Manufacturing

Be

Manufacturing

Business Excellence Online

www.bus-ex.com ISSUE 1

A

of

world

manufacturing Stories from all over the world demonstrate the debt that manufacturing owes to Toyota

Editor’s letter

Excellencein

manufacturing EDITORIAL

Managing Editor Becky Done bdone@bus-ex.com Editor In Chief Martin Ashcroft mashcroft@bus-ex.com

DESIGN

Production/Creative Director Zachary Smith zsmith@bus-ex.com Production Design studio@bus-ex.com

BUSINESS Director of Sales James Martin jmartint@bus-ex.com Assistant Research Directors Vincent Kielty vincent@bus-ex.com Sam Howard showard@bus-ex.com Richard Halfhide rhalfhide@bus-ex.com Robert Hodgson rhodgson@bus-ex.com

Chief Executive Andy Turner info@bus-ex.com Subscriptions info@bus-ex.com

Our world of manufacturing owes a great debt to Toyota. If imitation is truly the sincerest form of flattery, Toyota must be blushing. The production system that inspired lean manufacturing, 5S, kaizen and a host of other improvement initiatives has become the global pinnacle of excellence to which would-be world class manufacturers aspire.

In this special issue of Business Excellence we are proud to present an account from the horse’s mouth, as it were, in the form of an interview with Nigel Ward, VP of purchasing and engineering for Toyota South Africa, about the value of collaborative supplier relationships. Also in the automotive sector, Chris Glover, head of manufacturing planning, tells us about continuous improvement initiatives in Volkswagen’s operations in South Africa.

Lean manufacturing is by no means confined to mass production these days, however. Even the luxury European yacht builder Icon Yachts has taken a lean approach with what it calls ‘modular engineering and construction’, where all the components of a super yacht can be broken down into preengineered sub-assemblies that can be constructed, primed and tested before final assembly, reducing cost and lead time.

Demonstrating the spread of lean thinking across sectors and geographies, Andrew Bellamy, CEO of Austal, tells us why he believes the Western Australian based shipbuilder has the most efficient aluminium shipbuilding processes in the world.

Other companies have their own ideas about what represents excellence in their industries, but continuous improvement is a consistent theme. USbased wireless communications specialist Powerwave Technologies has consolidated its supply chain after a series of acquisitions, and kaizen events are staged regularly at its production and assembly facilities.

And that’s just a snapshot of the excellent operations behind this cover.

Infinity Business Media Ltd Suite 22, St Francis House Queens Road Norwich, NR1 3PN UK Tel: +44 (0) 203 137 7100 Fax: +44 (0) 1603 666466

www.bus-ex.com

The content of this magazine is copyright of Infinity Business Media Ltd. Redistribution or reproduction of any content is prohibited other than: - You may print or download to a local hard disk extracts for your personal and non-commercial use only.

- You may copy the content to individual third parties for their personal use, but only if you acknowledge the magazine as the source of the material.

You must obtain our written permission to commercially exploit any content.

© Copyright 2011 Infinity Business Media Ltd.

Contents Toyota South Africa A firm foundation

Understanding the value of collaborative supplier relations, Toyota is investing in its South African supply chain.

Volkswagen Group South Africa Investing in the future

A major development programme to upgrade facilities and improve productivity includes the construction of a new press shop.

Bunting Bearings

Getting your bearings

Innovative new products continue to expand the already comprehensive portfolio of this Ohio-based manufacturer.

Marcotte Mining Machinery Riding the rollercoaster

With innovation a part of company DNA, customization and R&D help the company stay ahead in a volatile industry.

Sohar Aluminium Vision 2020

The first new aluminium smelter to be built in the Arabian Gulf in 25 years has become a catalyst for industrial growth in the region.

14 32 42 48 56

Contents

Austal

Winds of change

Customisation, innovation and technical expertise are key ingredients for success in the aluminium ship building sector.

Highveld Steel & Vanadium Corporation Ltd. Changing times

Currently the only South African producer of heavy steel sections, Highveld is making plans to boost productivity.

Rajhi Steel Industries Reinforcing growth

This market leader in Saudi Arabia is turning out more than one million tons of steel products every year.

Technocraft Group

Success through ingenuity

Opening facilities in the midst of the competition is an innovative way of ensuring market share is not lost to rival companies.

