Small and midsize plastic processors that are seriously considering China need to step up now, says Chicago-based consultant Bill Liu.
Unless your product portfolio is highly specialized, highly customized or difficult to transport, he said, sourcing is inevitable to stay competitive.
Liu is vice president of NaviAsia Consulting Group Inc. The 6-year-old company said 40 percent of its business is with the plastics industry, including consumer products, office supplies and small auto parts. Besides the Chicago headquarters, NaviAsia has a staff of 50 in four offices across China, including Beijing, Suzhou, Yuyao and Dongguan.
``Sourcing from China is not news any more'' he said. ``And we've already seen how some companies fail to leverage China's manufacturing capability.''
Liu used a Midwest auto supplier as an example. The firm, which made auto interior parts, approached him two years ago for sourcing solutions from China. After some internal argument, the company bailed out because it didn't want to ``lose jobs to China.'' Although the supplier's sales doubled within two years, it kept losing money. The firm ended up being sold.
``The current market dictates that some traditional companies, competing on prices with Chinese suppliers, probably will not survive and need to find sources of products from abroad to lower their costs,'' he said. The cost of tooling in China is only one-fifth or even one-tenth of the cost in the United States.
As sourcing and supply chain management in China can be complex, Liu suggested some solutions to the most pronounced issues that concern small buyers.
``It's not hard to find a supplier, but they may not meet the quality requirement or the delivery headline, or they constantly want to raise the price.''
To ensure quality, he said, U.S. companies should thoroughly investigate a potential supplier's capability before committing. ``You need a very clear picture of a supplier's technical capability, equipment, products, client list, export experience, personnel [experience and education], [quality assurance] process, QA certification, etc.,'' he said.
In addition, product specs can get lost in translation. Liu said it is better to have on-site representation to supervise production and facilitate communication to avoid misunderstanding in product requirements and scheduling.
``Some clients specify that they want to find injection molders that haven't made products in the same category,'' he said. In such cases, NaviAsia helps to retrain the suppliers, especially on tight-tolerance products.
Some small processors may find their size a disadvantage in dealing with Chinese companies.
``With most Chinese suppliers inundated with orders, small orders tend to receive less attention,'' he said. ``If the order volume does not meet suppliers' expectation, suppliers will also want to raise prices to ensure their profitability.''
Liu said NaviAsia helps piggyback small orders and still ensure quality and delivery time.