Five Benefits of a Wholly Owned Foreign Entity for Global Contract MAnufacturing

There are five key benefits of a Wholly Owned Foreign Entity (WOFE) structure like Hankscraft’s facility in Suzhou, China:  

1. Seamless Communication  

2. Quality Assurance  

3. Direct Connection  

4. Flexibility of Services  

5. Competitive Advantage of Location  

Hankscraft’s unique WOFE business structure for contract manufacturing provides key benefits to optimize your manufacturing internationally. Listed below is a breakdown of the key advantages. 

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Seamless Communication  

With Hankscraft’s WOFE, our expert engineers handle all complex, tedious communication for you. This eliminates the hassle of coordinating with multiple vendors, foreign agents, brokers, and other product manufacturing hassles. Also, it ensures that you have a direct line of communication with a US-based company.   

One of the major challenges of sourcing from Chinese companies is managing communications. Different time zones, languages, and business practices can make communication difficult. Regardless of your location, our team is dedicated to meeting your needs and making the entire process smoother and more efficient.  

Direct Connection  

Unlike dealing with agents or brokers, partnering with Hankscraft provides you with a direct connection to the manufacturing source. This direct relationship eliminates the middleman, reducing costs and fostering a stronger, more transparent partnership.   

You benefit from having direct access to the manufacturing process, greater control over production timelines, and a better understanding of your product’s journey from start to finish. You can even rest assured that there’s a team in a geographical location near you. 

Quality Assurance  

Quality is central to Hankscraft’s operations, and our Suzhou facility upholds the highest standards of quality assurance. Our skilled team of engineers oversees production and takes care to develop processes and procedures to ensure the quality of every product meets your expectations. The facility is ISO 9001:2015 certified, which reflects our commitment to quality management and continuous improvement.   

By maintaining strict quality controls, we deliver products that consistently meet or exceed customer expectations. 

Flexibility of Services  

Our Suzhou facility offers unparalleled flexibility in managing production and supply chain logistics. Whether it’s optimizing lead times, setting up stocking agreements, implementing change control measures, or addressing component obsolescence, we have the systems and expertise to adapt to your needs.   

An additional benefit of working with a WOFE is negotiable contract terms. To eliminate the challenge of paying 100% up front for products without quality control, Hankscraft offers our customers room for flexibility in payment and product delivery. 

This flexibility ensures that we can respond quickly to changes in demand and provide tailored solutions that keep your supply chain running smoothly.  

Competitive Advantage of Location  

China’s business ecosystem is one of the most efficient and cost-effective places to manufacture products. This is thanks to a large, skilled pool of suppliers, component manufacturers, and distributors. 

Our Suzhou facility leverages its strategic location to provide you with a competitive advantage. We have access to a vast and trusted vendor network as well as robust logistical capabilities. This helps us ensure timely delivery and cost savings on components and manufacturing.  

By choosing to work with Hankscraft’s WOFE in Suzhou, you gain these significant advantages. We ensure high-quality production, seamless operations, and a competitive edge in the market. Experience the benefits of a trusted partner dedicated to meeting your manufacturing needs with excellence.  

Other Types of Foreign Expansions  

There are many ways to enter a foreign market with manufacturing services. Some of the different types of business structures for foreign expansion partnerships in manufacturing include:  

1. Subsidiaries   

2. Wholly owned subsidiaries  

3. Joint ventures  

Subsidiaries  

To put it simply, a subsidiary is a company controlled by another company. This control is achieved through the parent company’s majority ownership of the subsidiary’s stock, although it does not necessarily mean full ownership. 

Maintaining a majority stake, rather than complete ownership, allows the parent company to avoid some financial risk. It also allows for the potential for valuable market insight and connections from local partners. 

An important disadvantage is that since they aren’t fully integrated with the parent company, they often involve more complicated legal and accounting work.  

Wholly Owned Subsidiaries  

Like subsidiaries, wholly owned subsidiaries are companies controlled by another company but instead have one hundred percent of their stock owned by the parent company. 

With this structure, the parent company has complete control over operations, policies, and strategic decisions. This allows for consistent business practices, a more unified corporate culture, and greater profit gain. 

