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Old August 17th, 2011, 05:26 PM
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Lightbulb Why we left our factories in China

An interesting article about how one company has reshored i.e. moved their operations from overseas back to the USA.


Quote:
Why we left our factories in China


Fed up with the poor quality of having their products made in China, American businesses like Sleek Audio are moving production back home.
By Sheridan Prasso, contributing editor

FORTUNE -- When Mark Krywko and his son, Jason, launched Sleek Audio, a small business making in-ear headphones for iPods and other audio devices from a Florida town near St. Petersburg, they asked several U.S. manufacturers for quotes on how much it would cost to make their product. It was, of course, oh so much cheaper in China, so they contracted with a factory in Guangdong province and launched their first product in 2007.


But last year, fed up with low quality, too much travel, communications problems, shipping delays, rising costs, and -- worst of all -- a ruined shipment of 10,000 sets of earphones that cost millions and nearly brought the company to its knees, the father-and-son team made a big business decision: quit China and move their manufacturing back to the U.S. "It became very difficult and taxing on us," says Jason. "Now we control the quality of the product. No more waiting for production has been a wonderful thing."

Sleek Audio is part of a trend called reshoring, in which primarily small businesses decide that China is a hassle and that they want to bring their operations closer to home, where the recession has lowered costs, created workers eager for jobs, and made it easier to justify U.S. manufacturing. Reports have emerged from California, Texas and all across the country as small businesses -- and even large ones like GE (GE) and Caterpillar (CAT) -- take advantage of local incentives and move back at least some of their manufacturing operations for products sold in the U.S. market.

Sleek Audio's costs are about 15% to 20% higher because of the move back, but the company's redesign of earphones that replaced a formerly Chinese-made plastic component with U.S.-made high-end aluminum, titanium and special carbon fiber, resulted in a higher quality product that justifies the price. It not only gets a "Made in USA" label, but Sleek Audio's redesign of the SA7 earphone won a 2011 Best of Innovation award from the 2011 Consumer Electronics Association. "Even though there's a tremendous cost savings when you go to China, in the end it really isn't that much," says Mark. "It's the hidden costs -- the delays, the shipping costs, you pick all that up on a learning curve.

When Sleek Audio got off the ground in 2005, they first found that U.S. manufacturers were quoting prices of $19 or $20 for one particular component that the Chinese were offering to make for $2. But when the Krywkos decided to quit China last year and asked around again about making the part the U.S., this time the answer was $8. A box that used to be quoted for $4 to $5 in the U.S. before was quoted at $3 now. And the Krywkos found a defense contractor doing industrial design that they hadn't known existed before, just a 10- to 15-minute drive down the road. "The economy has allowed us to get better deals. Now that we're aware and we know the pricing, we can say, 'You can't charge us this much.' But companies now realize that if they want to be competitive, they have to lower their prices here and work on quantity."
A big part of the problem in China is that small companies cannot afford to have someone there full-time to oversee their operations. That means they have to travel, or stay up until 2 a.m. to talk to people on the phone in China over even minor problems, says Mark. Small companies often get their production runs squeezed in between larger orders, meaning that they can get short shrift. "Great care would be used to satisfy us when we were there," says Mark. Adds Jason: "We'd go there and they would do it perfectly, but when we'd say go ahead and make 10,000 to 20,000 pieces, that's when the differences would happen."

Now, with manufacturing to their specifications done just down the road, the Krywkos have much more control. And they estimate that their orders from various U.S. companies now support 100 jobs. They haven't been able to make everything here -- in fact, a particular type of Rosewood can't be found in the U.S. But while 35% of their components are still made in China, they plan to have 80% back here by the end of this year. "Our long-term goal is 90% to 95% of everything we make made here in the U.S.," says Jason. "We've been getting thank you emails for bringing it back to the U.S. It feels very good."


