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
Getting into the zone
Kinedyne selected the city of Nantong, a port on the Yangtze River, because it had an economic development zone that would allow the company to zinc plate metal parts.
“It was important to us to be part of an economic development zone,” Klausmann says. “This one allows metal plating, which is difficult to find.”
China has 12 economic development zones. Companies that manufacture there get several advantages, including:
- Tax breaks
Tax rebates are offered for the first 3-5 years that a company is in business.
- Labor
Assistance is provided for recruiting the employees that are needed.
- Language
Officials involved in economic development zones tend to be proficient in English, reducing communication difficulties.
- Power
Economic development zones get priority in a nation were electricity is not always available.
“We are guaranteed a steady flow of electricity,” Klausmann says. “When we were not in an economic development zone, power outages were frequent. Sometimes the outages were the result of maintenance, but they also were due to allocation. When you are in an economic development zone, allocation of electricity is not an issue.”
Letting off steam
In China, electricity is important, but it is not the only way to power a manufacturing plant. Steam also serves as a utility, and government regulators have a say as to which process is powered by electricity and which uses steam.
Steam comes into manufacturing plants through large diameter pipelines that can be seen crisscrossing industrial parks. As the steam enters the plant, it passes through regulators that reduce the operating pressure.
“Before coming to China, we didn't know that steam is an option,” Klausmann says. “Now we use steam for our plating operations and our e-coat line — anything that requires a lot of heat tends to be powered by steam.”
Kinedyne has yet to go through a winter in its new plant, and the company has been advised that the relatively mild climate of Nantong makes heating the plant unnecessary. But management says that it will monitor employee comfort in the coming months. If the decision is made to heat the plant, steam will be the method of choice.
“It's reasonably priced, and the supply has been very reliable,” Klausmann says.
Kinedyne sees its move as an effort to be more competitive on a global stage. The company recently installed a new ERP (enterprise resource planning) computer system that links its China operation and other operating points in the U S, Canada, and Mexico with headquarters back in New Jersey.
“We did it because we have to step up our manufacturing operations,” Klausmann says. “We aren't just competing against manufacturers in the United States. Sometimes we have to compete against companies in other parts of the world, companies that used to be our vendors. We are doing that by vertically integrating our entire manufacturing operation so we can control the cost and quality of every component that goes into a Kinedyne product. To compete effectively, we have to do things that set ourselves apart. When you are on the global stage, you can't be just like the other guy.”
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