BAT South Africa

Learning to bend with the wind

BAT Group’s Heidelberg factory in South Africa has undergone a remarkable transformation over the last three years.

90 100 116 126 132

Contents Tobacco Processors Zimbabwe Back from the brink

Zimbabwe’s largest processor of green tobacco leaf will play a big part in this year’s forecast rise in tobacco sales.

Cosumar Morocco A sweeter tooth

Modernising the country’s sugar industry by implementing industrial and agricultural best practices.

Shoreline Beverages

A refreshing approach

Innovation is crucial to the producer some of the most popular soft drinks sold in the province of KwaZuluNatal, South Africa.

Tydstroom Fresh Farm Chicken A fresh approach

Chicken is a valuable and popular source of protein; but its production requires a well-oiled machine.

Britannia Industries Fortune cookies

Being a successful food megabrand in India today carries with it some awesome corporate social responsibilities.

160 168 174 184 196

Contents Bridor

Serious dough

Bridor is thriving by adapting European breads, croissants and pastries to North American tastes.

Procter & Gamble Egypt FMCGs, Egyptian-style

Retail in Egypt has barely changed in decades; but Procter & Gamble is trying to modernise from within.

L’Oréal India

More than skin deep

This major consumer brand cares as much about sustainable development as it does about making women beautiful.

Afripack Pty Ltd

From sack to pack

A story of growth transforming a maker of paper sacks into a leading manufacturer of flexible packaging.

Powerwave Technologies Inc. Eyes on the future

A careful supplier strategy and low-cost procurement techniques provide a solid foundation for leadership in the wireless revolution.

206 214 224 234 254

Contents Tellumat Electronic Manufacturing An African high-tech solution

When entering the field of consumer electronics, it is a great advantage to be associated with a world class brand like Sony. Â

Icon Yachts New wave

A radical new approach to building super yachts is leading to lower costs and shorter lead times than yacht builders have offered before.

Just Refrigeration A cool customer

Implementing strategies for quality, efficiency and innovation has led to expansion across Africa and into Australasia.

Karbochem

Dedicated to development

The only manufacturer of synthetic rubber in Africa sees research and development as its greatest opportunity for the future.

Brampton Brick Ltd.

Building for growth

Established in Canada for over 100 years, the company has recently opened its first manufacturing facility in the United States.

268 276 286 298 308

A firm foun

Toyota is investing considerable resources in dev of purchasing and engineering Nigel Ward explai supplier relations and Toyota’s philosophy of res 14

Manufacturing

Toyota South Africa

m ndation

veloping its South African supply chain. VP ins to Gay Sutton the value of collaborative spect for people and mutual trust

Manufacturing 15

F

ew companies can have influenced industry and business as deeply and fundamentally as Japanese car maker Toyota. Quietly and intelligently, during a period of national financial hardship, the company evolved a unique set of operational and business philosophies that have revolutionised thinking in the manufacturing sector worldwide, and are now performing the same miracle for organisations in sectors as widely divergent as health, banking and government services. Moreover, Toyota has been open about its philosophies in a way that may seem counter-intuitive to some: it did not grasp these successful business advantages to its chest, but shared them, firstly with its suppliers and then with any company interested in learning.

16

Manufacturing

Toyota South Africa

Manufacturing 17

18

Manufacturing

Toyota South Africa Takata As a global player in the supply of high quality and cost effective automotive safety components, Takata shares a sound business relationship with South Africa’s leading automaker, Toyota. The success of both Takata and Toyota is based on the business principles of safety, quality and cost.

Takata holds this excellent business relationship with Toyota in high esteem.

Bearings International Bearings International has supplied hub units and wheel bearings to Toyota South Africa’s production lines since 2005, during which time it has received several awards recognising its quality management and supply excellence. Bearings International is extremely proud of its long-standing association with Toyota, a global company which demands the highest standards of performance, safety, ethics, environmental awareness and social values.

The basis for Toyota’s operational excellence is the Toyota Production System (TPS), which defines the company’s management philosophy and how this operates throughout the organisation and into its supply chain. It governs everything from interactions with suppliers through to the shop floor and management levels, and finally to distribution to the customer.

Today, Toyota continues to be the exemplar of what has become generically known as lean manufacturing. Moreover, through operational excellence, quality of product and the ability to manufacture what the customer requires, it has become the world’s number one car maker, manufacturing in some 27 countries and regions around the globe.