The downside is that wholly owned subsidiaries can cost a lot of money and bring higher financial risk to the parent company because they must cover all losses.   

Joint Ventures  

Joint ventures involve the collaboration of two or more companies that agree to create a new, jointly owned entity. This partnership combines the strengths of both parent companies, often including technological expertise, market knowledge, and financial resources. 

They are often useful when entering foreign markets where regulations may restrict foreign ownership. An additional benefit is the shared financial risk and investment between the two companies. 

However, since two separate entities need to work together, conflict and difference of management styles can make decision-making challenging.   

Types of Contract Manufacturing Partnerships 

Whether you’re looking for local or global contract manufacturing services, there are several partnership types to choose from. Some of these kinds of supply chain partnerships are summarized below: 

What are Sourcing Agents for Manufacturing? 

Sourcing Agents serve as the intermediary between the party seeking manufacturing and the manufacturer themselves. Their primary function is to assist a business in finding and procuring sources for products. These agents may even work with a wholesaler or trading company to facilitate a manufacturing relationship.  

What are Brokers for Manufacturing? 

Simply put, a Broker connects companies with manufacturers to produce their goods. They focus on finding and managing supplier or manufacturer relationships. They take on roles for companies such as manufacturer evaluation, negotiation, quality assurance, production coordination, etc. 

What are Contract Manufacturers? 

Contract Manufacturing is a type of partnership for a company seeking to produce goods. A full-service contract manufacturer can handle all the production details, from design for manufacturing (DMF), regulatory compliance and quality processes all the way to final assembly and logistics coordination. This eliminates the need for a middleman, such as a Broker or Sourcing Agent. 

Hankscraft offers deep experience and proven excellence in full-service, global contract manufacturing. By partnering with Hankscraft, a company seeking to produce manufactured goods can access all assets of an international or US manufacturing facility without investing in ownership.  

Hankscraft also specializes in manufacturing project management, overseeing all the communication details for their customers. Hankscraft’s ownership of a WOFE manufacturing facility opens doors for international business while maintaining the convenience of local business dealings. 

Top Countries for Global contract Manufacturing 

Five of the top countries for global manufacturing are China, the United States, Japan, Germany, and South Korea. 

Manufacturing in China  

China is a manufacturing powerhouse and leads the world in volume of manufactured goods. In 2019, China made up just under 30% of all global manufacturing.  

This leadership is thanks to its extensive labor force, strong business ecosystem, comprehensive supply chains, and powerful production capacities.  

Exports from China span many industries, from consumer goods and textiles to electronics and machinery.  

Manufacturing in the United States  

The United States holds a strong position in global manufacturing. In the United States, manufacturing is the 5^th largest industry for employment according to the US Census Bureau.  

The US focuses on technological innovation and high-value industries such as medical, automotive, aerospace, and advanced machinery. Its manufacturing strength is supported by a well-developed infrastructure, a skilled workforce, and substantial investment in research and development.  

Manufacturing in Japan 

Japan is renowned for its precision engineering and is a global leader in automotive manufacturing, robotics, and electronics. Manufactured metal products are the largest portion of its manufacturing business. 

The country excels in producing high-quality, technologically advanced products. It is supported by a culture of continuous improvement and significant investment in research and development, like the United States.  

Manufacturing in Germany  

Germany’s manufacturing sector is synonymous with high-quality engineering and innovation, particularly in the automotive and machinery industries. Known for its “Made in Germany” standard, the country emphasizes precision, durability, and advanced technology.  

Manufacturing in South Korea  

South Korea is a key player in global manufacturing, particularly in the electronics, automotive, and shipbuilding industries. The country’s rapid industrialization and focus on technology and innovation has propelled its manufacturing sector. Leading South Korean companies like Samsung and Hyundai drive global competitiveness and technological advancements. 

What is PMI for Manufacturing?  

The Purchasing Managers’ Index (PMI) is an important economic indicator that comes from monthly surveys of private companies. It measures the health of the manufacturing sector based on new orders, inventory levels, production, supplier deliveries, and employment. 

A PMI above 50 means the manufacturing sector is growing, while a PMI below 50 means it is shrinking. A PMI of 50 indicates no change.   

