Offshore manufacturing is growing quickly—but so too is recognition of some of the problems it brings. Uncertain quality control, lot-to-lot inconsistency, exposure of trade secrets, and communications difficulties are the downside of lower costs. However, Shercon has largely solved such difficulties with its “WOFE” (wholly owned foreign enterprise) at Hangzhou, China.

Shercon owns and manages the plant, retaining control of staffing, machinery, quality procedures and certifications, and the formulation and testing of its own rubber in-house. Meanwhile, the company’s Santa Fe Springs, CA, site houses its headquarters, design, development engineering, and die-cutting operations. The arrangement avoids language and time zone barriers for customers and allays their concerns about trade secrets finding their way to a competitor. Shercon believes the process offers a significant competitive advantage—or “the best of East and West,” as CEO Keith Ennis describes it.

Shercon has been manufacturing custom-molded rubber parts since 1946. Traditionally these have been used for precision masking in the surface finishing industry during painting, plating, E-coating, and powder coating. Today its customers in this market include well-known names such as Caterpillar, John Deere, Case New Holland, Harley-Davidson, and Boeing. For example, Shercon manufactures a template for Boeing that fits over the aircraft window and protects it while the bodywork is being chemically stripped and painted.

However, a growing side of the business uses the same technology to sell rubber-molded parts to OEMs in the automotive, appliance, fluid control, sealing, and lighting equipment industries, which includes companies such as Ford and General Motors. Currently around 55 percent of Shercon’s business is concerned with masking products and 45 percent on the OEM side. However, this more recent development is the focus of its new Chinese manufacturing operation and is experiencing the bulk of growth.

Opened in 2004, the 75,000-square-foot facility at Hangzhou manufactures most of the company’s rubber products, which involve a medium to high level of complexity in terms of the compounds, dimensional tolerances, and technology involved. The plant employs around 300 staff and runs two shifts, six days a week. “We’ve just added a further 70,000 square feet, and we’ve also invested in equipment such as vacuum presses to ensure there are no voids or non-fills in the customers’ products, as well as mixing equipment, which allows us to manufacture our own silicone compounds,” said Ennis. Other new investments in the last three months include a cryogenic deflashing system (which trims excess rubber “flash” from newly molded parts in seconds compared to traditional chemical or mechanical methods) and an innovative CO2 cleaning process for tools. “It takes only 15 to 20 minutes, and you don’t need to take the tool off the press for a couple of hours to clean it.”

Ennis cites three elements that are helping to achieve Shercon’s goal of US/European quality with the price benefits of manufacturing in China. First is the support for the Chinese manufacturing operation. “We have engineers in Los Angeles, Ohio, and Detroit, and distributors in Sweden, Belgium, and the UK,” said Ken Shane, development engineer. “The key is to have engineers close to the customers to identify their true needs—someone who can sit down with them, understand their application, find out what technical procedures are needed, and then provide the technical know-how to develop the rubber part.”

Another vital element is effective communications among Shercon’s engineers, design center, and the Hangzhou manufacturing facility to enable a transcontinental workflow. “Everyone needs to be working from the same page,” said Ennis. “We have two tools to achieve this. One is a package called Streamline, which is an online design collaboration system. It’s Internet-based and allows an engineer in the Midwest to upload customers’ exact 3-D drawings and their compound, quality, and packaging requirements so that they’re available for the design team to see in L.A. and the manufacturing team to see in China. When you’ve got a customer in Cleveland, a design team in L.A., a tooling operation in Taiwan, and production in China, the challenge is for everyone to have access to the correct information at the right time.”

The second enabling tool is online project management. Shercon’s system has nine different modules, from the initial customer interface through development of tooling and processes and continuous improvement. “It means the different facilities can check their responsibilities for a project, what their deadlines are, and the status of a project even when they’re in different time zones and 8,000 miles apart,” explained Ennis.

As well as facilitating communications between remote functions, Shercon’s two software packages are also open to customers and can be accessed at Shercon’s facilities or the customer’s site. “From a sales standpoint it’s a huge plus. We want to be seen as a company that is easy to do business with,” added Hans Nilarp, sales manager. The systems are continually evolving to meet new business needs, with the option for videos and other materials to be added.

The third element in achieving Shercon’s goal is the development of the Hangzhou facility. Ennis has located there full-time to encourage the establishment of a Western culture on the site. “We want to ensure we achieve our goal, that customers have quality products when they need them. All our key team members in China are highly educated and have experience at working for major overseas companies such as Motorola, General Electric, and Exxon Mobil, so they’re familiar with the standards and expectations of our US and European customers.”

Supporting this aim is the international certification of the Hangzhou plant, which has achieved ISO 9001 and 14001 compliance and QS-9000 registration from the BSI with TS16949 certification under way. APQP (Advanced Product Quality Planning) processes are used to ensure that projects are developed on time and meet all specifications. “We look at the customers’ specifications, then sit down with them to completely understand their needs and develop a project timeline,” said Shane. “We supply Tier One automotive suppliers in the US and are audited on numerous occasions. When foreign companies come and audit our Hangzhou facility, they have peace of mind that we are internationally certified and a US-managed corporation.”

The Chinese operation follows lean principles, including WCM and Six Sigma, which have led to impressive process and productivity improvements. “For example, for one high-volume job, where we produce 20 million parts a year for the customer, we’ve increased from 12 cycles to 18.5 cycles per hour over three and a half months. We’re ultimately aiming for 20 cycles per hour in the next six weeks,” said Ennis. “This has been a technology transfer project to China from the US engineering team. It’s been a very important project, not only in increasing our productivity but also in giving us the opportunity to train the Chinese team in how to develop and fine-tune their processes systematically.” Ennis cites another set of products where the ongoing scrap rate six weeks ago was 8 to 9 percent. Through process refinements and a team approach, this has now been reduced to below 3 percent.

A new ERP system went online in February this year at the Hangzhou plant: a Kingdee system, produced by the second-largest ERP manufacturer in China. “It’s cost-effective and has very good functionality,” said Ennis. “It has helped us increase productivity and reduce scrap. The reports we receive from it help me set goals for production and engineering improvements.”

The biggest challenge currently facing the company is recruitment in China. “The number of foreign companies setting up in China is increasing every year, and there’s competition for quality employees. There’s high demand for a fixed supply of people with a good education and the right competencies,” explained Ennis. This is particularly important for Shercon, whose products require a sophisticated level of tooling and compound knowledge. Rubber compounds are mixed in-house, rather than using outside vendors, therefore the company has been investing in chemists. “When we set up in Hangzhou, our primary goal was not to achieve particular sales figures but to develop the technical skills in compound development, tooling development, and process development,” said Ennis. “Our focus is on recruitment and working to develop competencies—to train, educate, and transfer technology and satisfy our customers’ demand for a higher level of complexity.” Shane added: “They’re not standard products that we produce in China; two years ago they could not have been made there because of the sophistication of the tooling and compounds required.”

Shercon is committed to continuing to add value, develop new technology, and introduce new products. But, as Ennis acknowledges, “The most important part in our success is having the right people on the team. How you move from being a good company to a great one is having the right people on board, whether you’re in L.A. or China.”