Its manufacturing presence in South Africa dates back to 1962, when a company called Motor Assemblies began to assemble cars for Toyota alongside vehicles for other OEMs such as Mazda, Fiat and Renault. By 1981 the plant had become exclusively dedicated to Toyota assembly and between 1997 and

Manufacturing

19

20

Manufacturing

Toyota South Africa

Schaeffler South Africa Schaeffler South Africa is a subsidiary of the Schaeffler Group. With its INA, LuK and FAG brands, the Group is one of the world’s leading rolling bearing manufacturers and a renowned supplier to the automotive industry. The Group is a recognised development partner with systems expertise for the complete powertrain. With around 1,250 patent applications annually the Group is one of Germany’s leading innovators.

2003, Toyota progressively acquired equity in the plant. Today it is 100 per cent owned by Toyota Motor Company and is run according to all its philosophies.

Nigel Ward, Toyota South Africa’s current VP of purchasing and engineering, has also grown with the company. Beginning as a trainee in the purchasing department in 1982, he witnessed the plant’s migration to the Toyota Way, and now has a very wide remit encompassing purchasing, planning and engineering. His skill set also epitomises everything that is successful about Toyota.

“There are two key fundamentals to the Toyota Way: respect for people and continuous improvement. And we use those principles throughout our plant and supply chain,” he says. “I believe the secret to good management is to really interact with people on this basis of respect and trust. Ultimately I’m not here to manage the job, I’m here to manage the people.”

The Toyota philosophy for supply chain management has always been collaborative and people oriented, and the company has spearheaded a remarkable change in global supply chain awareness over the past 20 years. “Historically, purchasing and supply chain relationships have always tended to be—and I use the word loosely—bloodied

Manufacturing

21

Toyota South Africa

“There are two key fundamentals to the Toyota Way: respect for people and continuous improvement. And we use those principles throughout our plant and supply chain” and confrontational. However, through mutual trust and an open philosophy from both parties, we have ensured it is participative.”

Unlike many OEMs who source parts from around the world, the Toyota way is to localise its suppliers in the area of the Toyota plant, reducing the need to transport parts over long distances and removing a considerable amount of waste from the system. Toyota South Africa has been actively working towards this for many years, attempting to attract some of the world’s top automotive suppliers to set up operations in South Africa. But it was not until two years ago that

the company took the step of doing this in collaboration with six other automotive OEMs operating in South Africa.

The reasoning behind this move was, like most ground breaking ideas, surprisingly simple. Setting up a new manufacturing plant is both expensive and risky, particularly when it is supplying into a relatively small business sector—and the automotive industry in South Africa is small in comparison with, say, the coal industry. However, by acting together the car makers believed they would be able to

Manufacturing

23

Toyota South Africa

leverage economies of scale, and make it financially attractive for top European and Japanese suppliers to relocate locally.

“We therefore launched an initiative called the South Africa OEM Collaboration Group three years ago,” Ward says. Members include the likes of BMW and VW. “The purchasing heads of each of them have formed an executive committee. Underneath us we have five commodity groups with a total of 45 people from the OEMs working cross-functionally to identify initiatives to localise new parts in South Africa. If, say, three of us can support the initiative, it can become very lucrative for a global supplier to set up here.”

The initiative has seen considerable success, and its work will no doubt continue. During the early days, when the Durban plant first began operating purely for Toyota, approximately 80 per cent of parts used in the factory were supplied by true local South African suppliers.

That balance has shifted over the years, and today 80 per cent of supplies are produced by leading global automotive suppliers manufacturing in South Africa. This was achieved by facilitating JVs and TAs with the existing suppliers, says Ward.

The Toyota plant in Durban currently employs in the region of 6,000 people and

Manufacturing

25

Toyota South Africa

“We’re tr ying to promote best practice within our supplier base in areas such as management, HR development, kaizen and the elements of the Toyota Production System” manufactures two models: the Corolla and the Hilux.

Of the 104,000 vehicles currently manufactured each year, some 50 per cent are exported: 50 per cent of which go directly to Europe, with the remaining 50 per cent distributed through 30 countries on the African continent.

