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Regional Development Guide: More Butler County companies setting up shop in China

April 20, 2012  |  West Chester Butler County Ohio doing business in China

Business Courier by Cindi Andrews, Courier Contributor

Date: Friday, April 20, 2012, 6:00am EDT

 

The distance between China and West Chester is shrinking all the time.

For years, companies in West Chester and elsewhere in Southwest Ohio have bought inexpensively manufactured products in China for import to the United States. But increasingly they are both setting up their own manufacturing operations in China and selling their products there.

In addition, West Chester leaders are now looking to attract Chinese companies to set up operations here.

Long-Stanton Manufacturing, a metal stamping and sheet-metal fabrication company, was one of the first West Chester companies to set up its own operation in China.

“In the early 2000s all my customers were going to China and that was a big, big problem,” said Daniel Cunningham, president and CEO of the 150-year-old family business. “I felt as a businessman that I had to take it upon myself to set up operations in China to serve our customers who were going there.”

Long-Stanton’s customers were selling their own finished products in China for use in the machines that were going into the many new factories being built there.

So Cunningham tasked his son, Marvin Cunningham, with starting a plant there. Long-Stanton got a business license to operate there in February 2005, six months after beginning the process.

“There really wasn’t a book,” Marvin Cunningham said. Now the paperwork has been streamlined, he said, so that it’s a 30- to 45-day process.

He moved to China in 2005, committing to stay five years to get the business up and running.

Dan Cunningham also entered into a rubber-making business with a classmate from Harvard who was a native of China. It was important to him that they connected on a personal level as well as a business level.

“He’s my age, we both have wives who are far smarter than we are, we both have two great kids,” he said. “Trust is very important when you don’t see each other every day.”

Having a partnership with a Chinese businessman helped the Cunninghams understand and navigate the complexities of a very different culture, government and business world.

‘You have to be flexible and change quickly’

Factory space was plentiful and Long-Stanton decided to lease its building rather than buying it. That has made it easier to adapt to changing needs, Marvin Cunningham said.

“The biggest thing is you have to be flexible and change quickly,” he said. “Initially we thought our business profile would be basically like it is in the States.”

However, he soon found that doing high-speed production such as metal stamping didn’t make as much financial sense in China because the labor cost amounted to pennies per piece regardless. Instead, Long-Stanton’s Chinese factory has focused on work that requires many steps or components to complete, producing mostly finished products instead of the components that make up the majority of its work in West Chester.

Also, the company started its operation in Changzhou but in 2011 moved to a more convenient location in the Zhonglou District.

Another lesson learned: New jobs must be explained very specifically to Chinese workers. “Once they’ve done it in general they’re very good at repeating and repeating it,” Marvin Cunningham said.

Some companies have had issues with the quality of parts made in China. However, that hasn’t been a problem for Long-Stanton since it runs its own plant instead of contracting the work. Many of its Chinese employees have been with Long-Stanton for seven years.

“We knew early on that quality would be a key differentiator,” Dan Cunningham said. “Marvin has had no rejection of products (by a customer) in seven years.”

Today, Long-Stanton Asia makes up about 15 percent of the company’s total business.

Long-Stanton has paved the way for other local companies through its trial and error. The Cunninghams have shared the benefit of their experiences with Southwest Ohio businesses by participating in seminars on working in China with law firm Frost Brown Todd   Frost Brown Todd Latest from The Business Journals Follow this companyand accounting firm Clark Schaefer Hackett.

Creating base for other Asian markets

Fairfield-based Tedia is a more recent entrant into the world of Chinese-based manufacturing. The chemical company had been selling its high-purity solvents to pharmaceutical companies in China since 1998, President Hoon Choi said. When Tedia also began buying raw materials there, it made sense to set up processing in China rather than shipping them back to Fairfield for processing.

Tedia began its processing operation there about two years ago, creating a joint venture with a Chinese business. Making its products in China positions the company for growth, Choi said, because the Chinese market for high-purity solvents is growing at about 10 percent a year, versus 2 percent to 3 percent in the United States. It also provides a base for Tedia to increase its sales in other Asian markets.

West Chester Township Trustee Lee Wong is supportive of local companies’ success in China. However, he thinks it’s time that Chinese companies begin setting up operations here.

“Our economy is tied more than ever to a global market,” he said. “We already are appealing to other companies around the world like IKEA   IKEA Latest from The Business Journals Follow this company.”

In January, he joined the board of the Greater Cincinnati Chinese Chamber of Commerce, which has sent delegations to China and has two board members based in Beijing. Now the group is trying to arrange for a Chinese delegation to visit Greater Cincinnati – something Wong is hopeful will happen this year.

“If you want something you have to go get it,” he said. “I want to bring Chinese investment over here. We need it. We need jobs.”