Buying from China. Is it worth it?

Over the past five years, we’ve been gradually transforming our family business from predominantly distributing church supplies towards manufacturing more of the products we sell ourselves.

As part of that transition, we’ve recently taken delivery of the first of four candle moulding machines we’ve bought directly from China.

The economics looked compelling. The machinery was considerably cheaper, and by combining the order with a bulk purchase of waxes, wicks and dyes, we were able to buy the component raw materials we needed at substantially lower prices than sourcing them from Europe.

But price and value aren’t the same thing.

Now that the first machine has arrived and commissioning has begun, we’re starting to understand the other side of the equation.

Why did we need new machinery?

We’ve been making candles in Devon for several years using relatively traditional, labour-intensive methods.

That has taught us a great deal about waxes, wicks and the many variables that determine the quality of a finished candle. It has also exposed an obvious constraint: productivity.

If we want to offer high-quality, handcrafted candles at prices that make them affordable to a much wider range of customers, we need to increase output substantially.

The obvious answer might appear to be automation.

But increased productivity isn’t our only objective.

Our longer-term ambition is to manufacture candles from 100% sustainable and/or recycled waxes.

We don’t yet know exactly what those formulations will look like. That’s part of the work we’re doing now.

We need to experiment with different waxes and blends and understand how they behave. How do they melt? How do they pour? How do they cool and contract? How easily do they release from a mould? Which wicks work with which formulations? And, most importantly, how does the finished candle burn?

That requirement had a significant influence on the type of machinery we chose.

Why traditional water-cooled moulding?

We chose traditional water-cooled candle moulding machines.

It’s a well-established method of candle manufacture. Molten wax is poured into individual moulds containing the wicks, water is circulated around the moulds to control cooling, and the finished candles are then released.

There are faster and more automated methods of manufacturing candles, particularly pressing and extrusion. These technologies are very effective at producing large quantities of standardised candles.

But that’s not quite what we need at this stage.

We want the freedom to experiment with wax blends, wicks, pour temperatures, mould temperatures and cooling profiles and observe how each affects the finished candle.

Traditional water-cooled moulding gives us the combination we’re looking for:

A substantial increase in productivity while retaining control over the materials and manufacturing process.

So, for us, this isn’t outdated technology.

It’s the right technology for the stage we’re at.

The machines effectively have two purposes. They should increase our production capacity now while also providing the development platform we need to work towards candles manufactured entirely from sustainable and/or recycled waxes.

Why buy from China?

Once we’d established what we wanted, China became difficult to ignore.

It wasn’t simply about finding cheaper machinery.

We were able to combine the machinery purchase with a bulk order of waxes, wicks and dyes — all the component raw materials we need to make candles.

The economics were significant.

The equivalent waxes alone would have cost us at least twice as much if we’d purchased them from Europe.

For a relatively small business investing in manufacturing capability, that matters.

It allowed us to invest simultaneously in increased production capacity and sufficient raw materials to manufacture candles, conduct experiments and develop new formulations without committing a disproportionate amount of capital.

On paper, the case looked very strong.

The reality is proving a little more complicated.

1. You pay upfront

This is perhaps the first thing another small business considering buying directly from China should think about.

There can be a considerable gap between paying for machinery and materials and actually having them available for productive use.

The machinery has to be manufactured. The order has to be consolidated. It has to be shipped halfway around the world, clear customs and finally be transported to your premises.

Based on our experience, I would allow at least two months between committing the money and receiving the goods.

For a small business, that’s significant.

The cash has left your bank account long before the investment has any opportunity to generate a return.

And when you’re buying machinery and bulk raw materials together, the amount of working capital tied up can become substantial.

The purchase price therefore isn’t the only financial consideration.

Time has a cost as well.

2. After-sales service? Don’t count on it

This is probably the biggest practical difference we’ve encountered.

If we’d bought a machine from a UK supplier and discovered a problem during commissioning, we’d reasonably expect the supplier to help us resolve it.

Buying directly from China is rather different.

In practical terms, I think you need to approach the purchase on the assumption that once the machine arrives, it’s your problem.

That means being prepared to understand the equipment, commission it, troubleshoot problems, make modifications and ultimately maintain it yourself — or have access to people who can.

We’ve already encountered our first example.

During the initial water test of our first machine, we discovered a leak around one of the lower cooling-water inlet connections.

Because controlled water circulation is fundamental to how the moulding machine operates, it’s not something we can simply ignore.

So commissioning has stopped while we establish exactly what’s wrong and how best to repair it.

That’s going to be the subject of another blog.

3. Finished quality can be mixed

Our experience so far is mixed.

The machine itself appears solid and substantially built, but the quality of the finishing and some of the components isn’t what we’d expect from more expensive European equipment.

Most of the issues we’ve found are relatively minor and fixable.

Ultimately, what matters isn’t the paintwork or cosmetic finishing. It’s whether the machine can reliably produce candles at the quality and volume we require.

We don’t know that yet.

The thing I consistently underestimate: time

There’s another lesson in all of this that isn’t specifically about buying from China.

Reality rarely matches the plan.

One thing I’m learning about developing manufacturing capability is that almost everything seems to take longer than I expect.

We ordered these machines during the summer.

My plan was for them to be installed and producing during the final quarter of this year.

More importantly, our financial forecast reflected that assumption. We’d allowed for a significant increase in production from September, with that additional capacity contributing to sales and profitability during the financial year.

That’s clearly not going to happen.

Manufacturing takes time.

Shipping takes time.

Customs takes time.

Installation takes time.

Commissioning takes time.

Then you discover that you need different fittings, a water circulation system needs developing, ancillary equipment needs modifying or, in our case, a brand-new machine has a leak that needs investigating before you can go any further.

None of these problems individually is particularly significant.

Collectively, they move the timetable.

My next best estimate is that we’ll have the new production capability properly operational during Q1 next year.

That means the assumptions in our financial forecast will also have to change, and our targets for this financial year will need to be revised.

That’s frustrating, but it’s also part of learning to manufacture.

There’s a difference between buying a machine and acquiring a manufacturing capability.

I’m beginning to think that the important date in a manufacturing investment isn’t when you order the machine, when it leaves the factory or even when it arrives at your premises.

It’s when the entire production system can reliably and repeatedly produce saleable products.

Those can be very different dates.

Or, put another way:

A spreadsheet assumes an asset becomes productive on the date you tell it to. A factory doesn’t.

So, is buying from China worth it?

At this stage, I genuinely don’t know.

The savings are certainly real.

We’ve acquired considerably more machinery and raw material for our investment than we could have sourced closer to home. That’s allowed a relatively small business like ours to accelerate investment in UK manufacturing without committing an unrealistic amount of capital.

But those savings come with trade-offs.

We’ve accepted longer lead times, significant cash tied up before receiving anything, variable finishing, limited after-sales support and considerably more responsibility for commissioning, troubleshooting and maintaining the equipment ourselves.

Whether that’s a good trade will ultimately be determined by what these machines produce.

If they provide years of reliable service and allow us to manufacture high-quality candles more efficiently while developing the sustainable and recycled wax formulations we’re working towards, the answer may well be yes.

If commissioning and maintenance consume the initial savings, the calculation could look very different.

We’re not there yet.

And rather than pretending otherwise, I intend to document what actually happens as we build our manufacturing capability — the successes as well as the problems.

The savings are real. The question is whether they translate into value.

For now, we have a leak to fix!