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Old August 17th, 2011, 05:35 PM
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Re: Why we left our factories in China

good one.
Excellent example of Global Economics at work.
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Old August 17th, 2011, 05:39 PM
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Re: Why we left our factories in China

just blaiming china for HIs mis-management.
I visit China every other week and to tell..the Quality and production is per what the Original Owner decides.

China sub-contract factories will give the product you wanted and paid for...

and have seen much better Set ups in china than in USA ( I ahve direct interactions with manufacturing factories every day)

Jsut blaiming china donesn't help..he(son and father) could not come up with the Product spec and must have let China factory decide (to manufacture whatever they see feasible), instead of giving correct specifications.
On the other hand this Audio compnay must be looing for cheap components and make more profit....they get what they pay for or decide.
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Old August 17th, 2011, 06:06 PM
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Re: Why we left our factories in China

Quote:
Originally Posted by BKN View Post
just blaiming china for HIs mis-management.
I visit China every other week and to tell..the Quality and production is per what the Original Owner decides.

China sub-contract factories will give the product you wanted and paid for...

and have seen much better Set ups in china than in USA ( I ahve direct interactions with manufacturing factories every day)

Jsut blaiming china donesn't help..he(son and father) could not come up with the Product spec and must have let China factory decide (to manufacture whatever they see feasible), instead of giving correct specifications.
On the other hand this Audio compnay must be looing for cheap components and make more profit....they get what they pay for or decide.
See that is the plus point of working with local US manufacturing.
The engineers here love their work and therefore they do what they do.
So if I give a local machine shop to make something for me, they will help me in getting an optimal design based upon their own experience with manufacturing using various materials. China is chootiya-chap. They do not have the drive to "help" a customer.
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Old August 17th, 2011, 06:29 PM
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Re: Why we left our factories in China

Quote:
Originally Posted by Diplomat View Post
See that is the plus point of working with local US manufacturing.
The engineers here love their work and therefore they do what they do.
So if I give a local machine shop to make something for me, they will help me in getting an optimal design based upon their own experience with manufacturing using various materials. China is chootiya-chap. They do not have the drive to "help" a customer.
in reality..the chinese want to go out of way to help the client (limited to CHinese manufactureres though)
For out side china they are purely commercial - pay and get what you pay for

But man these chinese are hard working people for sure..unlike Japanese
Japs these days work means coming to office..sit before computer and charge overtime....Output...take 2 months to finish for 1 week worth Job in USA
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Old August 17th, 2011, 07:49 PM
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Re: Why we left our factories in China

Quote:
Originally Posted by BKN View Post
in reality..the chinese want to go out of way to help the client (limited to CHinese manufactureres though)
For out side china they are purely commercial - pay and get what you pay for

But man these chinese are hard working people for sure..unlike Japanese
Japs these days work means coming to office..sit before computer and charge overtime....Output...take 2 months to finish for 1 week worth Job in USA
As a small business, I have had the opportunity to outsource some work and every time I wanted something made, they would ask for a "sample" and then they would reverse engineer it. If I ever asked for samples of their own work, it was a one way street. Never got anything.
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Old August 17th, 2011, 09:30 PM
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Re: Why we left our factories in China

Quote:
Originally Posted by BKN View Post
just blaiming china for HIs mis-management.
I visit China every other week and to tell..the Quality and production is per what the Original Owner decides.

China sub-contract factories will give the product you wanted and paid for...

and have seen much better Set ups in china than in USA ( I ahve direct interactions with manufacturing factories every day)

Jsut blaiming china donesn't help..he(son and father) could not come up with the Product spec and must have let China factory decide (to manufacture whatever they see feasible), instead of giving correct specifications.
On the other hand this Audio compnay must be looing for cheap components and make more profit....they get what they pay for or decide.
If you think this duo did not care about their products and passed on shoddy stuff into the market, do you think they would have survived and thrived so long? Consumer electronics, especially consumer electronics accessories market is a very competitive and fickle market. One quality slip and you are dust.
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