As manufacturing continues to move en masse to China, many companies are being forced to change the way they operate their business. Although some of these operational adjustments have been relatively minor, others have been much more significant, especially for companies in the highly competitive consumer goods sector.

Quoizel, a decorative lighting manufacturing company headquartered in Goose Creek, South Carolina, has been in business for 70 years. In the early and mid-1980s, the company's parts suppliers started to move their manufacturing to Taiwan. "We had to follow them there," says Ed Clark, vice president of operations, because "less and less was being manufactured in the United States."

Then in the 1990s, "China opened up a bit more, and these same suppliers relocated there to take advantage of lower labor costs and other regional opportunities." In 1996, Quoizel also relocated its headquarters from Long Island down to Goose Creek, just outside of Charleston. "At that time, our business consisted of about 60 percent direct import and 40 percent assembly here in the U.S.," says Clark. "We've always been 'assemblers'-buying parts and assembling them into lighting, which we then sold and distributed throughout the United States and Canada."

But recently, things have begun to change. "In our industry, like so many others today, the lines have blurred. Sometimes we run into our customers [buying from the same lighting parts suppliers that sell to Quoizel]."

And, it's not as uncommon as you might think. In their quest to constantly drive down costs, U.S. retailers are increasingly circumventing the middle man (the importer and/or distributor) and going directly to the overseas supplier, which has prompted Quoizel to consider several "defensive" options, as Clark puts it.

"When you're not the prime manufacturer and you're not the retailer, you're in the middle. Nowadays, being in the middle is not the best place to be," he says. Furthermore, "There's nothing to prevent a Chinese manufacturer from coming over here and setting up a sales office."

However, Quoizel's forte has always been their original designs. "We're definitely a design-oriented company. So, one option we're considering is to form a joint partnership [in China], open a facility there, and act as a prime manufacturer. With our designs and our name, we believe this would be a good move."

Related industries see the light, too

Indeed, it may be the only move left in the fiercely competitive marketplace. Clark notes the parallels between the lighting industry and the furniture industry, which along with tobacco and textiles, has been the industrial backbone of the South, particularly the region surrounding High Point, North Carolina.

According to Greensboro's News & Record, furniture shipments from China are up 80 percent, while shipments from U.S. plants have fallen by 11 percent. Today, nearly half of all wood furniture sold in the U.S. comes from the 2,000 or so furniture-making plants found in China. The chairman of La-Z-Boy, Inc. put it succinctly; "It's a scary time for us. This whole thing has caught the industry by storm."

Even the domestic industry groups are changing with the times. The American Furniture Manufacturers Association (AFMA) announced in November that they were dropping 'manufacturing' from its name, and instead will go by the name American Home Furnishings Alliance. The executive director of the trade group, Andy Counts, said that longtime AFMA members were no longer able to fit into the membership profile. That is, members were required to maintain a manufacturing facility in the U.S.

"While our new organization will remain a voice for domestic manufacturers at the state and federal level, we will also create new services for those members and prospective members whose business models do not necessarily include domestic furniture production," Counts said.

Regarding the name change, industry analyst Jerry Epperson remarked, "Imports of wood furniture are now well over 50 percent of all wood furniture sold in the U.S., up from less than 20 percent 15 years ago, and the membership reflects that," Epperson said. "They are redefining themselves to represent the factories, wherever the factories are that sell to the U.S. retailer."

Clearly, American manufacturers, such as those in the lighting, furniture, and home accessories industries, are in a tough spot. On one hand, they're being blamed for sending American jobs overseas. On the other, it's not far-fetched to say that they don't have a good chance of surviving if they don't at least shift their manufacturing operations to places like China.

Quoizel is a good example. Clark says that the company's products aren't low-end, nor are they high-end. Most of the company's lighting is used in the housing market-new construction, remodels, decorating-and when it comes to competitive pricing, "the only place to fill that niche is from overseas."

The Wal-Mart influence

Clark talks about a recent program on PBS, which explored the profound ways Wal-Mart has reshaped American manufacturing, retailing, and consumers themselves. "We are a nation of consumers and we want a good deal," Clark acknowledges, but it's hard to preserve U.S. manufacturing jobs and keep prices down at the same time.

Says PBS correspondent Hedrick Smith, "Retailers are now more powerful than manufacturers, and they are forcing the decision to move production offshore."

And, Wal-Mart is leading the way, it seems. The retail giant has an estimated 6,000 global suppliers, and about 80 percent of them can be found in China. "Wal-Mart has a very close relationship with China," notes Duke University Professor Gary Gereffi. "China is the largest exporter to the U.S. economy in virtually all consumer goods categories. Wal-Mart is the leading retailer in the U.S. economy in virtually all consumer goods categories. Wal-Mart and China are a joint venture."

Wal-Mart's global procurement center is in Shenzhen, China, a place where a lot of lighting and furniture manufacturers are located as well, says Clark. The city's main seaport didn't even exist ten years ago, but today it's on the verge of becoming the world's third busiest. While Wal-Mart takes the credit for most of this expansion, other U.S. companies' rush into the Chinese manufacturing mecca have contributed to the boom.

China's growing pains

Quoizel's imports from China move primarily by ocean via the Panama Canal. This all-water route has been in place for some time and has worked well for the company. "We bring in over 1000 containers a year and we get a very good response from the Port of Charleston. Our carriers-K Line, Evergreen, and Maersk-are also very good."

However, some of Quoizel's containers are shipped directly to their customers, and often times this means going through the ports of Los Angeles and Long Beach. It's no secret that delays at the West Coast port complex-a major gateway for freight from China-have created disruptions to many an importer's supply chain.

"We've definitely been affected by the delays," says Clark. "Our customers give us a ship-window and they want their container delivered between certain times. But it's out of our control when it hits the West Coast-there's just nothing you can do about it."

The peak shipping season has also been extended, he explains. "It used to run from June through October. Now it's June to January."

While it's sometimes been frustrating being on the 'receiving' end, companies who have established their own manufacturing operations in China can utilize their Asian presence to open up new markets in the region.

While selling to the domestic Chinese market doesn't appeal to Quoizel at the moment, partly because of prohibitive regulations, gaining a foothold in countries like Australia and Japan are of potential interest.

In short, Clark says that, "You have to figure out what you are and then draw your line in the sand. We're a distributor. We have a full design staff. And, we have relationships over in China. It makes sense for us to do our own manufacturing in China. It will give us a competitive edge."