Massachusetts entrepreneur Jamey Bennett thought manufacturing in China was a no-brainer when he wanted to start making his product, a rectangular, page-size light that slips over books and provides unobtrusive bedroom reading.
Instead, he said, the 2002 product launch soon became a nightmare of problems. The result was blown market opportunities, like shipping late for the holiday shopping season. The delays ended up costing him an estimated $1.5 million in lost sales last year.
"I was pleased at first because we had created something out of nothing," Bennett said in a recent interview. "The problem was that we were not getting the attention we needed on small, but obvious, quality issues. We were not getting any help with minor design modifications. We were not getting any flexibility in making changes to packaging and product."
Eventually, his product's reading lenses began arriving covered in a mysterious goop. His worries crystallized with a late-night phone call to his Asian manufacturing subcontractor to try to resolve a problem.
"There are five minutes of Chinese going solid among four different people and you get a one-word answer back," said Bennett, chief executive officer of LightWedge LLC in Nantucket. "Your confidence level just goes out the window."
Bennett said he took the product to China to save money - it was about 30 percent cheaper to mold and manufacture there compared to bids from the United States. But he quickly became immersed in manufacturing problems, a major drag on his fledgling, three-person firm. The company lost crucial focus on developing new products and thinking strategically.
He switched suppliers in China, only to find the second one worse, before eventually pulling the work back and awarding it in August 2003 to Canon Virginia Inc. The Newport News, Va., injection molding plant owned by Tokyo-based Canon Inc. currently makes about 2,000 of the LightWedge units per day, Bennett said.
On one level, the story runs counter to some conventional wisdom and the barrage of news reports about manufacturing flooding to low-cost locations. Work going to China and then coming back to the United States has a definite "man bites dog" appeal to U.S. manufacturers.
But Bennett, who co-founded Internet banking giant LendingTree Inc. before leaving in 2000 (with an estimated payout of some $2 million, according to Forbes magazine), cautioned against reading too much into his story. He said he considers his experiences unique to a new firm like LightWedge.
"I got to the point where I realized that unless I had somebody there looking out for me, I was going to spend a week out of every month in China," he said. "With three full-time people on our staff, that just wasn't an option. Coming back here was the way we decided to deal with it."
The decision was strictly economic. Canon, for instance, continues to buy its printed circuit boards and tooling for the product from China.
And Bennett said he will consider taking all the manufacturing back to China if production scales up. He said it costs him $8.50 to make the lamp in Virginia, compared with $7 in China. Various models retail for $25-$45.
Charlotte-based industrial design firm Bolt Group Inc. worked closely with Bennett to develop the LightWedge. In a presentation with Bolt President Bob Gibson at the Plastics Encounter Management Day conference, held March 24 in Charlotte, Bennett acknowledged Bolt had advised him against taking production to China. But he was lured by the potential of lower costs.
Bennett said he will not be as quick next time to assume a new firm will save much money in China. And he realizes the project management challenges can be overwhelming.
He picked a "friend of a friend" to guide production in China, and while initial signals were good, problems quickly developed. He said it became apparent that the manufacturer did not have enough experience. Making changes proved very difficult, for example, when LightWedge sent color chips to get the right color on packaging, and then got back samples "that looked like the person who was looking at it was colorblind," Bennett said.
"No matter what we said and how we said it and how we went about it with our supplier in China, we couldn't get them on the dime," he said.
The second Asian supplier was worse. Finished products could not even be sold in stores - they arrived with lenses covered in "little goopy boogers" when the protective film was removed, Bennett said.
" 'Goopy boogers' does not translate into Chinese," he said. "We could not get the problem solved."
When LightWedge finally shifted the work back to the United States, Bennett walked away from $45,000 in tooling in China, which he said he still is trying to get back.
Costs were higher in Virginia, but with a factory in the same time zone, many of the headaches disappeared. It's easier to discuss where the business is heading, and manufacturing now is transparent - Bennett said he knows who the key Canon subcontractors are, a marked shift from China, where "they didn't want us to know anything."
He said Canon's project management is much better. And quality has improved.
"All of a sudden, without really trying, we were able to get an 18 percent improvement in brightness of the product because the materials we were able to get and use here had a better clarity than what we were able to get in China," he said.
In the end, Bennett said, managing both a new company and a long-distance supplier relationship proved too difficult. But he does not rule out taking the work back to China, with the help of a more experienced partner like Canon.
"If we got our little $3 million company to be a $20 million or $30 million company, we would probably be making different decisions," Bennett said.
"We would have more bandwidth to manage it, but we're just not there."