China’s allure fades for DeVilbiss

‘The cost advantage that China has over the U.S. has gone way down’
Friday, May 31, 2013

SOMERSET, Pa. – DeVilbiss Healthcare is leaving China and taking its oxygen concentrators with it.

The company is in the process of moving the manufacturing of this product line back to its facility in Somerset, Pa., after five years in China. The biggest reason: the need for improved communication between the engineers who design its products and the workers who make them.

“When you have workers here, like we do, who have an average tenure of more than 20 years, they have good ideas about how to build things and they tend not to get implemented because of that divide,” said Ed Murphy, president and CEO.

DeVilbiss already manufactures respiratory products like suction devices and flow generators in Somerset.

Sealing the deal for DeVilbiss: Wages in China, though still low compared to the U.S., are rising; the currency rates between the yuan and the dollar aren’t as favorable as they used to be; and transportation is increasingly costly, Murphy said.

“When we moved to China five years ago, it was a cost-reduction move,” he said. “But when you look at today’s world and the way things have changed, the cost advantage that China has over the U.S. has gone way down. We’re looking at a 30% increase in costs in currency alone.”

Helping to make the move back to the U.S. possible was a $1.8 million USDA Rural Development Business and Industry Loan Guarantee, Murphy said.

DeVilbiss has already moved a line of aerosol products back to Somerset. It has also completed a production run there for its transfill systems and it’s conducting a small field trial to make sure everything’s up to snuff, Murphy said.

“We expect the entire transfer, including for oxygen concentrators, to be complete by the end of September,” he said.

DeVilbiss plans to increase the headcount in Somerset by about 25 when all is said in done: 20 in production roles, and five in supervisory or engineering roles, Murphy said.

“We’ve hired eight of those people already,” he said.