Companies that have been turned off by China's lead-paint toys and unfavorable tax policy changes in the past six months, think again. The issue for some companies manufacturing in China is knowing how to do it right, said U.S.-based contract manufacturer Eastek International Corp.
The Buffalo Grove, Ill.-based company, which manufactures exclusively in China, has operated there since 1992. Eastek reported sales of $35 million for fiscal 2007, up about 15 percent from the year before. It is projecting sales of $40 million for this fiscal year.
``The tax law changes haven't impacted our business,'' said sales and marketing Vice President Bob Wiegand. The firm's 100 percent-export business model shields it from value-added taxes, he said.
Eastek operates a 465,000-square-foot manufacturing campus of five buildings in Dongguan. Plastics operations, which account for nearly half of Eastek's sales, comprise tooling, injection molding and assembly.
``The vertically integrated structure enables us to better protect our clients' intellectual property, because we are fully in control of the production, quality and schedule,'' Wiegand said in a telephone interview.
In Dongguan, the company runs 28 injection molding machines from 45-440 metric tons of clamping force, including an 80-tonne multishot press that it added in August. It plans to acquire more multishot equipment this year, the firm said in a Jan. 15 news release. The operation employs more than 1,100.
Maintaining quality at the campus is an in-house concern, Wiegand said. ``We don't entertain subcontracting. It's very difficult to manage the quality and processes,'' he said.
The company does outsource such services as plating and powder coating, however, but it makes sure suppliers are qualified, he said. A Hong Kong office deals with financing, purchasing, shipping and logistics. Eastek's China tooling facility, a joint venture with Phillips Plastics Corp. of Phillips, Wis., has capacity for 500 tools annually.
Eastek also is expanding from southern to eastern China, to provide local support for customers, Wiegand said. ``We are opening a facility in the Shanghai area.'' he said, ``Three of our major customers have relocated their operations to Suzhou,'' an hour from Shanghai.
That facility will start as with light assembly and also function as a warehouse, with less than 20,000 square feet and about 10 employees. But it is likely to add injection molding in the future, Wiegand said.
He emphasized the importance of being local, speaking the same language and working in the same time zone as customers. Buffalo Grove serves as a distribution center, but also manages projects.
Quality director Mihnea Ianches said Eastek uses a rigorous quality control system in China.
``We inspect each batch of incoming resin, using a range of criteria including the melt-flow index,'' Ianches said by phone.
Workers also test sample parts at various stages in the production process. The Dongguan plant is certified in various standards, including ISO 9001:2000 and TS 16949, and the firm claims more than 150 customers, including Siemens AG, Bayer AG and Ingersoll-Rand.
Industrial products are its largest end market, followed by consumer products, medical and transportation.
Last summer, Eastek launched Eastek Access, a service that Wiegand describes as a ``factory within a factory,'' to help customers quickly set up operations within the firm's Dongguan campus. In addition to manufacturing space, customers can import materials and export finished goods under Eastek's license.
``We also take care of the utilities and employee issues,'' Wiegand said.
Customers usually have their own general manager on the factory floor, but all the workers are on Eastek's staff. They also have the option to use Eastek's machinery and distribution services. The company also provides an in-house training program.
``Attracting and retaining workers in southern China is much difficult now than it used to be,'' he said.
Eastek has two clients in its Access program, and is negotiating with two others, he said.