Situation
The Department of Defense was the primary customer of a U.S. company that treats third-party textile products with a proprietary application. DoD regulations required all production to be in the U.S. After several years, the company established a foothold in the wholesale apparel and textile market, a huge revenue opportunity.
Most of the base products for their wholesale customers were manufactured in Asia. Shipping them to the U.S. for treatment and then back overseas for distribution created logistical and cost issues, hampering the company’s ability to attract customers and grow.
Solution
The CFO, now a E78 partner, along with his team, determined that the company’s growth opportunities depended on building a plant in Asia.
The team identified three business plan scenarios and created detailed five-year plans for each scenario. These included a customer analysis, funding requirements, a break-even analysis, a new pricing model, and international tax implications. Eventually, they decided to build a plant in China that would be 100 percent owned by the U.S. parent. The E78 partner was chosen to lead a “startup team.”
The startup team hired a consulting firm to help with the documentation required for the Chinese plant. They also created detailed manufacturing and warehousing documentation, so the Chinese plant mirrored U.S. processes as much as possible to ensure quality and hired local legal counsel to tailor employment agreements. To reduce communication issues, they selected a general ledger package that provided reports in both Chinese and English.
Results
The plant began operations in under a year and was profitable within the first year. After three years, sales originating from the plant topped $10 million. Its success became the model for the company’s additional plants in future years.