In South Africa itself, there is considerable brand loyalty to Toyota. In fact, the company has enjoyed market leader position for the last 30 consecutive years—a record only surpassed in the brand’s home nation, Japan.

As you would expect, the Durban plant operates the full suite of Toyota systems. “The Toyota Production System and kaizen are a way of life for us,” Ward says. However, the number of employees

at the plant is probably a little higher than the global average. “This is largely because the level of automation here is not quite as high as you would find in the high labour cost countries like Europe and Japan. Labour costs in South Africa are not exactly cheap, but at the moment we have an unemployment rate of 26 per cent, so we have some social responsibility to the economy and to the government to provide jobs. The same applies to our suppliers too. They do not produce the volume to warrant considerable investment in automation. So for them, it’s a matter of finding the balance that makes them competitive.”

Manufacturing

27

28

00 www.bus-ex.com May 10

Manufacturing

Toyota South Africa Ongoing training is a fundamental element of the global corporation’s kaizen (continuous improvement) philosophy; and one of its key elements is benchmarking, or learning from other people’s operations. The company therefore makes a considerable annual investment in sending its staff to Toyota facilities in locations such as Japan or Thailand. “We do this for staff at all levels: our team members, middle and senior management. Our team members, for example, will visit these plants and work in the Dojos (the shop floor training facilities), learning all about the systems in operation. They then return and share that knowledge with us in the Durban plant.” This ensures that all plants keep up to date with the latest ideas in operational best practice.

The South African operation also provides a wide spectrum of training through its Toyota Academy for Learning, Africa (TALA), and this is organised into three schools. The first school is aimed at internal employee development, and offers a series of courses ranging from the basics of the TPS and the Toyota philosophies through to team member and senior management development. The second school provides training for the company’s external partners, and is attended by the technical and sales staff from the dealerships.

The third school is for Toyota’s suppliers. “And here we’re trying to promote best practice within our supplier base in areas such as management, HR development, kaizen and the elements of TPS,” Ward says. “This is a very extensive programme, and by working in partnership with our suppliers in this way we can help them to grow with us. We believe that it’s no use us growing and expanding if our suppliers are unable to grow at the same rate.”

The downturn, of course, has significantly affected the automotive sector around the globe, and for Toyota South Africa and its suppliers the story was no different. “We saw a drop in production of between

30 per cent and 40 per cent,” Ward says. “In 2008 we produced 187,000 units and in 2009 we produced 104,000 units—so 2009 was what we think of as a year of survival.

“We did lose a few suppliers who really struggled,” he continues. “We also had to release a number of temporary staff, but we have retained all our permanent staff and this

is very much the case in our supply chain too.”

It may have been a hard year, but the company has used that very challenging time positively, to bring about some significant changes and improvements in its own operations, and to help its suppliers do the same.

“To begin with we focused internally, examining our own operations and restructuring our business to perform better and to reduce costs. Then we also worked closely with our suppliers to help them restructure their businesses,” Ward explains.

“It sounds simplistic, but one area we worked on was scrap management. We examined how we create scrap in every aspect of the business, not only on the shop floor but also in the offices. From that we were able to change our wasteful processes and

Manufacturing

29

30

Manufacturing

Toyota South Africa

behaviours. We then shared this with our suppliers by showing them physical examples in our plant. For example, we showed them how we cut down on the number of forklifts so that we could use less gas.

“In our own plant we also initiated an energysaving project which we called ‘no work, no watt’,” Ward continues. “We encouraged everyone to turn the lights off and use natural light. In some places, we even took the roof off, replaced it with translucent sheeting and removed the lights.” The initiative has been a great success, and through this alone, the energy costs to the plant have been reduced by 20 per cent. “We’ve also made a big investment in solar heating to heat water for all our ablutions—showers and so on. On a site the size of ours, that has also been a big cost driver.”

Everyone within the organisation has been contributing to this restructuring programme, and

Ward is convinced that this type of kaizen activity is the only real route to sustainable business improvement. “You can certainly just slash costs,” he comments, “but simple cost cutting doesn’t bring sustainable benefits in the way that this will.”

In parallel with these internal improvement activities, Toyota invested considerable time and resources in helping its suppliers weather the financial crisis. The effort began with a ‘survival kit for 2009’ aimed at sharing the lessons the company had been learning about business improvement. “This was essentially a roadmap of how our suppliers could study their businesses and look at methods for restructuring,” he explains. “We introduced this to them, and then shared with them the initiatives we had been undertaking in our business.”

