Road Map To China
Elyria Manufacturing Corporation is a family-owned and operated precision machined parts manufacturer located in Elyria, Ohio. It was founded in 1925 and today is run by Jeff and Brad Ohlemacher, who are fourth generation family to the founder. We sat down with Jeff to discuss how his company deals with the issue of off-shoring work to China. On his company Web site, www.elyriamfg.com, there’s an icon on the home page that directs visitors to a “Global Sourcing Solution.” We wanted to find out more about that.
Production Machining: Jeff, Elyria Manufacturing is a medium-sized job shop located in Ohio. What prompted you to set up a relationship in China? How did you get started?
Jeff Ohlemacher: In the late 1990s one of our major customers asked us to find lower cost sources for their component parts in China. They even had suggestions as to where we could start looking. The customer had built a plant in China and was looking for suppliers similar to us for that plant. Their preference was not to buy direct or through brokers, but rather to use us because we were so familiar with their products. So we debated about what to do. In 2001, the Young Presidents’ Organization (YPO), which I am a member of, scheduled a university seminar in Shanghai about how to do business in China. We spent a week in Yunnan Province to get a feel for Chinese culture, and after touring the countryside we went to Shanghai for the university.
Meeting with other companies and officials at the university, we decided to give our customer’s request a shot. We committed ourselves to a 5-year plan to get involved in China.
P.M.: What was the next step?
J.O.: Well, my first trip showed me China was logistically doable. Next, I discussed options with my brother, Brad, and armed with supplier leads from our customer and other sources, we planned a second trip. Through the PMPA we made contact with the China Business Network, which arranged additional meetings for us. We also used contacts from the YPO to help us with a translator and guide.
P.M.: So a key starting point is network connections such as associations?
J.O.: Yes, it certainly expedites the learning curve and eliminates cold calling. Business in China is relationship oriented, and having an introduction from a known entity makes it much easier.
P.M.: What about commercial issues such as licenses, customs forms, shipping?
J.O.: We hired an agent to handle the commercial issues. Ongoing, the agent coordinated visits and other arrangements. Eventually, as business developed in our key supplier’s plant, the agent provided us a quality control person to be on site.
P.M.: What was it like working with Chinese suppliers?
J.O.: Because the Chinese are relationship oriented, we found out that we needed an executive such as a chairman or president to get the most out of the relationship, so I was assigned the duty. We also found it difficult to find suppliers that do small or medium runs. They want volume production for relatively simple parts. This is not a surprise because complex parts can be a problem. As a job shop, a big hurdle was that we didn’t have the volume business to place. Only a couple of parts we made here were sourced in China; everything else was new business because we could offer customers a global solution. Like a job shop anywhere, we’d get the request and send it out for quote. We’d either get the business or not. One of our suppliers we visit every 6 months is doing very well for us. It is all about investing in new equipment and training. If you visit a potential supplier, I advise you to have some work with you. If you don’t follow up with these shops in 30 to 90 days, they lose interest.
P.M.: How has this business development affected your company in Elyria?
J.O.: Because of the complexities of interfacing with our commercial agent, we dedicate a person to be responsible for the tactical end of the relationship. Moreover, we discovered the need for someone on the quality engineering side. We hired a Chinese engineer, based in the U.S., to translate prints so there is no miscommunication between us and the supplier. He’s basically our global troubleshooter. I spend about 25 percent of my time on our global sourcing initiative.
P.M.: Do you feel the efforts have been worth it?
J.O.: After we put the infrastructure in place and smoothed out the bugs, we went to our existing customer base with the value-add proposition of global sourcing. The proposition was, “If your business wants to take advantage of global pricing without the expense and overhead of setting it up yourself, we can do that.” It’s been successful. Our relationship with China began at zero percent of our business in 2002; I project it will be more than 15 percent in 2007, and in 2008 we expect 20 percent. We were lucky initially to have a customer that gave us sufficient work and knowledge to help us set up this global sourcing program. We’ve learned a lot and gained much more confidence in our abilities. Going global is not for everybody, but it’s certainly possible.
P.M.: Thanks, Jeff.