It's How You Look At It

While those at some U.S. shops are writing letters and signing petitions about “the China problem,” those at other U.S. shops are quietly figuring out how to take advantage of “the China opportunity.” These shops are developing ways to use China as a resource to help them cut costs and grow their businesses.

One approach is to send low-end work overseas. This allows a company to devote its efforts and resources to high-end work. Why have your $60-an-hour shopfloor do $20-an-hour work when you can get that work done in China for even less? For example, shops are having routine machining of mold bases, die plates and the like done in China, while the shops at home concentrate on high-end machining of cavities, contours and details.

This approach reduces the fixed overhead costs related to supporting the low-end work, frees up floor space and reserves in-house talent for what adds the most value (and thus earns the high pay.) It also keeps proprietary designs and intellectual property at home where it can be protected.

Other shops are using China for affordable customization. Rather than settle for standard catalog items, they are redesigning non-critical components and having them manufactured in China. Otherwise, the cost of developing that stronger bracket, more comfortable handle, or tighter fitting wouldn’t be cost-justifiable, yet these minor product improvements add up to win customer acceptance. The “design and build” of critical product features, however, stays in house.

Other strategies involve taking advantage of the fact that companies sourcing molds, dies or tooling from China will need a local provider of maintenance and repair services. Because these services are time-critical, opportunities lie in developing the responsiveness and expertise required.

This is not to say that “the China opportunity” is an easy and sure thing. Many shops choose to work with brokers who can facilitate the business arrangements that must be carefully worked out with a supplier in China. Establishing personal contacts and developing partnerships are tackled later as experience grows.

Many aspects of trade with China are troublesome. There is a China problem that needs to be addressed. The campaign to attract attention to this problem may help clarify the issues for decision makers in state and national government and may ultimately result in positive change. Nevertheless, the entrepreneurial spirit must also find expression in seeking opportunities no matter where they may be found.