Toyota’s VP of manufacturing, Dave Finch, gave a series of presentations to the suppliers, explaining how the company had been taking advantage of the slowdown to examine and readjust its business, illustrating the changes and improvements that were being made at the Durban plant, and how this was leading to some significant cost savings. The talks were then followed up by visits from Toyota’s technical staff, who spent time helping suppliers identify and implement their own business improvements.

Today there is significant growth in the market and employment rates are climbing.

The global automotive sector has undoubtedly evolved, but so has Toyota South Africa and its suppliers. “Our businesses are all a lot leaner and a lot smarter now. We’re well prepared for this upturn and a lot more focused,” Ward says. More than that, the company has cemented the supportive partnership with its suppliers, and this has reinforced the cohesive strength of the business, preparing it well for 21st century operations. www.toyota.co.za BE

Manufacturing

31

Investing in

thefu

Having cornered the global export market for production for the derivative Cross Polo, auto South Africa has embarked on a major develo improve productivity and efficiency. Manufact talks to Gay Sutton about the latest project— 32

Manufacturing

Volkswagen Group South Africa

uture

r the right-hand drive Polo and total omotive manufacturer Volkswagen Group opment programme to upgrade facilities, and turing planning division head Chris Glover —the construction of a new press shop

Manufacturing 33

34

Manufacturing

Volkswagen Group South Africa

T

he automotive landscape in South Africa is far from static, as it gears up to take its place as a major player in the international export market.

One of the trailblazers in this rapid evolution is Volkswagen Group South Africa, and this year the company is celebrating its 60th anniversary in the country, marking the date in 1951 when SAMAD (South Africa Motor Assemblers and Distributors) first began producing the iconic Volkswagen Beetle from the same manufacturing site at Uitenhage, Eastern Cape. Today, of course, the company is a wholly owned subsidiary of Europe’s largest auto manufacturer, the Volkswagen Group.

Volkswagen Group South Africa has been at the forefront of a remarkable change in the South African automotive industry, not only introducing the latest concepts in manufacturing best practice, but increasing the volume of products exported to the global market and encouraging the establishment of an array of the world’s top automotive suppliers close to the plant.

“Our policy in recent years has been to reduce the number of platforms produced at the plant from five to two, thereby reducing complexity in the plant,” explains manufacturing planning division head Chris Glover. “But at the same time, we have significantly increased volume through the plant, and this has been a big incentive for international supplier companies to establish themselves locally.

We currently produce over 600 cars a day but still have some possibilities for future expansion.”

Manufacturing 35

Volkswagen Group South Africa

The most significant change in manufacturing efficiency and export output began in 2008 when the South African plant was awarded the contract to manufacture right-hand drive Polo models for the worldwide market. The plant’s comprehensive business case and investment plan for producing the model were supported by the fact that Volkswagen could derive economies of scale by having right hand drive manufacturing located at one site.

The South African subsidiary also offered a favourable logistical position. With the two major markets for right-hand drive Polos being Japan and the UK, the plant’s location close to the Port Elizabeth port and the new international deepwater port at Ngqura made it well positioned for the receipt of CKD material and the export of finished vehicles to both destinations, as well as other markets in Malaysia, Singapore, Hong Kong, Australia and New Zealand.

“By 2008, we had already invested some ZAR 750

Aveng Trident Steel Aveng Trident Steel is the leading supplier of automotive raw materials and services to all the original equipment manufacturers in South Africa. As always we strive to be at the forefront of current technologies by listening to our customers and reacting to the needs of the industry. Through this, Aveng Trident Steel has taken the initiative of installing a comprehensive service centre in Port Elizabeth designed to live our ‘safety first’ culture and is TS19649 qualitycertified. Aveng Trident Steel is proud to be associated with a blue chip organisation such as Volkswagen and remains an enthusiastic supplier to the automotive industry.

million (over €70 million) commissioning a new paint shop, which gave us the capacity

Manufacturing

37

to deliver world-class water-based painted bodies in an energy efficient and environmentally friendly way,” Glover says. “But with approval of the worldwide Polo production in 2008, we began a €300 million investment programme which included the installation of a state of the art production line capable of handling 500 units per day. Right-hand Polo production then commenced as planned in July 2009.”

