Countering Counterfeiting
For Hayward Pool Products, an Elizabeth, N.J., maker of heaters, pumps and other swimming pool equipment and a division of Hayward Industries Inc., an offshoring strategy did not begin with the search for a low cost producer in a country half way around the world. Quite the opposite -- the strategy began with a low-cost Chinese manufacturer finding Hayward products ideal for counterfeiting, says Paul Adelberg, vice president, technology. The Chinese firm was illegally copying its products right down to using the same part numbers, adds Adelberg.
The Chinese firm did its best to fool Hayward's global market, he alleges. "They copied our packaging including the actual logos on the bags and the result, superficially at least, was so convincing that our largest customer referred the competitive price of the pool components to the attention of our sales and marketing vice president," says Adelberg.
The customer noted that while the counterfeit pool components duplicated appearance and function, pricing averaged 25% lower. That jeopardized more than $20 million in sales to this one customer, he says.
In addition to potential revenue loss, Hayward's other major concern was the reputation of the product. "We knew that the material specifications were inferior -- definitely not the same grade used by Hayward. That would severely curtail product service life.
"Issues of reputation and market share compelled us to add an offshore strategy even though we were well along in our implementation of the lean manufacturing and Six Sigma practices of the Toyota Production System."
Although its optimization efforts produced significant process benefits for Hayward, they weren't enough to counter Chinese mainland labor costs equivalent to 40 to 60 cents per hour.
Nevertheless, for Hayward, the optimization made possible by its lean and Six Sigma initiative has played two pivotal roles. Since the company's offshoring strategy is one of augmenting, not replacing the capabilities of its U.S. plants, it is important for the company to have its U.S. operations as efficient as possible, explains Adelberg. Hayward's strategy is to use its Chinese supplier for the longer, more stable product lifecycles while the U.S. facilities smooth out supply logistics and concentrate on new product introductions. Significantly, to gain employee commitment for its initiative, Hayward adopted a no layoff policy at the time of the offshoring decision. "We need our people to grow our company through product development and customer service programs," insists Adelberg. And the lean and Six Sigma initiative is playing a critical role at Hayward in administering its offshoring program. "It helps us decide which products to offshore and how to best help our supplier achieve quality, cost and production goals."
