Volume 7 Issue 3 March 2006
The Cutting Edge
Finding all the Pieces to the Puzzle
by Jim Plavecsky
Engineers in China will need insight into our domestic window market, and constant guidance concerning material as well as design specifications so that product is manufactured to meet North American codes and certification requirements.
Everybody is talking about China. Some speak with excitement and others with concern. The fact of the matter is, because of advances in both communication and transportation we are living in a world that has highly efficient access to global economic resources. With labor rates a fraction of what they are domestically, Chinese manufacturing companies are forming global partnerships with U.S.-based companies which are now offering window components at prices well below those of domestic manufacturing firms.
So what do you look for if you are considering a relationship with such a company, where raw materials, labor and manufacturing processes are being managed thousands of miles away from your window manufacturing plant? After all, if something goes wrong resulting in defective material received on your end, you can’t pick up the phone and simply say “send a new batch” and know that replacement product will end up on your doorstep tomorrow. Or can you?
Well, the answer is “Yes-but.” It is all quite possible, but someone needs to supply the other pieces of the puzzle. Lowering cost of goods and improving profit margins is not just a simple matter of buying lower cost window components. There are logistic issues such as ensuring reliable delivery from transportation partners, both intercontinental and transcontinental. A domestic inventory must be maintained to ensure uninterrupted supply in the event of some disruption in the supply flow. This may be due to a transportation issue, an unexpected quality control issue resulting in unusable product, or even an unexpected spike in demand. Regional warehousing can act as a shock absorber for these occasional bumps in the offshore supply road. Also, some degree of financial management is necessary since product is being tied up for a month to five weeks simply traveling from the factory abroad to its final position on the factory floor.
Collaboration is a Must
There is also the issue of design engineering. Engineers in China will need insight into our domestic window market, and constant guidance concerning material as well as design specifications so that product is manufactured to meet North American codes and certification requirements. This takes domestically based engineering knowledge and North American window industry experience. A competent engineering staff needs to be in place at both ends of the supply chain. There must be clear and efficient communication occurring between the two groups. Product and process development must both remain close to the customer. North American based engineers must be looking at possible product improvements continuously which will add value to the window system.
Ultimately, the most successful window fabricators will be those that take a fair share of additional profits that are spawned by global sourcing and then re-invest these dollars into superior engineering designs that offer the end user the highest degree of innovation and quality at the lowest possible cost. This can be in the form of new designs which add thermal or structural performance. Or, perhaps lowering cost of goods now allows the window fabricator to invest in automation so conversion costs are also reduced while optimizing fabrication consistency.
So there you have it—global sourcing. Is it risky? The answer is yes, but one may argue that there is even more risk in maintaining the status quo. If it is approached in strategic manner with careful attention to operational details, then global sourcing can allow the smaller companies to compete more effectively against the larger, more vertically integrated companies. In other words, pay attention to all of the pieces of the puzzle and a picture of a more profitable and competitive company will definitely come into view!
Jim Plavecsky is the owner of Windowtech Sales Inc., a sales and consulting firm specializing in the door and window industry based in Columbus, Ohio. He may be reached at JimPlav@insight.rr.com
© Copyright 2006 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.