so as to simplify jobs for the workers. They worked from Mon to Thur and Fri was considered an overtime day, paying 1.5 times the usual rate. This helped to increase salaries by a third for those workers who wanted to earn more.
Most of the middle-aged hires have stayed on with the company even after a decade. Many have moved up the ranks to become supervisors and managers.
Today, half of Makino Asia’s 480 employees in Singapore are above 40. A fifth are above 50. His oldest employee, a lead technician, is 68. 25% of his 160 production workers are PRs and Malaysians while 75% are Singaporeans. The other 320 employees who are in administrative, finance, sales and marketing are largely Singaporeans also.
In fact, he wants to reduce the Malaysian production workers from the current 20% to a maximum of 10% in 3 years’ time. He reasons that as wages increase in Malaysia, there will be less incentive for them to come to work in Singapore.
He’s now aggressively recruiting young ITE graduates to make up for the shortfall. He is currently paying ITE graduates $1,300 but with quarterly increments and incentives, they can earn a minimum of $1,650 within 2 years. He is also piloting a scheme to deliver components to housewives looking to supplement their family incomes to assemble in their free time at home. This is being extended to several associations for the disabled.
Machines produced in Singapore cheaper than those from China
When asked about manufacturing cost being lower in China than Singapore, Dr Moh replied, “I never believe in chasing costs. China and other countries may be cheaper in labour but the other costs of doing business are expensive: the unseen administrative costs, productivity costs and human relations costs. People always ask, why don’t we go to China or India in a more aggressive manner and why Singapore still remains our major manufacturing base.”
“The bulk of our machines – about two thirds – are built here, China and India make the other one third, though they represent two thirds of demand. Why? Because we’re able to effectively use our labour here in a way that is more productive. Today, some of the machines I produce here are cheaper than what I produce in China.”
.
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It was reported in mainstream media that the CEO of precision engineering company Makino Asia, Dr Moh Chong Tau, said that his direct labour cost is only about 8% of his total manufacturing cost, despite hiring mostly Singaporeans. Makino Asia is Japanese-owned but locally managed by Singaporeans.
Dr Moh said, “Some companies want to take the easy way out. They hire foreign workers because they want to get people easily, are not willing to train them and want to pay less. In our case, we don’t look at salary as key. My direct labour cost is only about 8 per cent of my total manufacturing cost. So what if I get a foreign worker who is 30 per cent cheaper, it will only affect me 1 per cent net, but I lack the stability, quality and reliability. And he will occupy the time of my supervisors, human resource people and trainers. He is here to stay for two to three years and only interested in making money. Whereas (when) you have a local, their life is with you. If we do well, they do well, it’s reciprocal.”
A decade ago, Dr Moh started doing away with foreign workers and replacing them with older Singaporeans. He in fact, even increased his revenue five times. Back in 2002, there was a downturn and it made it hard for the company to renew work permits. At that time, he had 220 production workers of which 40% are foreigners, mostly from China and India. Once their contracts were due, he sent them home.
About a quarter of his foreign workers were skilled enough to apply for permanent residency (PR), so he kept them and coaxed them to become Singapore citizens eventually. In fact, his condition for staff who want to make it to general manager is that they need to hold a ‘chilli-red’ Singapore passport.
He took the opportunity of the downturn to increase automation in the factory. He also instituted a four-day week, and aggressively recruited older Singaporean workers who were laid off in droves during the 2002 downturn. He paid them 50% more than what a fresh recruit would earn. He re-engineered the production process so as to simplify jobs for the workers. They worked from Mon to Thur and Fri was considered an overtime day, paying 1.5 times the usual rate. This helped to increase salaries by a third for those workers who wanted to earn more.
Most of the middle-aged hires have stayed on with the company even after a decade. Many have moved up the ranks to become supervisors and managers.
Today, half of Makino Asia’s 480 employees in Singapore are above 40. A fifth are above 50. His oldest employee, a lead technician, is 68. 25% of his 160 production workers are PRs and Malaysians while 75% are Singaporeans. The other 320 employees who are in administrative, finance, sales and marketing are largely Singaporeans also.
In fact, he wants to reduce the Malaysian production workers from the current 20% to a maximum of 10% in 3 years’ time. He reasons that as wages increase in Malaysia, there will be less incentive for them to come to work in Singapore.
He’s now aggressively recruiting young ITE graduates to make up for the shortfall. He is currently paying ITE graduates $1,300 but with quarterly increments and incentives, they can earn a minimum of $1,650 within 2 years. He is also piloting a scheme to deliver components to housewives looking to supplement their family incomes to assemble in their free time at home. This is being extended to several associations for the disabled.
Machines produced in Singapore cheaper than those from China
When asked about manufacturing cost being lower in China than Singapore, Dr Moh replied, “I never believe in chasing costs. China and other countries may be cheaper in labour but the other costs of doing business are expensive: the unseen administrative costs, productivity costs and human relations costs. People always ask, why don’t we go to China or India in a more aggressive manner and why Singapore still remains our major manufacturing base.”
“The bulk of our machines – about two thirds – are built here, China and India make the other one third, though they represent two thirds of demand. Why? Because we’re able to effectively use our labour here in a way that is more productive. Today, some of the machines I produce here are cheaper than what I produce in China.”
.
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