by Brittany Willes, contributing writer
Plastics Business
Overseas manufacturing. It’s a phrase that likely conjures images of overcrowded factories in distant lands while American factories sit abandoned and rotting. It is a phrase that can leave a bad taste in the mouths of some Americans, but – as with most stories – there is more than one side to consider. Some American companies are discovering that manufacturing overseas does not have to be the death sentence it once was for US jobs. Poly-Cast, Inc., has moved some manufacturing to China, and the company is doing so without compromising its commitment to US manufacturing.
Establishing a base
Poly-Cast, headquartered in Tigard, Oregon, established its manufacturing license in 2006 in Suzhou, China. “We had been hearing about manufacturing in China for a long time,” remarked General Manager Jeff Leedom. “Most of what we were hearing was about low-cost manufacturing for export to US and European markets.” This wasn’t a type of manufacturing that Poly-Cast was overly interested in. The company felt it could better serve its clients locally and narrow the price gap by focusing on continuous improvement and other initiatives to drive out unnecessary costs. Things changed in 2004, when one of its fastest-growing clients in the US announced that it was making the move to China and encouraged its key suppliers to make the move as well.
“We were the only injection molder of theirs that made the move,” said Leedom. The decision came after CEO Dan Leedom made an exploratory trip, returning with eyes wide open. At the time, he thought, “I’m not sure how a regional family business like Poly-Cast is going to make the transition to a global footprint, but we have to find a way. We need to be in China!”
According to Jeff Leedom, what gave Poly-Cast the confidence to make the investment was Chinas developing global market in China. No longer just a low-cost production for export model, Poly-Cast could make the investment knowing it had a current client to support, while at the same time opening a door to many more global clients in an industrial zone far beyond its regional reach in the US. “Our initiative from day one has always been that we are going to China for the China market,” stated Leedom, “not to manufacture cheap and displace jobs in the US.”
Manufacturing for the China market
By bringing its processing expertise to the automotive and other engineering-intense markets in China, Poly-Cast was able to have an immediate impact. “We could hit the ground running and grow our business, because not all ‘local’ processors knew how to process engineering-grade materials professionally or efficiently,” said Leedom. This enabled current and potential clients to recognize the benefit of partnering with Poly-Cast (Suzhou) instantly.
Furthermore, because the strong global presence in China is highly concentrated into relatively small regions, Poly-Cast gained business from companies that had a presence in China but were headquartered in Europe. According to Leedom, Poly-Cast would never have heard of – let alone had an open door to – such companies solely out of its US headquarters. “Due to our relative locations in China, we were able to connect and develop a partnership that continues to exist to today,” he affirmed.
Additionally, developing relationships with overseas businesses opened the door to business growth in the US as well. “We’ve been able to build relationships with clients that we found in China and who also have a US manufacturing site, as well as with US clients looking to align their growth strategically with a supply chain that has a global footprint, said Leedom. By taking on the China market, Poly-Cast is able to supply a much larger pool of global clients that it would not have otherwise been in contact with from its regional headquarters in the US.
Partnerships have played an important role in another way: Over the last 10 years, Poly-Cast has taken on two US partners – Viking Plastics in Pennsylvania and Falcon Plastics in South Dakota. “The partnership, for our Suzhou operation, has been a really good thing,” explained Leedom. “It has opened up the door to different markets, products and customers that we now support in China, as well as a larger pool of technical abilities, globally for the Suzhou team to leverage off of when taking on new clients.” It’s important to note that, while the companies are equal owners in the China investment, they are separate US entities.
“Investing in the Chinese market has opened our eyes to an entirely different way of doing things,” said Leedom. “It has helped us better understand our overseas competition back home, and, instead of bantering back and forth on the relevance of their abilities in taking market share away from our US operations, we focus on getting better and competing stronger to manufacture products in the US that make sense to manufacture there. We are able to be the experts and educate our clients and speak intelligently of why and how we will produce in the US location vs. China for each client’s particular case.”
Evaluating the challenges
Naturally, investing in overseas markets is not without its challenges. For instance, the likelihood of success overseas decreases without dedicated resources and focus. On the other hand, a focus on succeeding overseas could cause distraction in the US organization. As Leedom noted, the challenge is aligning management in understanding the strategic effort to be overseas and recognizing the benefit in doing so.
Adding to the challenges is the fact that the boundaries of international competition change quickly. After acquiring its license in 2006, Poly-Cast first began production in China in 2007. At the time, Leedom explained, it was rare to find a local competitor who was skilled at processing engineering-grade materials. “Clients were coming to us for our expertise in processing glass-filled nylon,” he said. “Today, many of our competitors in China have learned how to process engineering-grade materials.” Companies operating overseas must be able to adapt and find ways to differentiate themselves from one another and do so constantly.
Competition in the overseas market also works differently, according to Leedom. “In the US, its fairly standard to have a few known competitors. You probably even have a good idea of how you measure up against their capabilities,” he said. “In Suzhou, there are roughly 2,000 injection molders in our area.” While Poly-Cast may not be in direct competition with all those molders, having so many in a single region certainly makes for more market pressure than most US companies are used to in their regions.
Of course, when there are large investments at stake, expanding into unfamiliar territory can be more than a little unsettling. “Any time you invest in an emerging market – or even in a recently developed market – you will certainly face many pitfalls: unknown government polices (that change frequently), cultural difference in work force, language barriers, etc. the list goes on and on,” said Leedom. “Know going in that you cannot force US ways on the market you are investing in.”
Leedom went on to advise: “Before I would encourage anyone to invest in an overseas operation, I would strongly suggest they really identify and understand what they are trying to accomplish.” With so many low-cost manufacturing “pockets” around the world, it is imperative for companies to have a thorough understanding of their goals and to develop strategies for how to best execute those goals.
Leedom also recommended that companies align experts within their global headquarters with overseas operation experts. “This will ensure that the company culture and standards will be better managed, focused on and executed,” he stated. In turn, such action allows for a much smoother entrance into the market companies want to produce in. “Amazingly enough,” he remarked, “you may just find, with the right management and coaching, that the overseas team becomes the technology or performance leader of your global footprint. It’s pretty amazing when that happens!”
