Warehousing, Distribution and Management of Chinese Operation
Western Client needed China-based manufacturing capabilities in order to provide quick product turnaround to Asian customers, cut costs and provide more responsive service.
East West Associates (EWA) Client was a U.S. Industrial Company with a 45-year history operating in North America. They had good product brand recognition and a sizeable client base of Western multinational and mid-sized companies operating in China. Clients began pushing the North American industrial manufacturer to establish manufacturing capacity in China in order to reduce the product lead-time, provide more responsive service, and cut costs. This industrial company had a sales office in China but no personnel with knowledge of how to establish and manage a manufacturing and distribution site.
The Company had significant Intellectual Property (IP) concerns about entering China and having their IP taken by a China-based competitor. Their primary IP was a unique manufacturing know-how process as well as the names of the China-based customers and pricing lists. If a competitor in China accessed the Company’s manufacturing IP, the competitor would be able to replicate the process in their facility. The manufacturing equipment was relatively standard among the industry, so there was a low barrier to entry for competitors.
Determine the most cost-effective solution to establish China-based manufacturing capabilities. Available options were:
Establishing their own manufacturing plant in China
Subcontracting with a Chinese manufacturer
Acquiring a Chinese operation
Hiring EWA to manage their China business
EWA and the Client developed the financial and operational Proformas for each of the 4 scenarios as well as the ROI figures. EWA then evaluated these scenarios based on their effectiveness of protecting IP.
After careful assessment, the industrial company chose to establish a China Business License and hire EWA to handle the following:
Purchase their manufacturing equipment from China and import some “retired” equipment to the EWA selected site
Engage EWA to hire the manufacturing personnel for the Company who will run the equipment and the company will send their technical and quality personnel to China to train these employees
Manage this manufacturing operation with experienced China personnel, including raw material procurement, production, quality control, and distribution with a focus on protecting IP and fragmentation of information.
EWA established a manufacturing operation for the Client and is managing the China-site with our team. The Client will have an operational site in China and can now take their China-based clients to this facility to highlight their quick turnaround manufacturing capabilities.