Navigating China Guide (2012) - New Zealand Trade and Enterprise

ATRAX CASE STUDY
Sourcing from China to build a global business
Atrax founder and Managing Director Kevin Maurice says
moving his manufacturing operations to China meant he could
source parts and materials at more competitive prices, leaving
him better placed to compete with his international rivals.
Atrax, which makes weighing and measuring products used in
airports, began manufacturing in China after Maurice sold off
the domestic arm of his business to focus on exporting.
But in order to build a global business and compete
internationally he had to be able to source parts and raw
materials at the best prices. And that’s what China offered,
he says.
“I can buy the same European-branded parts in China much
cheaper than I can buy them in New Zealand or Europe. If my
competitors are accessing parts at those prices I need to do
the same, otherwise I’m at a disadvantage right from the start.”
For some products the difference in prices between China and
New Zealand can be as high as 60 percent.
“Manufacturing in China isn’t cheaper just because of the lower
wages – which are actually rising fairly quickly. Other things go
into the mix, like the price of raw materials and the fact that
China is so much closer to international markets.”
Atrax products, from the small scales that weigh in your check
in baggage to the large scales used to weigh cargo for air
freight, are in 101 countries. The company is well-positioned in
China to take advantage of the surging middle-class demand
for air travel and resultant expansion of airports across Asia.
Atrax rents a factory in southern China in collaboration with
another New Zealand company. The two businesses have
complementary technology, but are in unrelated industries.
Maurice set up a Chinese company – a wholly owned foreign
enterprise – to operate the factory and has installed Atrax staff
alongside the Chinese managers to run it.
To ensure the factory manufactures goods to a consistently
high standard, he put considerable effort into documenting his
processes and employed an engineering manager who spends
around half his year in-market. Maurice himself spends at least
three months a year in China.
He says manufacturing in China has involved “surprises”, but not
all of them were bad. “The bureaucracy is difficult; it’s very hard
to understand. But the quality we’ve been able to achieve in
particular areas has been better than I expected.”
The threat of intellectual property (IP) is an issue, as it is in other
countries. But this is just another issue to be managed and
shouldn’t stop exporters going to China, he says.
While ensuring Atrax has all the necessary registrations in place,
Maurice has also taken some practical steps to protect his IP.
He has segmented his business so that there is little contact
between the design capability in New Zealand, the
manufacturing plant in southern China and the sales centre
in Shanghai.
He routinely ships bulk goods back to New Zealand where the
products are then loaded up with the software. And whenever
he uses a sub-contractor in China, he will ask them to make a
piece of steel or electronic part but never divulge what it is for.
His advice to other Kiwi manufacturers considering a move to
China is don’t expect it to be like New Zealand and don’t judge
it from a New Zealand view point. “Some of the things they
do seem unusual to us. But we’re a country of 4 million and
they’re a country of 1.3 billion – so who’s to say they’re the
odd ones out.”
He also advises Kiwis to use their networks. “Talk to other
people up there. Not just New Zealanders but other Westerners
(or Westerner savvy Chinese) in China or Hong Kong.”
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