Two Safety Harbor entrepreneurs are middlemen for U.S. firms and inventors who need products manufactured for less.
By KRIS HUNDLEY
Published March 25, 2004
SAFETY HARBOR - While outsourcing may be a dirty word to some people, David Colangelo and Jim Wetzel argue that moving work offshore actually creates jobs stateside.
And they can point to their own jobs as examples.
For the past four years, the two Tampa Bay area men have been consultants doing product development and manufacturing, primarily through factories in China. Among the products handled by their Safety Harbor company, CSD Worldwide, are rollers for automated car washers and trays for mail-sorting machines, as well as novelty consumer products such as mini dehumidifiers and three kinds of lottery ticket scratchers.
Colangelo and Wetzel are like many U.S. entrepreneurs who have turned manufacturing contacts in the Far East and a knack for salesmanship into a business as contract manufacturers. Companies such as CSD act as middlemen, easing the way offshore for both hopeful inventors and established businesses looking for a cheaper way to produce goods.
Colangelo, 41, developed his Asian contacts as co-owner of Sun Time Enterprises, a novelty watch company in Clearwater that went bankrupt in 2001 after 10 years in business. CSD's Chinese partner lives in the south China city of Shenzhen and works with engineers and factories throughout the country; Colangelo and Wetzel typically travel to China once a year.
The movement of manufacturing to China is nothing new, but it is gaining momentum. In a complaint filed last week with the World Trade Organization, the AFL-CIO claimed 727,000 U.S. factory jobs have been lost as a result of the relocation of work to lower-cost Chinese factories. And in 2003, China posted a record $124-billion trade surplus with the United States as Americans snapped up everything from inexpensive imported DVDs to dolls to desks.
The recent surge in relocation of call centers and software programming to India and China has only heightened pressure on U.S. politicians to take action against sending work offshore. But Wetzel and Colangelo argue that such efforts would be futile.
"It's a backward-looking argument," said Wetzel, a 37-year-old who said he's tired of protectionist politicking on the subject. "(Democratic presidential candidate) John Kerry will complain about jobs going overseas, then he'll be talking on a cell phone that's made offshore. Outsourcing is good for the U.S. economy."
CSD's owners say moving work offshore helps U.S. companies grow, and they point to several of their customers as proof.
"We focus on small to midsized companies that are having a growth spurt," Wetzel said. "We can expand their manufacturing capacity and deliver product waste-free, so that frees up their time and money to focus on other things."
Sure-Feed Engineering in Clearwater is one such customer. The 6-year-old company makes nearly 20 different models of mailing and packaging machines, selling for $3,000 to $250,000 each. All machines are assembled at the company's plant on 49th Street N from thousands of parts, most made domestically. The company's workforce has grown fourfold, to 100, in the past five years. Last year it had revenues of more than $12-million.
About three years ago, Joe Springer, Sure-Feed's controller, started working with CSD, trying to find lower-cost components abroad. "I had tried to go direct, looking for factories in China and Mexico myself," Springer said. "But it was so hard, I just gave up."
Springer said he gave CSD samples of certain high-quantity parts, like rollers and bearings, for competitive bid. Now about a dozen of Sure-Feed's components are made in China. "The prices have been pretty good, and so is the quality," Springer said. "If you can get the same quality for lower price, why not go there? I'd rather keep jobs in the U.S., but if you can't increase sales, you've got to look at increasing margins elsewhere."
While established companies such as Sure-Feed make up about 80 percent of CSD's business, the rest are inventors who hope low-cost foreign factories will transform their brainstorms into financial bonanzas. "They may be only 20 percent of our business, but they take up much more of our time," Wetzel said. "These ideas are like their babies."
Working under a nondisclosure agreement, CSD charges $299 to give an inventor an estimate of the cost of producing their invention in China. In some instances, the company will buy rights to market the product, as it did recently with a gadget used to pick up pieces of gypsum wallboard and plywood.
More often, it works with people like Gary Krouth, a truck driver from Green Bay, Wis., who, with his father Carl, patented the Fish-n-Chum, a leg-mounted fishing rod holder. For $13,000, CSD found a factory in China to make a mold for Krouth's gizmo, which looks like a lower-leg brace. Krouth said U.S. factories were asking $52,000 for the same work.
"One company here said it would cost $15 apiece to produce this thing," said Krouth, who wanted the product's retail price under $20. "The pricing was insane."
Now Krouth is lugging his Chinese-made Fish-n-Chums, priced at $19.95 each, to fishing shows all over the Midwest. He's also talking to Colangelo and Wetzel, who own a marketing company with a third partner, about getting the product into retail stores.
"I definitely would have loved to make this product in the U.S., and I tried to find somebody here for three years," said Krouth, who describes himself as politically conservative. "We get some raised eyebrows at the shows when we say it's made in China and I just ask, "Would you be willing to pay $55 or $60 for this?' And they always say no."