In parallel with this, the company embarked on an extensive training programme to prepare its staff for the introduction of the new Volkswagen production system, which was being rolled out concurrently across the group. Three new training academies were built and all production employees were extensively trained. “This has enabled us to drive improvement from the shop floor upwards, resulting in a big breakthrough in productivity,” Glover comments. “And of course the timing was perfect, as it coincided with the introduction of our new production line.”

In true kaizen (continuous improvement) fashion, however, improvement has not been a one-off single investment but an ongoing process. With the refurbished facilities up and running and output increased, it became apparent that the existing press shop had a number of shortcomings. “We then received approval from the Group to invest a further €43.5 million in the construction of a new press shop and high speed press line. This brings our press plant in line with the Group-standard investment we had made into other areas of the plant.”

The new press line is to be housed in a purpose built 10,800 square metre facility located alongside the existing press shop. Construction commenced in January this year and the building will be ready for press installation at the end of November. There will be six presses in all, the lead press having a press capacity of 2,100 tonnes and the five following presses with 1,200 tons capacity each. “The line will incorporate brand new technology, ‘Wave Line’ motion for the presses from the Spanish company Fagor Arrasate,

38

Manufacturing

We have significan increased volume the plant, and this been a big incent for international su companies to esta themselves locally

Volkswagen Group South Africa

ntly through s has ive upplier ablish y

Manufacturing 39

integrated with automated ‘Cobra’ part transfer system and special software from the company KUKA Systems. We believe we are the first company in the world to use it,” comments press shop project leader, Robert Pressly. “The presses are highly automated and include an automatic five-minute die changeover cycle which is a considerable improvement on our current manual tool changeover process. Every minute saved means additional parts we can produce.”

Considerable attention has also been paid to the environmental performance of the new building and plant. Recycled building materials have been used where possible, maximised usage of natural light and rain water harvesting are all included. Energy consumption played a significant part in the selection of the press line.

The construction project has not been without its challenges, though. “We are building onto bedrock, and the area has

40

Manufacturing

a high water table so we have had to pay special attention to the design and waterproofing of our press pit,” Glover explains.

The press pit is a vast L-shaped hole in the ground with a total surface area of 451 square meters. The entire area of the pit is six metres in depth with an additional 2.5m foundation thickness.

The construction methodology necessitates the removal of 7,247 cubic meters of natural ground.

While the bedrock provides a solid foundation for the presses, experience shows there is a risk that vibrations can be transmitted through the rock to surrounding buildings. A special imported damping layer will therefore be installed between the pit base and the bedrock to alleviate this problem. To ensure all technical details are being thoroughly addressed in the project, the local team is working closely with specialist engineers from Volkswagen in Germany.

“Interestingly,” Glover continues, “we have also proved that Murphy is alive and well in South Africa!

For the last five years we’ve had drought conditions here in Uitenhage. But from the moment construction

Volkswagen Group South Africa began we’ve had abnormally high rainfall, posing some interesting challenges for the project.”

The entire project is being conducted according to a very tight timeframe. With production scheduled to start in July 2012, building work has been progressing in parallel with the development and manufacture of the presses in Europe. “The presses will arrive literally just in time for installation into the building,” Glover says. While this will undoubtedly be quite a planning feat, it is no less than the JIT delivery one would expect of the highly efficient automotive sector.

For Volkswagen Group South Africa, when the press shop comes online next year, there will be many benefits. Not only will it deliver a marked reduction in operating costs and an improvement in reliability, but it will also future-proof the plant.

“The new press line will create greater efficiencies,”

IC-L For more than 32 years we at IC-L have been working as expert planners for the automotive industry, in particular VW on international industrial construction and civil engineering projects. To this end we have been—and in part still are—involved in projects in South Africa, Russia, Mexico and the US, China, Slovakia, Spain and Poland, among others.

Our focus is mainly on project control, full design team package, general planning, object planning/ design,

structural

design

and

construction

supervision, as well as architectural visualization.

