A Beaverton operation IDs Chinese factories best-suited to to clients' production needs01-Oct-2009 by Matthew Kish, Portland Business Journal staff writer
A summer of made-in-China horror stories is turning into a whopper of a business opportunity for a Beaverton company. Founded in 1999, E-Business International Inc. helps manufacturers find factories in China that operate according to the highest quality standards.
Thanks to recent high-profile recalls of Chinese-made products ranging from pet food to children's toys, business has never been better for the company, as manufacturers scramble to ensure their Pacific Rim operations aren't supplying them food laced with pesticides or toys coated in lead paint. "We help companies navigate through the darkness," said Kevin McKelligon, an E-BI senior account executive. "Going to China can seem like a daunting task."
The company landed on the Portland Business Journal's list of the fastest-growing local companies the past three years, climbing to 17th on this year's list with revenue growth of more than 200 percent over a three-year period: $9 million in 2006, $5.8 million in 2005 and $3.1 million in 2004. The company could easily claim another spot next year. Chief Executive George Wang predicts revenue could hit $40 million in the next three years. Wang hopes to leverage the growth into a new round of financing. If he's successful at raising $4 million from local investors, he plans to beef up sales and marketing efforts and possibly open offices in Chicago, Los Angeles and Europe.
If all goes as planned, Wang also wants to take the company public within three years. Wang founded the company with the help of 13 local investors after a previous business of his ran aground when he couldn't find a quality low-cost manufacturer.
Most of the 200 customers E-BI works with are small and midsized companies that already do business in China, but are "fed up" with what's happening there, Wang said. Seventy percent are U.S. manufacturers. Customers range from heavy manufacturers like Caterpillar to complex manufacturers such as Xerox. The company has a network of 1,000 factories in China in 22 industries ranging from injection molding to die-casting. Each factory is monitored on a regular basis to ensure that it maintains the highest-quality metrics, including ISO 9001, the gold standard for international quality control. In addition to monitoring quality, E-BI can also assist with product design and engineering support.
"We're like an extension of the U.S. company's business over there," McKelligon said. Each year, roughly 15 percent of the factories are removed from the network for not meeting various quality measures. "A factory is just like a person," Wang said. "They change." The network could eventually include factories in Vietnam and India, but those countries are 15 years behind China in terms of manufacturing capacity, Wang said, especially for complex products. The company has 12 employees in Beaverton and more than 100 in Chinese manufacturing hot spots such as Shenzhen and Ningbo. The cost is minimal, Wang said. It breaks down like this: If a company manufacturers cell phone holders in China that it sells for $30 in the United States, it probably pays less than $2 to have each product manufactured in China. E-BI's cut is 2 percent of the cost of manufacturing the product in China, or less than 4 cents for each $30 product. "It's almost free," Wang said. Portland-based Peco Inc. can vouch for E-BI's work.
The company hired E-BI 15 months ago to provide engineering support at its Chinese facilities. The partnership has allowed Peco to save thousands in international airfare. "The savings on airfare alone paid our monthly fees," said Kai Carlson, Peco's former director of operations. The industry is robust partly because of the swelling trade deficit with China, which has grown from $10 billion in 1990 to $238.4 billion, according to the U.S. Department of Commerce. "It's a very healthy [industry]," said Liza Milliner-Bloom, president of Beaverton-based Offshore Solutions Inc., a similar company. "In the last couple years a lot of companies ... have been having issues. It's not so much that the Chinese are not capable of manufacturing the parts. They are, but sometimes there are interpretation issues."
Similar to E-BI, Offshore Solutions is growing. It's now a $10 million company with 20 employees. Manufacturers often choose their Chinese facilities by looking at Web sites or answering cold calls from Chinese salesmen, Milliner-Bloom said. Having a representative on the ground in China is invaluable, she added.
Perhaps the biggest downside to the growth is the hectic travel schedule. Wang logged more than 100,000 miles last year, regularly jetting from Portland to visit customers across the United States and in Europe, Australia and New Zealand. "At some point the airport is more comfortable than the hotel," he said. "You don't even want to open your bag because you know you'll have to repack it in the morning."