A U S company finds good reasons to manufacture in China and not just source there
Dec 1, 2009 12:00 PM, By Bruce Sauer
View all Kinedyne Corporation
photos and captions
Kinedyne, a U S-based manufacturer is now producing its line of cargo control equipment in this plant in Nantong, China.
AMERICA is a major consumer of products that are fabricated in China. What would it be like if an American company owned the manufacturing plant?
So far, so good, according to Kinedyne Corporation, the cargo control equipment manufacturer based in Branchburg, New Jersey.
Earlier this year, Kinedyne began producing in a $25-million plant that the company built in Nantong, China.
“Five or six years ago, a joint venture between a U S company and a Chinese firm was the way to go,” says Jim Klausmann, president. “But that has changed. It is possible now for U S companies to build here and own the building.”
The ability to set up shop in China is helping companies like Kinedyne control how their products are manufactured and sold.
“We want to be able to control all facets of the manufacturing process,” Klausmann says. “It's common for a U S manufacturer to find a Chinese vendor to produce products for him only to eventually have him cut corners. We don't want to take chances, and you can't always tell when a supplier is producing to your specifications.
“Furthermore, in the past, we have had contract manufacturers produce patented products for us in China. While the patent protects us in the United States, it is hopeless to keep people from making your product and selling it for themselves in another country. By opening this plant, we can protect our product and our quality.”
The process of getting the plant up and running went relatively quickly. Kinedyne obtained the land in November 2007 and broke ground in May 2008. By the end of 2008, the building was completed. Plant equipment began arriving in January 2009, and by July, the plant was in production.
In China, property is literally government property. Individuals, including citizens of China, build on land that is leased long-term from the government. Such is the case with Kinedyne, where the company has a 99-year lease for the property on which the plant is constructed.
At least for the time being, a 99-year lease is enough.
“Given the changes that have occurred in China recently, I can't imagine what this country will be like when our lease is up,” Klausmann says.
Think of China, and it is easy to think of explosive economic growth, particularly in the manufacturing sector. But the country is experiencing other changes as well. Among the many changes that Klausmann cites:
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Workers' rights
During the past two years, the government has enacted a significant amount of rules regarding how companies must treat their employees. Companies are required either to provide housing or to transport employees to and from the job.
“Labor is not a inexpensive as it used to be,” Klausmann says. “It's up about 80% as a result of the regulations. Plus, with the boom in the Chinese economy, you are definitely competing with other companies for the best employees. We have had difficulty getting skilled labor. We knew it was going to be competitive because of all the new manufacturing plants that are going up here.”
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Environmental regulations
Much has been said about the air quality in China, but Klausmann says that the permitting was comparable to what one might expect in the U S.
“Anything discharged into the air or water is tightly regulated,” Klausmann says. “We had to go through an environmental assessment before we were able to build. Once construction started, inspectors were here frequently to make sure everything was being built as specified.”
Klausmann estimates that Kinedyne spent $2 million on its waste treatment system. The system handles water used in the company's plating and e-coat operations, as well a metal polishing. The result of the system is waste water clean enough to drink, Klausmann says.
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