Glover concludes, “and this will enable us to expand production volumes in the future, in line with our long-term strategic initiatives.” www.vw.co.za BE

Manufacturing

41

Gettiyo

bea

A comprehensive product portfolio, marke Bunting Bearings a leader in its field, Davi 42

Manufacturing

Bunting Bearings, LLC

ing our

arings

et expansion and customization add up to make id Hendricks reports

Manufacturing 43

44

Manufacturing

Bunting Bearings, LLC

J

ust over a century ago in Alliance, Ohio, Bunting Brass and Bronze was founded in 1907. After some mergers and acquisitions, the company became Bunting Bearings, LLC, with headquarters including a machine shop in Holland, Ohio, and two in-state casting facilities at Mansfield and Delta. It also has a powdered metal facility in Portage, Michigan, and two distribution centers, in Houston, Texas, and Cerritos, California.

The company’s general product categories include: cast bronze bearings; continuous-cast solid and cored bars and wearplate, and centrifugal-cast bronze bars; custom machined products; powdered metal bearings and thrust washers; powdered metal bars, discs and plates; powdered metal structural products; lube-align mounted bearings; engineered plastic bearings; and permanent mold products.

Vice president of sales and marketing Alistair Brixey has been with Bunting for less than two years but brings 30 years of industry experience, mainly in the UK and Europe. What attracted him, he says, was the company’s wide-ranging portfolio, its versatility in customization of products and its quality standards. “All our plants are ISO 9000:2008 certified,” says Brixey, “and we’re also starting six sigma training. We’re always looking at continuous improvement of our processes, and increasing our

Manufacturing 45

productivity is a natural result of that.” The company has invested heavily at its Portage facility, installing a variety of presses for manufacturing parts.

“Among the reasons I wanted to join this company were its range of products and its vertical integration,” Brixey explains. “We actually have full control of the raw material, from the ingots coming in, making the bronze, then producing the bronze bearings from our own bronze bar and selling bronze bar materials. The materials we work with are mainly leaded tin bronzes and aluminum bronzes, but we also produce a whole range of ‘greener’ no-lead and low-lead bronzes.

We have a large machine shop, so we can produce custom-machined bronze bearings and complex-shaped bronze components.

And if someone needs a standard bearing modified, we can do that too.”

Bunting manufactures a vast array of bearings from one-eighth of an inch to 20 inches, in materials from plastic to aluminum bronze, to market sectors including oil and gas pump manufacturers, agricultural and construction part makers, the military, aerospace, heavy machinery, material handling equipment, medical equipment, utilities and shipbuilding. It makes a lot of OEM parts, mainly for two of its largest customers, John Deere and Caterpillar. Bunting has all bases covered, in terms of sales: it sells directly to customers through its own sales reps, as well as through its distribution network, and it also has arrangements with sales rep companies.

Joining the company in 2008, the beginning of the global economic crisis, was a positive factor for Brixey. “The recession was a good time for us to look at how we were supplying customers and what extra value we could offer them, and also how to improve our portfolio. We introduced some new products

46

Manufacturing

that are variations of our standard products. For example, we have self-lubricating bearings that are normally filled with standard oil, and we came up with bearings that are fully impregnated with synthetic oil and can be used in the food industry, which hasn’t been hit by the recession as hard as other industries. We also saw a gap in the market where bearings are used in start/stop applications, and we introduced PTFE additives to bearing oils that vastly improved bearings in those high-stress situations. We also introduced two other full bearing ranges, one for high-load applications and one for high temperature.”

Bunting discovered that in a recession, its customers’ purchasing departments were looking to reduce their supply base, “and that suited us fine,” says Brixey.

“We could offer them a one-stop shop where they could buy bearings made of nylon to cast bronze and so on. Most of our customers have expressed to us that they wanted their supplies simplified to the point where they would have one company do it all for them if possible, and I love to hear that.”

One of Brixey’s intentions was to make it easier for customers to do business with Bunting 24/7, especially with customers in different time zones, so Bunting improved its company website. He wanted it to be more than just an online catalogue. “I wanted an actual sales tool where we could provide customers with specifications and drawings that they could download and save their engineers time and effort; they could download our bearing and insert it into their product, or download a sales drawing and send it directly to their purchasing department. They could also easily send us a request for a quote.”

It’s working, and already Bunting is picking up inquiries from around the globe and supplying companies in the oil fields of Saudi Arabia, power station companies in China, and entities in the Middle East and other parts of the Far East. In fact, business has grown considerably, necessitating adding staff and opening up distribution into Europe—France, Germany, Spain, Italy and the UK. One product that Bunting offers exclusively is

Bunting Bearings, LLC the Dri-Plane range of powdered-metal bearings that can be used at high temperatures and in vacuums, because of a dry lubricant in the material.

