Solid Height - Spring Manufacturers Institute

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ment, that’s a huge market, and government buyers are invoking the Buy American clause more often than they did in the past, so you can do well,” he says. The Buy American initiative has been around for a long time, but it was not enforced heavily. “It is being enforced now,” says Pepka, emphatically. “There are Buy American regulations for export and import controls, especially related to components that go into weapons.” These include the Defense Federal Acquisition Regulation Supplement (DFARS). “I think there will continue to be a spring industry in the U.S. China will have to deal with inflationary costs that are substantial, and everything will even out in 10-15 years,” he predicts. “Nevertheless, offshoring will continue. It’s a marketplace where buyers will often go to the lowest cost producer, regardless of where in the world they are.” Pepka posits, on the macro scale, that is it time for the owner of a spring company to decide which markets he wants to be in. “Here is how I would put it,” says Pepka, “Do you want to run an $8 million company that has a good profit level or a $10 million company that breaks even? You can’t always make up profit in volume. Sometimes, you have to ask yourself if it’s time to fire a few customers.” 16 SPRINGS July 2006 Pepka says springmakers must determine where they want to position themselves. “For example,” he says, “if you are in the oil patch business, you have to maintain high quality and timeliness, and still have to be agile. If you are in the aviation parts business, you have to maintain certifications and keep improving the shop floor. How successful you can be has a lot to do with what market niche you choose.” Dudek & Bock <strong>Spring</strong> Manufacturing Co. Chicago, IL Matt Puz, vice president of sales and marketing, has been to China to explore partnership options on behalf of Dudek & Bock. He says the offshoring trend will definitely continue and that investigation of the Asian market is a natural course of business in this climate. Dudek & Bock currently has plants in Chicago, IL; Detroit, MI; and Mexico.
“The lure of cheap labor and other cost drivers will continue, no doubt, because of the need of large users of our product types to further explore and pursue offshoring to low-cost country sources where appropriate,” says Puz. “However, sitting here in 2006, I think we’re all a little wiser about what is involved in sourcing products in general, and springs specifically, overseas, especially in China.” “The things that we all knew could very realistically go wrong, somehow inevitably seemed to do so: unannounced material changes, production pre-runs not complying dimensionally with original sample submissions, logistical snafus and the like,” continues Puz. “Also, the sheer number of springmakers in low-cost countries – particularly in China – makes it difficult to distinguish between those that are truly capable of consistently, effectively supplying U.S.-based production lines and those that are not,” he adds. Puz also addresses the ”save money at all costs” attitude of OEMs that prevailed in the early 2000s. He sees the pendulum swinging the other way regarding some aspects of the business. For example, the large OEMs now realize that they cannot compromise their new product launches by depending entirely on LCCs for support. “These companies are now counting heavily on innovative launches as a means of breaking their products out of what some call the ‘commodity syndrome,’ ” says Puz. “In short, as large OEMs seem to be increasingly choosing to wage their own competitive wars on the front of differentiated new products [vs. price points alone as key drivers], we view this as both a challenge and opportunity to provide valued designbased input.” Puz is secure in the knowledge that springmakers are the best engineers for designing products that include springs. “As springmakers, we can provide very targeted information, specific to the function of our products in their applications. This, combined with full service, product launchrelated support, forms the basis of our new value proposition that may have been somewhat undervalued during the ‘save money at all costs’ era that plagued our industry during the dark years of the early 2000s,” he says. “This is where North American springmakers have a clear advantage over the LCC competition.” “Is overseas sourcing still a looming threat?” he asks. “Sure, you bet. But in our view, the criteria by which value is assessed in 2006 fortunately provides a more favorable landscape for the battles we’re now fighting. We now see that these battles are winnable.” SAIC USA Inc. Detroit, MI Tom Shen is the chief North American representative for SAIC USA Inc. His perspective is a bit different because he is selling Chinese-manufactured springs to U.S. companies. Though he agrees that there are some leveling factors between U.S. and Chinese springmakers, he pinpoints the issue we all know well: The labor cost in China is cheaper than it is in the U.S. “Surprisingly, 30 to 40 percent of the spring companies in China are actually owned by foreigners or are joint ventures,” he says. “These foreign investments have an inherent advantage over the locally owned companies that make up the balance of the spring companies in China for one reason: The joint ventures and foreign-owned companies are more able to invest in state-of-the-art equipment. That eliminates the technology barrier to doing business with China.” “In China, the technology and the equipment are at the same level as in the U.S.,” insists Shen. “The only real difference is that the labor cost is cheaper than in the U.S. In fact, Chinese labor costs are low SPRINGS July 2006 17
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Solid Height - Spring Manufacturers Institute

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