Amway, the $11.3 billion direct sales giant, produces most of the $4 billion in household products it sells in China every year in that country, but it also exports components and raw materials from the U.S. for use in products made in its Chinese manufacturing facilities.
With 46 percent of Amway’s global business generated by sales of nutritional products, the $11.3 billion company has to safeguard the reputation of those products in China by supplying them from its plants in the U.S. It supplies nutritional and health care products for China from the United States because Chinese consumers are concerned about the safety of locally produced products of these types.
“Made in the USA still has cachet in China,” said George Calvert, Amway’s vice president of R&D and supply chain.
Ada, Mich-based Amway, which generates most of its global revenue on the model of direct door-to-door sales that it started in the U.S., uses a slightly different model in China, where it also operates some stores. It has a shop in Shanghai with more than $100 million in annual sales, for example. “You can imagine for a market that’s a little short on protein and long on wanting to develop their kids it’s a great product to have,” Calvert told The Journal of Commerce.
Amway also supplies the core technology for its water filters in the U.S. for the water-purification products made in China. It ships about 10,000 40-foot-equivalent units annually in its global supply chain, of which about half are shipped on the westbound trans-Pacific to Asia.
“We’ve enjoyed very favorable ocean freight rates and very favorable lanes for a long time on exports from Los Angeles to Busan, South Korea, where we have a major distribution center for North Asia,” Calvert said. “The carriers love us because we pay them to ship containers back to Asia.”
Amway negotiates freight rates under annual contracts with six primary carriers, including Hamburg Sud, Hyundai Merchant Marine, “K” Line, Maersk Line and NYK Line. It also uses vessel space contracted by Expeditors International of Washington, its Seattle-based non-vessel-operating common carrier.
Freight rates on the westbound trans-Pacific are very low, and Calvert expects them to stay in that range this year. “We continue to see our rates go down,” he said, “and we would expect to be near bottom in 2013.”