Overseas competition can freeze the hearts of many businesspeople, particularly manufacturers. But three Minnesota manufacturers who spoke at the “Minnesota Manufacturing Summit” at the Hilton Minneapolis last October noted that globalization was as much opportunity as threat. Each had a different story to tell, but their tales added up to one message: Don’t fear offshore competition—find a way to make it work for you.
Darlene Miller, president and CEO of Permac Industries, a Burnsville company that makes customized metal and plastic components for a variety of industries, realized a few years ago that some of her customers were purchasing from Chinese manufacturers that undercut Permac on price. Miller soon discovered that foreign component makers were very strong in producing “turned” parts—simple components and hardware with symmetrical designs, such as screws and knobs. If Permac were to survive, it needed to be repositioned to create more complex components, which couldn’t be easily copied and mass produced.
So Permac purchased several CNC (computer numerical control) machines, which can produce complex parts—and which require fewer operators. So far, the repositioning strategy is working: In the past two years, Miller said, Permac’s sales have significantly increased.
Patrick Peyton, chairman and CEO of Despatch Industries, a Lakeville producer of industrial ovens used to finish parts for medical devices, electronics, and other products, offered a few variations on Miller’s theme. China is a growing market for Des-patch’s ovens—and a challenging one. For one thing, there’s the familiar problem of intellectual-property protection—not one of China’s stronger suits.
To counteract knockoffs, Des-patch continually updates its products. It’s not worth “fighting for IP protection,” Peyton says—it’s better to avoid the problem all together.
Wayne Fortun, president and CEO of Hutchinson Technology, Inc., in Hutchinson, offered yet another story. Hutchinson’s customers are almost entirely located in Asia, as are its two other competitors. But the company, which makes suspensions for disk drives, has found it profitable to continue manufacturing in the United States and set up inventory hubs near its customers or inside their plants.
“You can’t beat China simply by working harder,” Fortun said. Companies have to be involved in continuous improvement via their processes, their products, and their employee training. And while working with Asian firms can be helpful, it’s wise to reveal as little about your technology as possible: “Don’t say anything you don’t want them to know,” Fortun advises.
