The list of American businesses that have found success in China is long and diverse.
Like many American businessmen, I read about and observed that other companies were successfully doing business on the “other side” of the world.
After careful consideration and having some positive experience with producing our subassemblies in China, about three years ago we decided to move production of our CNC machining centers to China. So, in 2009 we moved our production equipment and product inventory to the KOMO China facility and our company opened a manufacturing line in Nanjing, China, with 45 employees. This included CNC fabrication and machine assembly.
The decision to make this move was done for all the right reasons. We wanted to reduce labor costs and we could certainly do that in China. We basically wanted to reduce costs overall, including material and overhead. To be honest, I thought with minimal effort, we would be able to train the workforce at our Nanjing facility and in a short time begin producing a quality product.
At least this is what I and some of my business associates believed. Reality presented a different story. Our experience in China started off as if the venture was going to be successful but as time passed, we discovered things weren’t quite as they seemed. Here are some of the reasons why.
We sell our machines primarily to American wood and metal manufacturers. Many of them, we learned, prefer their machines to be made in the United States. Our customers made that clear to us very quickly. While this was an obstacle for us at the time, it was comforting to realize that there is still something magical and alluring about a “Made in USA” stamp on a product.
China, to state the obvious, is not around the corner. We discovered that if all went well, it took about five additional weeks for us to deliver KOMO CNC machines to our customers. An extra five weeks added to our lead time is a very long time for anyone, even a loyal customer, to wait for a delivery. We also realized that many of our customers wanted to visit our manufacturing facility to see our capability and observe their machine being assembled. In doing this, they could talk to us directly on the shop floor, view our operation and ask any machine specific questions they wanted. This was not a practical consideration when we were manufacturing in China. We lost the ability for our engineers to cost-effectively oversee the product on the shop floor where they could more readily introduce new technology improvements.
We also found that having a plant in China impeded the training of our technical support workers back in the United States. As was done in the past, many of our new field technicians develop their product skills while assembling machines in production at KOMO. We like to promote qualified individuals from within. With that in mind, imagine how difficult it is to convince a qualified worker here in the United States that if he or she wants a well-deserved promotion they must train for a long period in China or relocate there. It’s not easy recruiting talented people under this scenario.
Upon setting up our plant in China, we hired and trained English speaking supervisors to run it. This was effective, but only up to a point. We came to realize that relying on Chinese supervisors was not the best way to ensure the quality that we wanted. With no disrespect to the individuals working for us, effective oversight was difficult for us to maintain.
And then, there are the obvious language and cultural differences that needed to be overcome. Although we hired mostly English speaking personnel, the technical communication at times proved difficult and blending two different cultures was a challenge.
Now, we were saving money in China on labor costs, but we eventually realized that the savings were more than offset by the hidden costs created by many of the factors I have cited here.
So, in January of 2011, it was decided that we would begin the phase out of manufacturing in China. We closed our Chinese assembly plant in June and moved our manufacturing line to Lakewood in Ocean County, New Jersey. Over the last two years, we have hired 35 people at our Lakewood facility. This feels good, because we are taking people off of the unemployment roles and helping to improve our state’s economy. We have also re-cultivated supplier relationships and partnered once again with key vendors throughout the United States. This also helps to fuel the U.S. economy. The move back to the USA has been very successful logistically and profit wise.
In early October 2011, Lieutenant Governor Kim Guadagno visited our Lakewood facility as part of her statewide tour of 100 businesses. We were gratified that the lieutenant governor took the time to visit us and we were delighted to tell her that we are happy to be in New Jersey, where I have lived all my life. Also, now that we are back “home,” we are hoping to expand and grow the business.
In addition to the press we received from the State of New Jersey, CNN Money found our story newsworthy and recently created a two-and-one-half minute segment featuring KOMO Machine’s Lakewood, New Jersey, manufacturing facility. The segment is about manufacturing returning to the United States from offshore, in particular China.
Not that we thought the grass was greener on the other side of the world, but we certainly did not anticipate many of the obstacles and challenges that we faced after making such a decision to move manufacturing offshore.
It’s nice to be back home.
Michael D. Kolibas is president of KOMO Machine Inc. of Lakewood, NJ, a subsidiary of PMC Global Inc. in Sun Valley, CA. KOMO designs and builds precision computer controlled routers and machining centers. KOMO has produced more than 3,000 CNC machines for the USA and the international markets.
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