Importing from Overseas: Quality Control, Forecasting and Landed Costs Are Crucial

September 11, 2013 at 5:58 PMHeidi Bragg

Depending on their individual products, customers, and markets, businesses that import from overseas have specific requirements and expectations. What works for one company may not work well for another because each situation is unique. To find out more about this topic, we interviewed representatives from businesses in two very different markets. John Blichmann is the president and founder of Blichmann Engineering, based in Lafayette, Indiana. His company makes precision-engineered equipment for home brewing and winemaking. Shimon Cohen is vice president of Cherie Dori, a high-end jeweler based in Florida. Both Cheri Dori and Blichmann Engineering import products or parts from overseas, but their experiences have been very different.

Blichmann Engineering’s focus is on “quality, efficiency, and performance,” says John Blichmann. The company’s R & D efforts concentrate on developing unique products for their market. Then, the company patents these products and has some of the designs produced overseas. “We import primarily from Taiwan and China,” says Blichmann. “We use Chinese suppliers for the more common, ‘stock’ parts and fittings we use, but we send the production of our unique parts to Taiwan. Taiwan is more expensive than China (about 50% more for most of our parts), but still significantly cheaper than if they were produced in the U.S. Tooling charges there are much more reasonable than in the States, and the results have been impeccable.”

We asked Blichmann why he’d chosen Taiwan over China. “For standard components, the quality from China is fairly decent. And we purchase a few of our more simple custom parts from there, too. But we’ve had problems with high staff turnover in the production facilities, long lead times (especially around Chinese New Year), poor and inconsistent quality, and the lack of respect for our intellectual property (IP) protection. We don’t have those same issues with our suppliers in Taiwan.” For the past 10 years, Blichmann Engineering has worked with a broker in Hong Kong who inspects all shipments before they ever leave Chinese soil. “It helps that our broker was educated in the States, so he understands the cultures of both the U.S. and China,” he notes.  

“One of the most important issues for importers is capturing landed costs, especially in an environment of rising freight charges,” says Ian Benoliel, CEO of NumberCruncher. His firm designs enterprise resource planning (ERP) software for small- to medium-sized businesses. “Having the correct landed costs will give you better margin or markup information.”

Blichmann said that as economic conditions change, his company will continue to reevaluate what works best for them. “About two years ago, we started discussions with a company in Wisconsin about making one of our major parts. At that time, we simply couldn’t afford to purchase parts from them, even though it would make things much easier for us logistically.” However, as labor (and other) costs in China increased, Blichmann revisited the idea of sourcing domestically and re-established contact with the firm in Wisconsin. “Now, we can buy from a more local supplier. We don’t have to stock up to protect against holiday shortages, and we can use forecasting and blanket orders to make sure we always have exactly what we need when we need it.” The costs are only 10-15% more than the company was paying before and, Blichmann notes, “It means a lot that we’re able to stamp ‘Made in the U.S.A.' on that product.”

Cherie Dori makes both stock and custom jewelry for a very discerning clientele. The company is headquartered in Florida, but vice president Shimon Cohen is based in Israel. “That’s a real advantage when dealing with our suppliers and manufacturers in China,” he says. “When I’m working out of our office in Florida and have a question for a Chinese colleague, the time difference really influences how long it takes to get an answer. I email him one day and he gets the email the next day. If he needs additional clarification, it takes a third day before we get the situation resolved. Here, though, our time in the office overlaps by 5-6 hours each day, so we can easily work though any concerns that arise.”

Cohen has had a much different experience than Blichmann with his Chinese manufacturing facility. Cherie Dori has been working with the same factory for over 15 years. “We’ve had good experiences with our facility in China,” Cohen notes. “We’ve been working together for a long time and each of us knows the other’s expectations. They’ve been very responsive, and we have good communication.” Cherie Dori’s production comprises 80% of the factory’s total output. “We don’t see much turnover in the management of the factory; it’s roughly the same as the U.S. And we don’t go to China exclusively for the price – we also go there for quality,” says Cohen. He continues, “The leaders are investing in machinery, investing in top-of-the-line quality. They do very nice work.”

Another benefit is that Cherie Dori’s products ship out of Hong Kong, rather than China. This circumvents a lot of potential hang-ups with Chinese customs. “Shipments basically get to Florida overnight. And returns to Hong Kong are easy: we don’t have to deal with customs.” The only negative Cohen mentioned was the fact that the factory closes for 2-3 weeks over Chinese New Year. “Our engagement rings are all custom creations. If a customer wants to get engaged on a specific date during Chinese New Year, it can be difficult for us, but we do our very best to meet their needs.”

The designer jewelry market has unique considerations. “With jewelry, it’s not just the price that’s important to the customer – it’s the aesthetic, the quality, the durability of the piece," Cohen explains. "And what we’re creating is a very high-priced, often unique product.” Cherie Dori has put procedures in place to ensure that its design, production, and shipping processes run smoothly for this specialized market, and Cohen is pleased with the results. “Importing is pretty painless for us,” he concludes.

What can be learned from these two accounts? First of all, the same methods won’t work for every industry or company. Each situation is unique, and requires due diligence on the part of business owners and/or management to confirm that the proper balance between price, quality, and efficiency can be struck. Second, having a strong relationship with someone you trust in the local area is key. For Blichmann Engineering, it’s their broker in Hong Kong; for Cherie Dori, it’s the management of their production facility. Third, as world conditions change, it’s important to reevaluate how your current production processes are benefiting the company and see if any adjustments should be made. As both Cherie Dori and Blichmann Engineering demonstrate, employing these steps can help you create a successful, growing company.

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