U.S. Distributors Expand in the East

“China is the fastest-growing market in the world for our harsh-environment connectors. Both our suppliers and our customers have asked us to come to China to help support their growth,” said Dorwart, adding that PEI’s management team began researching the opening of a China facility five years ago. “Suppliers in China are focused primarily on high-volume, low-mix business, and very few companies have our assembly capability or connector focus. “

Dorwart also points to PEI-Genesis’ strength as a drop-in solution for customers that its supplier partners can’t serve directly. The distributor delivers millions of different part numbers in 48 hours while also offering engineering and design support.

“Everything we have learned about the Chinese market in our five years of exploration tells us that we will succeed there using our model,” Dorwart said. “We believe that if we can transplant our model to China, it has the potential to be as large a market for us as the U.S. or Europe. Europe is roughly 25% of our expanding global sales and we expect China to be a similar portion of our sales within four to five years.”

Duplicating Success

PEI-Genesis’ Zhuhai facility mirrors its warehousing and production facilities in the United Kingdom and the United States—an essential element to delivering the company’s value proposition to the Chinese market, Dorwart said. The facility uses the same proprietary automation, the same process flow, and the same software as its South Bend, Ind., and Southampton, U.K., locations, where it builds custom-made connector solutions. The duplication makes it easier to train local employees and leverage best practices across all three factories, Dorwart added.

“Our Zhuhai facility will enable us to assemble and ship connectors in 48 hours with flawless quality, just as we do in the U.S. and Europe,” he said. “We are very excited about this because we will be the first distributor in our industry to open such a facility in China.”

Although PEI-Genesis won’t be fully operational until May 1,  the sales team and all the operational staff are already in place, according to Jane Fischetti, PEI-Genesis’ general manager, Asia, South America and

Distribution, who has overseen the project, with the help of a consulting firm that aided the distributor in navigating the legal maze of setting up shop in China.  In all, the facility will employ about 30 people.

Fischetti noted that the hiring process went smoothly, and she pointed to local enthusiasm for working in a Western company as a key advantage.

“There is this sense that a lot of the people want to work for a Western company; they see that as important to their career path,” Fischetti explains, adding that the cultural atmosphere has been positive as well. “Everyone has been extremely welcoming.”

PEI-Genesis is using those positive attributes, in combination with its established supplier relationships in the region, to ramp up business right away. The company’s initial focus is on rail/mass transit, commercial air, oil and gas, solar, and industrial markets. Fischetti points to rail/mass transit as the greatest opportunity initially, explaining that PEI-Genesis’ supplier partners have introduced the distributor to potential customers in the region. PEI has also begun working with some commercial air contractors through a partnership with one of its connector manufacturers. The solar market is new for PEI, but Fischetti is optimistic about those prospects as well.

“Our suppliers say they really need distribution there to support them” with solar market customers, she said.

PEI-Genesis’ initial geographic focus is on China alone, but the plan is to support other customers in the region from Zhuhai, eventually. Today, all global business outside of Europe and China is handled by the distributor’s New York office; that business includes South America, India, Korea, Japan, and the rest of Asia.

Small Distributors Expand, Too

California-based Amidon Inc.  is another distributor focused on growing in China, having established a location in Shenzhen in late 2013. The company also has a small warehousing location in Hong Kong.  Julie Yuan, managing director of the specialty provider of ferrites, iron powder cores, and custom inductors and transformers, says the firm had a soft start the first year and plans to build business this year through more concentrated sales and marketing efforts. Amidon has served customers in the region for years, but decided to build on the business a few years ago by opening a location closer to existing and potential customers. Amidon supports contract manufacturers and small manufacturers in government, medical, consumer electronics, and similar industries across Asia, and has a special focus on small-quantity orders.

This year, Amidon is focused on continuing to support local customers’ need for those small-quantity orders while also getting a better handle on its need for particular products that are hard to find locally.  

“Over there, it’s very different because we don’t have that same sense of knowledge that we have here,” Yuan explained, noting that she will head to China in late May for a series of customer visits. “The first year, we went to see [about the business potential in the region]. For the second year, now [we’re examining issues such as] what needs to be stocked? What will be a constant mover? Is this a project that comes up regularly? We want to get a better mindset of how to do our stocking.”

The small distributor is also focused on marketing its services to a wider audience. Amidon launched a Chinese-language website last year and is working closely with supplier partners on marketing materials designed to showcase Amidon’s ability to provide both standard and custom-made, high-quality products. A close partnership with ferrite components manufacturer Fair-Rite has been a particular advantage, Yuan added.

“We have translated some of their marketing materials into Mandarin and are co-branding together,” she said. “We’re making a big push getting things into the Mandarin language and into the right hands.”

Yuan said she hopes that by the end of this second year in China that Amidon has a better sense of where local customers are turning to fill the demand that she agrees clearly exists throughout the region. That better sense of where customers are getting parts and what happens to bids Amidon doesn’t win will go a long way toward helping her and her management team better structure their local business for success.

“That is what I’m hoping for by the end of the year—that we’ll have the clarity to target the market even better and build on the good start we have already developed,” she said.