Midwest-based CEOs remain cautious on China strategies
By Staff -- Manufacturing Business Technology, 6/1/2006 6:00:00 AM
Forget about rolling back the clock on the rise of low-cost manufacturing in China and other regions, concurred a panel of CEOs of Midwest-based manufacturers in early May. Globalization, say panel members, is here to stay, as reflected in their own international operations and sourcing.
"Stop whining about [global competition]," says David Rayburn, CEO of Modine Manufacturing Co., a Racine, Wis.-based supplier of automotive heat-transfer components that just closed record sales of $1.6 billion for its fiscal year. "We're in a global economy … and it's not going to change."
The panel—held at the Wisconsin Business & Technology Expo—included Modine's Rayburn; Robert Arzbaecher, CEO of Actuant Corp., a Glendale, Wis.-based maker of motion-control systems and industrial tools; Peter Gottsacker, president of Wixon, a St. Francis, Wis.-based manufacturer of spices and flavorings; and Richard Meeusen, CEO of Badger Meter, a Milwaukee-based manufacturer of flow-measuring systems.
These executives from heartland America say their companies all have some degree of operations in China and other low-cost regions in the form of plants, partnerships, or sourcing. However, they take a cautious approach to doing business in China.
Meeusen says Badger Meter sources some components from China, but mainly small commodity items that can be returned via low-cost air freight. Badger Meter does have some plants in Mexico for the North American market, and in the Czech Republic for Europe. These are low-cost countries, he says, and close to the final market—which means fewer days of supply in the pipeline if logistics or quality problems ever occur. "We worry about the supply chain [when sourcing from] China," says Meeusen.
Rayburn agrees that for some commodity parts, sourcing from China makes sense. "It has to be the right part, the right strategy, and the right supplier," he says.
Arzbaecher claims Actuant sources some components from China, but for proven part designs rather than components on new launches. The biggest problem when sourcing from Asia, he says, is disruptions at the Port of Long Beach in California.
The future for U.S.-based factory sites, says Meeusen, lies in high-tech products and value-added services such as final configuration and testing. Badger Meter has thrived by evolving most of its sales from handheld meters to higher-end, radio-based systems. "We have to make sure we are [producing] the innovative, higher-tech products," he says.
Modine began migrating its manufacturing to Southern states decades ago to be closer to OEM assembly plants, Rayburn explains, but still has about 700 people at its headquarters in Racine. In fact, he says, the research & development staff there recently expanded by about 70 people due to consolidation of staff from an acquired company.
The panelists believe techniques such as Lean and Six Sigma can help U.S. operations stay competitive, though consistency is needed.
"I don't care which technique you use," Meeusen concludes. "Choose a method that seems a fit with your company, and stick with it."
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