China: If you can’t beat ’em, join ’em

Like an ocean freighter brimming with containers and steaming full-speed ahead, nothing’s going to slow down the momentum and direction of China any time soon. With 23 percent of the world’s population and an annual economy increase of 9.5 percent, it’s clear that China’s consumption is massive and growing.
China’s global presence and manufacturing capabilities are expanding, and a parade of U.S. manufacturers are packing up and marching east.
So, my manufacturing friends, a challenging situation is upon us. It seems we’re all involved with China whether we like it or not. Very likely, many of your customers are formulating strategies involving China at this very moment.
Perhaps they are looking for lower manufacturing costs or perhaps market growth, or maybe both. Whatever their reason, if your customers are even glancing in the direction of China at all, odds are they will be shifting some manufacturing there soon if they have not already done so.
We all know the chilling outcome – with their manufacturing relocation, comes your loss of domestic business.
The word “crisis,” when written in Chinese, is composed of two characters; one means danger, the other opportunity. Instead of fighting the shift of manufacturing to Asia, consider embracing it as we did.
We’ve found ways to continue supplying to our customers whether their manufacturing is kept in the United States or moved to China. We have also positioned ourselves to sell into China’s market, helping us to broaden our market base.
Two years ago, we formed a WOFE (Wholly Owned Foreign Enterprise) in China. Since then, we have opened 3 factories there. Accordingly, we’re in the prepared position of swiftly responding to any of our customer’s supply needs no matter where the delivery needs to be. In some cases, we actually supply our customers their product on both sides of the world.
Ultimately, our customers win because they are afforded the ability to continue using a single source, no matter if they have multiple manufacturing locations.
It isn’t easy. Establishing your business in China won’t work unless you relentlessly invest time and money into talent and infrastructure. You will also need to be determined to put a great deal of resources into continuously cultivating your operation in China.
Sometimes, a more effective strategy for entrance into China is to team up with fellow manufacturers. American manufacturers can all help one another capture the great opportunities China offers.
Partnering has been part of our strategy right from the start. Along with the factory infrastructure we created, we also entered into two Joint Ventures with U.S. companies that were looking for expansion into China. Partnering with manufacturers in complementary industries is an option to be looked at seriously. Each company will be provided an opportunity to broaden markets and increase capabilities both here and offshore.
One thing is for sure, plain and simple, if you are a manufacturer and cannot establish a successful operation in, or connection with China, you risk losing customers. By accepting China as the world’s factory, we are all able to remain competitive suppliers domestically. By establishing our factories in China, we are able to participate in the growth. If you can’t beat’em, join’em!
Joe Hennessy is vice president of Hankscraft Inc.’s Global Manufacturing Group, a Reedsburg company that operates three factories in China. He can be reached at (608) 524-4341.
April 29, 2005, Small Business Times, Milwaukee, WI