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March 1, 2004

5 Min Read
China operations and the competitive advantage

Successfully integrating manufacturing operations in China depends on a continuous real-time presence for Seattle''s PMI.

During a time when many plastics processors are complaining about losing business to China, Pacific Market Inc. is leveraging its operations there to develop innovative products for major retailers. The designer and importer of insulated drink ware, food storage items, backpacks, and sports duffels operates four Chinese facilities that follow socially responsible business practices and comply with PMI''s specs as well as quality standards from clients.

Talk about "a dollar and a dream."

This famous phrase just about sums up how Robert Harris founded Pacific Market Inc. (doing business as Pacific Market International and PMI), a designer and importer of insulated mugs and cups for several major retailers. Some 21 years ago, with just a $1200 initial investment, the PMI CEO and owner used credit to purchase an ocean container full of copper cookware sets abandoned at the Port of Seattle. The proceeds generated from selling the contents to liquidators not only enabled him to pay off his credit line, but also became the seed money to found the company.

Today, the Seattle-based company manages product for some of the biggest names in retailing, such as Starbucks Coffee Co. (Seattle), Eddie Bauer Inc. (Redmond, WA) and Target Corp. (Minneapolis, MN), as well as its own brands worldwide, including Aladdin, Stanley, and MiGo.

PMI produces more than 750 products and maintains offices in Seattle, Brentwood, TN, and Shanghai, China. An estimated 80% of the business comes from PMI''s insulated food and beverage container lines, with the remainder from bags and backpacks made for Eddie Bauer and Nike (Beaverton, OR). The firm posted an estimated $70 million in 2003 sales and reported double-digit growth the past three years.

The multi in multinational

PMI has maintained manufacturing operations in Asia since 1992. Through the years, it gradually increased its presence there, investing in a Guangdong injection molder in 1999 and a Qingdao stainless steel operation two years later. Today, products are manufactured at 11 locations in Asia. Factories are either pursuing or have achieved ISO 9001 factory certification.

"Not all of them are injection molding factories," notes Marc Platt, senior VP of operations. "We have three factories that are primarily stainless steel making, although there is some injection support for handles, cups, bases and other kinds of auxiliary components."

An estimated 70% of PMI''s business comes from plastic products. Four Chinese factories manufacture double-wall beverage containers, lids, handles, tools, and accessories with the capacity to produce 24 million units per year. The firm operates more than 500 injection molding machines with clamping forces ranging from 100 to 2000 tons.

"All of our factories have capabilities for spin welding, printing, and packaging," Platt says. The primary materials used for injection molding include PC, ABS, SAN, PP, TPE, acrylic, and silicone.

When in China, do as Americans do

PMI says it is committed to the smooth transition of product from design to prototyping, tooling, sampling, and production. Production lines and raw materials are scrutinized to meet PMI''s specifications as well as quality standards from clients. The facilities follow Six Sigma design processes and implement improvement initiatives. "That is a point of differentiation," says Peter Nazaroft, design engineer. "We have seen that proven by some of the recent contracts we''ve won on what we call the private label side of the business, where we are doing design and turnkey engineering and development for two major global customers."

Products are distributed to client locations in Asia and around the globe. "It gives us the ability to put over 100 products in the pipeline immediately from multiple manufacturing locations," Platt notes.

Although the China operations provide PMI with labor cost savings, Platt notes PMI is committed to socially responsible business practices and assures that its products are produced under lawful, humane, and ethical conditions. It engages a major independent firm to audit its factories and ensure compliance with its code of conduct.

"PMI took the steps that were necessary to comply with our Code of Conduct," says Michael Collier, advanced program manager, Nike Bags. "That''s a very important step for us and is really critical for determining business partners."

It''s in the bag

PMI has conducted business with Nike Bags, part of Nike''s Equipment Division, since 1999. Last year, it developed the framework for Nike''s EPIC 1 iD bag. Product development was tricky, as Nike sought to create a soft plastic garment that absorbed shock without breaking.

"Marrying those two materials has almost never been done at this level," Chris Helmsworth, Nike Bags'' director of development, contends. Two large inserts inside the bag are insert molded. "The injection molding, in particular, is very technical because the frame is made from a glass-filled TPU."

An ongoing challenge for PMI is ensuring the corporate office and manufacturing facilities are on the same page relative to product design and manufacturing. "The key is being in real time with factory partners, not managing factories from Seattle," Platt says. "We realize the need to have someone there in real time, making that tight connection with the factory so it is talking a common language."

PMI continues to fine tune the production process, from engineering design to quality control. For example, it instituted training certification programs at the plants, which gives them a uniform standard of inspection quality. "We just started bringing our factories on board with an Internet-based project management system," Platt says. "By the middle of this year, we will be online with two or three of our major volume products, where we will be able to almost watch process control in real time."

Greg Valero [email protected]

Contact information

Pacific Market Inc.   

Starbucks Coffee Co.   

Eddie Bauer, Inc.   

Target Corp.   

Nike   

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