Moving closer to clients

HONG KONG – Halifax Fan began manufacturing
industrial fans in 1965; its factory in West Yorkshire, England, with fewer
than 75 workers, produces heavy-duty machinery for customers like power plants,
food processors and pharmaceutical makers. In recent years, the company noticed
more of its products were being made for use in Asia.

“I thought, ‘This isn’t going to last long.
Asian makers will copy us and we’ll lose all that business,”’ said Malcolm
Staff, 46, the company’s managing director. “We needed to be closer to where
our customers are.”

The company turned to York Li, an
English-speaking Chinese engineer who was a former colleague of a Halifax
manager. In 2005, he signed on with Halifax and spent the next year working out
of his apartment in China, investigating business regulations, handling
paperwork, talking to government officials and looking for a suitable
manufacturing site.

“In the U.K., there are lots of big lawyer
and accountant groups who will help you get started in China, but if you go to
those guys, you get slaughtered in terms of costs,” Staff said. “We just
couldn’t afford to go that route.”

Halifax scoped out various cities in China
to figure out where to set up a plant. “Many cities were interested until they
found out we didn’t want to put in $1 million of registered capital,” said
Staff, recalling offers of tax abatement and cheap rent from government
officials. The company instead wanted to put in about $150,000 in registered
capital because, Staff said, it did not have a lot to spend.

Ultimately, Shenzhen’s proximity to Hong
Kong and the ease of shipping from its port persuaded Halifax to establish operations
there.

In late 2006, the company received approval
from the city’s authorities to register as a wholly owned foreign enterprise.
Then Li began outfitting the rented factory floor and hiring workers. The
initial plan, he recalled, was to make small fan cases, but not impellers – the
blade mechanism that spins inside. And they would make products only of carbon
steel, not stainless.

Then the first order came in, from a long
standing client of the England factory.
“They wanted impellers only, not fan cases,” Li, 38, recalled. And the second
client? “They wanted a stainless steel fan case.”
Reluctant to say no to any orders, the company dispatched workers from the
factory in England to advise on what tools to obtain and to train workers. Although
Li had translated a welding quality manual and had hired Chinese workers with
welding experience, there were cultural barriers to overcome.

“For the Chinese workers, speed was the
most important thing in their minds. If they did it quickly, they thought
they’d done a good job,” Staff said. “It’s taken a long time to get a different
mind-set in place.”

Another problem has been finding raw
materials in small quantities, like titanium and stainless steel with a
specific European certification.

Over the last three years, the company’s
Shenzhen factory has grown to more than 30 workers from five. Staff turnover
has been low – only four employees have left – and in a city where labour
shortages are common and workers switch jobs frequently to get more pay, that
is a point of pride for Li and Staff.

The company offers perks to keep its
workers happy. For example, the entire Shenzhen factory staff recently took a
weekend trip to Guilin, a town in southern China, to help bring employees
closer together.

The company expects revenue of $10.8
million this year, with about 20 percent of that coming from China. The
Shenzhen factory is now capable of making about 80 percent of the types of fans
that are produced at the England factory.

Last year, 60 percent of the products
Halifax made in Shenzhen were for use in China, while the rest were exported
elsewhere in Asia. Li said he expected 70 percent of the factory’s fans to go
to China this year.

Although the cost of raw materials is about
the same for the Shenzhen and West Yorkshire factories, labour costs in Britain
can be as much as five times greater, Li said. That initially led to concern at
Halifax’s home factory that jobs would be lost to China. But Staff said that
having the factory in China has led to more business for the England operation,
particularly for the most sophisticated fans that cannot be made in Shenzhen.

“The business climate
in China and Asia in particular is much more buoyant at the moment than Europe,
where project after project is being put on hold,” Staff said. “If we had not
developed our own facility here in China to sell, manufacture and service our
customers, and we were just reliant on the U.K., we could be in a hard position
at the moment.”

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