08/13/2009

Integrated Technologies Ltd.

Integrating China and the UK

Integrated Technologies Ltd (ITL) was established in the UK 35 years ago and has since built a reputation as the market leader in the design and manufacture of medical diagnostic and analytical instruments.

In the face of booming business, the company has recently opened a factory in China to supplement its UK manufacturing capability, allowing it to take on more orders, cut costs and keep ahead of the competition.

Over the past 35 years, integrated Technologies Ltd (ITL) has designed and manufactured hundreds of medical diagnostic and analytical instruments. The company’s core business is contract design and manufacturing. A client brings a concept that it wants ITL to prepare for market and ITL deals with all stages of the process. This can involve design, building a prototype, obtaining any necessary regulatory approvals, and finally manufacturing the actual product, or any part of that process.

In manufacturing, ITL has around 25 products on its books at any one time. One of these is a world class retinal scanner that uses lasers to check for early signs of pathologies like diabetes, and for other ophthalmic conditions such as a detached retina. ITL has been manufacturing these for the past 10 years and there are now several thousand in use across the US and in the UK. Another of its products that enjoys high volume sales is a handheld unit that checks for bacteria on food preparation areas. ITL manufactures thousands of these every month at its premises in Ashford, Kent.

“Our clients come to us because we have years of experience, whilst many of our competitors are new to manufacturing these kinds of products,” says Tom Cole, Managing Director of Integrated Technologies Ltd. “We have a highly skilled team of software, mechanical, hardware and electronics design engineers and systems engineers, many of whom have been with us for 15 to 20 years. Having both design and manufacturing within our company is crucial for our clients, who know that when they come to us we’ll get them to market quickly.”

Increasing capacity
Thanks to a high level of repeat business and referrals from existing clients, ITL has been working to near capacity in its UK factory. But, even though its order book is strong, the company was not content to rest on its laurels. Rather, it adopted a strategy of being proactive in driving its business forward. In 2007, the company set itself a new five year plan – to grow its business from £14.5 million to £29 million. So, it began to look for premises for a new factory that could take the pressure off the existing site.

At the same time, ITL recognised that its clients were looking for ways to reduce their manufacturing expenses and maximise margins. Seeing that cheaper manufacturing in India and China was a potential threat to its own business, ITL decided to turn this threat to its advantage. Rather than setting up new facilities in the UK, the company explored opportunities to expand over seas.

“We had already been working with China for over two years, mainly outsourcing the manufacture of parts and sub assembly,” says Mr Cole. “But, we needed to keep moving ahead to meet the ambitious target we had set ourselves. We can only fit so many products in our 30,000 square foot UK facility. So, we decided to release the simpler of our own and the more stable of our clients’ products, with their agreement, for manufacture overseas. This way, we were able to create capacity to bring in new and more complex products to the UK.”

Deciding Factors
Having settled on a strategy, ITL now turned its attentions to the details of what this would entail. The company approached UK Trade & Investment which allocated an International Trade Advisor to work with it and support its activities. It also commissioned an Overseas Market Introduction Service (OMIS) report, which helped it to identify five key suppliers to target in China. When Mr Cole made his first trip to China in September 2005, he went armed with a list of people he wanted to meet. Wherever possible, he had set up appointments before he arrived, so that he could make the most of his time.

Mr Cole was particularly impressed with the people he met in China, finding them to be highly skilled, professional and well motivated. Two and a half years after the initial decision was made to expand ITL overseas, the company settled on Shanghai as the location for the new factory.

“Having our own factory rather than outsourcing production gives us complete control of the manufacturing process,” says Mr Cole. “This allows us to protect our intellectual property of our clients. This is especially important to us because China is so far from home and it could be difficult to make sure that no-one was copycatting our instruments. As for the location, Shanghai offered several key advantages. It is very near to both sea port and airport, has good availability of qualified and skilled staff, and the Jinqiao Export Zone in Pudong offers good tax incentives and simplified customs clearance. We are also situated very close to future potential customers, including large blue chip companies in the medical and scientific industries that may require some of our own brand products. This will lead to multidirectional flow of trade.”

Recruitment Drive
The next challenge was to recruit suitable staff who could be trained to produce parts and instruments of the quality that ITL’s clients would expect.

“Its daunting recruiting staff from so far away,” says Mr Cole. “We spoke to other UK companies in China, and British Government organisations, taking advice about how to find a suitable local recruiting agent. Our local recruiting agent set up a number of interviews for someone to fill the position of Sales/General Manager during my visit to Shanghai, so I was able to be hands-on in the recruitment process. Things were easier once we had our General Manager in place. He was then able to interview other candidates in person before I conducted a final telephone interview from the UK.”

ITL now has 20 members of staff at its China factory and hopes to increase this to 40 within the year. Most design will still be done in the UK, but this will be supported by the company’s excellent mechanical and electronic engineers in China.

Quality Control
The China team is made up of young engineers who are very well educated, but they do not have the experience and standards of their UK counterparts. As part of its commitment to producing instruments of the highest quality, the company was determined that is operations in China would mirror the UK. So, it set about preparing a training programme, which its UK engineers would deliver, to bring them up to speed.

“We worked from the assumption that our people in China would know very little about our UK standards, and started from scratch,” says Mr Cole. “We pride ourselves on producing the highest quality goods, so the emphasis of our training is that quality comes first, before anything else. Setting up in China may allow us to cut costs, but we will not allow it to compromise the quality of our work.”

Even with this hands-on training by the UK staff, ITL recognised that it would be a challenge to ensure that quality is maintained. So, it set up a monitoring system whereby final assembly and all testing is carried out in the UK. Products manufactured in China are checked by the quality assurance engineers in the UK on a 100 per cent inspection basis. If all goes as planned, after the first year, this will be relaxed to sample inspections only.

Transporting the goods
ITL minimises the costs of this critical transfer of materials between China and the UK by sending everything by sea rather than air. This can take five weeks in transit and a further week clearing customs, all of which needs to be factored into the lead time of getting a product ready for market.

“It has taken a lot of careful planning on our part to make the most of this opportunity,” says Mr Cole. “Our factory in Shanghai is only 40 minutes from the seaport, which helps to speed things up and reduce our costs. And we are meticulous in managing our clients’ expectations.”

Back home
ITL sees its China operations as an integral part of the service it offers its clients.

“Our U.K facility will always be a centre of excellence for design and complex manufacture of medical and scientific instruments,” says Mr Cole. “We are continuing to grow both at home and in China. Two years ago we had 60 employees in the UK, now we have over 100. We believe we will sustain this growth of our business as a whole. And China is already helping us to do this by allowing us to take on more work.”

Mr Cole has the following advice for other UK companies looking to establish operations overseas.

“Once you start the journey you can’t do it half-heartedly. You need to be proactive, focussed and determined to get over the difficulties. It may be daunting to set up business overseas, and it certainly takes a lot of time and commitment. But we’ve found that it’s worth the effort in the short term to make the long terms gains.”