For contract manufacturers, a high PMI suggests strong manufacturing activity and higher demand for their services, as companies need more help to increase production. On the other hand, a low PMI indicates less demand and possible slowdowns. 

The PMI also gives insights into supply chain conditions, like how quickly suppliers can deliver and current inventory levels. This information is crucial for contract manufacturers to manage their schedules and meet client needs. 

By understanding these trends, contract manufacturers can plan better, manage resources efficiently, and help their clients find the right production levels. Overall, the PMI helps contract manufacturers make informed decisions and stay prepared for market changes. 

Hankscraft: A Brief History  

Headquartered in Reedsburg WI, Hankscraft’s history as a manufacturer began in 1920 with the invention of an electric egg cooker by founder Marshall Hanks. Over the years, the company expanded its product range to include various household items, such as baby bottle warmers, sterilizers, and the Model 240 vaporizer.   

In the 1940s, Hankscraft added small electric motors to its offerings, which were used in retail point-of-purchase (P.O.P) displays. In 1999, Hankscraft acquired AJS and Associates, adding custom-crafted wood tap handles to their P.O.P display offerings.    

By 2003, the company had expanded its global presence by establishing Han Ke Wu Jiao Mechanical & Electrical Co. in Suzhou, China. The Suzhou facility allowed Hankscraft to expand its production of various components and systems. These include printed circuit boards (PCBs), plastics, controls, electronic assemblies, wire harnesses, and motors.  

In 2017, Hankscraft formed Hankscraft Runxin to create high-quality water treatment components and systems for both residential and commercial users. Hankscraft Runxin, LLC, is a partnership between Hankscraft Inc. and Wenzhou Runxin Manufacturing Machine Co. Hankscraft Runxin is located at Hankscraft’s headquarters in Reedsburg, WI, with Hankscraft as the main partner. 

This partnership formalized their long-standing relationship to bring premium water treatment products with patented advanced ceramic technology to the North American market. With Hankscraft Runxin’s point-of-entry and point-of-use water treatment products, dealers and distributors now have access to a complete range of water treatment solutions for homes and businesses.  

Hankscraft Inc. is a leader in global contract manufacturing trusted by companies and specialty brands worldwide. With more than 100 years of manufacturing, design, and project management excellence, customers trust Hankscraft to deliver innovative solutions that are custom to their needs. Hankscraft Inc. serves numerous industries across the globe in three divisions: Contract Manufacturing, Water Treatment and Tap Handle/Point-of-Purchase Display.  

Related Inquiries:  

Question: What is a WOFE and how does it work?  

Answer: A WOFE is the acronym for a Wholly Owned Foreign Entity and is a company in a foreign country that is completely owned by a foreign parent company. It operates as an independent legal entity, allowing the parent company full control over its operations, management, and strategic decisions. The WOFE conducts business activities within the foreign country, adhering to local regulations and laws.  

This structure allows the parent company to manage risks, protect intellectual property, and maintain the quality and standards of its products or services while taking advantage of the benefits of operating in the foreign market. 

An example of a WOFE is Hankscraft’s facility, Han Ke Wu Jiao Mechanical and Eletric (Suzhou) Co., LTD. Hankscraft Inc. founded, owns and operates this facility to expand exceptional global contract manufacturing options to customers. 

Question: How Do I set up a WOFE in China?   

Answer: To set up a wholly foreign owned enterprise (WFOE) in China, you need to follow a series of steps to ensure compliance with Chinese regulations. 

First, decide on the type of business activities your WFOE will engage in and choose a suitable location. Next, gather the necessary documents, such as your business plan, lease agreement, and parent company certifications. Submit your application to the Ministry of Commerce (MOFCOM) or its local counterpart. 

Once you receive approval, register with the Administration for Industry and Commerce (AIC) to obtain a business license. Finally, complete additional registrations for taxes, obtain an organization code certificate, and set up bank accounts.  

Contact us today to discuss your project needs and explore how Hankscraft can assist you. Our team acts as an extension of your team. We’re dedicated to providing personalized solutions and seamless project management. Let us simplify your workload and improve your project outcome with our expertise and resources.