Valve Magazine - Spring 2008

“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 qualified too.”

“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

Protect
valves
from wear,

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.

corrosion
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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.”