“You don’t want your name on a valve
made from [untraceable] material.”
Felder says Valero takes certification a step further—it not only
approves foundries but their suppliers.
“Every time a manufacturer we’ve
qualified gets a new source, it has to be
“These foundries must source their
components,” Cowart notes, “so you
have to take the time to inspect their
supply chains, even down to the paint
they order. (Powell has a no-lead paint
requirement for its valves.) If a foundry
doesn’t have the supplier you need, you
have to help it find one.”
Another issue is valuation of the yuan
and reduced export rebates. China’s
national currency is rising against the
U.S. dollar, increasing 8.5% since
March 2007. Cowart says the yuan
reached a value in late February—
$0.14—that a Chinese government official told him two years ago would affect
the country’s competitiveness as a low-cost exporter.
At the same time, the government
has reduced export rebates to 17%
from 23% and may cut them further.
According to Cowart, the rebates pay
manufacturers for selling products offshore. “You can ship products out, sell
them at net-net breakeven prices and
make 17% on the back side,” he says.
“The more this gets cut into, the more
costs are added.”
The yuan’s rise against the dollar,
along with the reduction of export
rebates, has most manufacturers scrambling to improve profitability.
One major problem in compiling an
AML is that there are no hard and fast
ways of doing so and few organizations
a company can turn to for guidance.
Some industry associations may provide
suggestions and informal guidelines, but
these are mostly through member
exchanges at meetings. Distributors
develop their own AMLs, though
sources say the lists represent products
they want to sell rather than what buyers really need.
Some buyers distribute their AMLs
to select customers to make the valve-sourcing process transparent. Powell,
for example, has a confidential book
that lists its vendors and the types of
valves in which they specialize.
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Local Presence a Must
Most experts, though, say there’s no
substitute for having a presence in
China and dealing directly with manufacturers. This can be done through a
joint venture with a local company,
opening an office there, or at the very
least by finding a reliable representative
who will check the capabilities of manufacturers and monitor their operations.
“The key thing is boots on the
ground, and they have to be your
boots,” says Johnson. “You have to have
people you can trust who will give you
the right answers so the foundries do
what you expect.”
“There’s a great deal that can
change about a casting that won’t be
apparent when the valve is received,”
Smith remarks. “There’s a lot of money