ADR's service is one that goes beyond outsourcing

On his first trip to China some 20 years ago, Larry Mahoney found that "the streets were packed with people on bicycles."

These days, however, it's BMWs and Mercedes-Benzes that crowd the roadways, he said.

China's unrelenting march to prosperity has helped Mahoney build a business that's grown at an eye-fetching compound annual growth rate of 57 percent for the past five years.

Mahoney, 65, is founder and sole employee of Asia Direct Resources Inc. (ADR), a St. Anthony product sourcing company that helps clients find Asian, mainly Chinese, factories to manufacture a variety of customized products.

The service goes beyond conventional outsourcing, Mahoney insists, to include design engineering, project management and handling of all the duty and customs issues that go along with shipping. Services range from identifying the best manufacturing sources in terms of price and quality to providing ongoing inspections to assure ongoing quality to arranging on-time delivery at the lowest cost. Oh, yes, and ensuring that there's no child labor or hazardous materials involved.

Mahoney calls it "outsourcing at a premier level."

Not that he does it all by himself. Mahoney may be the company's lone employee, but he's backed by two dozen independent contractors, six of them engineers, sales reps and project managers in the United States and 18 of them sourcing specialists in Asia.

It's a business model that has attracted a blue-chip clientele, including Mattel, Maybelline, Kimberly-Clark, Evinrude, Heineken and Leinenkugel. Not to mention my favorite, the buoyantly named Wisconsin party supplies vendor, Big Dot of Happiness.

Add it all up and you get a business that grew 60 percent to $2.4 million in 2009, compared with $1.5 million in 2008. And based on 2010 buying estimates of major clients, Mahoney expects sales to approach $4.5 million this year.

What's the attraction? Mahoney avoids commodity products -- office supplies, coffee mugs, T-shirts -- to focus on customized goods such as toys for Mattel, promotional caps and rain jackets for Minneapolis businessman Irwin Jacobs' Ranger Boats, cosmetic mirrors for Maybelline and portable bars for Heineken.

In some cases, ADR's engineering contractors will even design a client's product. Case in point: a "pop-a-shot" basketball game developed for Massachusetts brewer Boston Beer.

It is not a simple process, often involving the need to coordinate the work of several factories to fill a single order. Take, for example, the paper cups, plates and napkins ordered by Big Dot of Happiness, which required a separate manufacturer for each item.

"And that required us making sure that the colors produced at different sites matched precisely," Mahoney said. Which means he often was up at 2 a.m. checking colors in an online video image.

His clients seem to appreciate the effort: "ADR clearly places the customer first and will go the extra step to make certain that the customer is pleased," said Teresa Bailey, product sourcing manager for BeveragePro, a Connecticut supplier of promotional products to the beverage industry.

Greg Cicione, founder and president of a Wisconsin-based vendor of tool belts and bags called Quick Belt System, more than agreed: He said "ADR has been crucial to the successful development" of his company's product line.

Learning the ropes

Before starting his own business, Mahoney spent nearly 15 years in production management at Gillette, Munsingwear, Lee Data and Eden Prairie toy manufacturer Spearhead Industries. It was a lineup that gave him a solid background in product sourcing abroad.

In 1992 he broke away to start International Marketing Resource Inc. in Minneapolis, a product sourcing business focused on manufacturers in Mexico, then the outsourcing choice of many U.S. companies. In the ensuing 10 years he built the company to a peak of $10 million in sales.

Whereupon the interest of his clients shifted to China and his business went into a nosedive. Undaunted, Mahoney renewed contacts with Chinese sourcing contractors he had met while at Spearhead and shifted his focus to Asia.

In 2004 he started ADR, signed up some of those sourcing specialists and was back in business. He found himself in an ideal environment: "The Chinese work ethic is phenomenal and the focus on doing business is universal," Mahoney said. "You can make business deals by accident with someone you meet in an elevator or on the street. Everybody seems to be there for business."

But what of complaints that outsourcing takes jobs away from Americans?

"Whether we like it or not, it's an international economy and we have to learn how to take advantage of it," Mahoney said. "China is only going to become bigger and stronger in the world market."

Dick Youngblood • 612-673-4439 • yblood@startribune.com