“Some customers wanted a bearing that was selflubricating, but using a standard oil-impregnated bearing in a vacuum isn’t possible, since the oil would be sucked out and at too high a temperature the oil would burn off. So we solved their dilemma for them. We also have bearings made of exotic materials that are more expensive than some of our standard products, but these can work up to 900° Fahrenheit and have a very long life.”

Brixey feels that the company’s bearing portfolio is now about 90 percent of the way to the place he’d like it to be. “It took 103 years to accomplish that first 90 percent of the journey, so the final 10 percent is more of a challenge. At the moment we’re looking at all the bearings offered by our various competitors

Jade Engineered Plastics Congratulations to Bunting Bearings on their achievement. Jade Engineered Plastics corporate philosophy is: A dedication to continual process improvement and total product quality backed by consistent customer service.

We at Jade Engineered Plastics achieve these objectives by first understanding and then attempting to exceed the requirements of our customers, both internal and external.

so that we can offer our OEM and distribution customers a complete portfolio of products. I want to be in the position where we can take any bearing or bronze bar order from any customer anywhere and offer them complete service.” www.buntingbearings.com BE

Manufacturing

47

Ridingthe

rollerc

Innovation is part of company DNA at Mar Denis Rienguette tells Gay Sutton how cus stay ahead in this volatile industry 48

Manufacturing

Marcotte Mining Machinery

e

coaster

rcotte Mining Machinery. General manager stomization and R&D help the company

Manufacturing 49

50

Manufacturing

Marcotte Mining Machinery

T

ake the Minejack, the vehicle base upon which most of today’s rugged mining utility vehicles are built, and you’re looking at one of the first innovations from Marcotte Mining Machinery. Started in 1979 as a family business providing services for the mining industry, the company moved swiftly into designing and manufacturing innovative parts and equipment for underground use.

Manufacturing 51

At an early stage of company development, during the early 1980s, Marcotte engineers recognized the capabilities of the Timberjack Skidder—a massive four wheeled tractor vehicle used by the forestry industry to lift and remove entire felled tree trunks—and they saw its potential for underground use. Initially buying-in the Timberjack vehicle bases, the company began modifying them and adding a variety of its own engineered products for use in mine applications. Eventually in 1997 Marcotte became the OEM,

52

Manufacturing

Marcotte Mining Machinery

Manufacturing 53

taking over the manufacture of the complete vehicle and developing it into a range of sizes and applications.

Today, Marcotte is part of the Timberland Group and employs some 60 people across engineering, sales, manufacturing, and field services, operating from a 35,000 sq ft manufacturing and engineering centre in Sudbury, Ontario. The company specializes in the design and manufacture of a wide range of utility vehicles for underground mining applications, and creativity and flexibility continue to be its driving principles.

“We can customize and modify all our products,” said general manager Denis Rienguette. “After all, our equipment will be asked to perform well under extreme conditions underground, and therefore needs to be adapted to specific mine situations. We have one product in the shop right now—a dry shotcrete sprayer—that is destined for the Kinross Kupol mine in Russia, where the underground temperatures there are typically -15 Celsius throughout the year. Similar conditions occur at the Rio Tinto Diavik diamond mine here in Canada, and we’re working on equipment for that destination too. Meanwhile, we have another wet shotcrete sprayer which we have developed in conjunction with Kinross, which is a self contained unit and holds its own cement.

This has gone into operation in the Buckhorn silver mine in Washington State.”

This flexibility is certainly sought after by the customer, but it imposes constraints on the factory by reducing the volume of standard parts and increasing the incidence of oneoffs. Combined with the increased engineering design time, this can add to the cost of the end product. “However, if the customer is procuring, say, ten of these vehicles, the development and production costs are spread across all the products, and we are often able

54

Manufacturing

to absorb most of it ourselves.”

In addition to customization the company continues to innovate, developing new products to solve existing issues, and to significantly improve the current range of products. “We must spend something in the region of $0.5 million each year on R&D over and above the amount our customers contribute. Some new products arise from our own ideas, but the majority of them come from customers who approach us with requests for equipment capable of doing something new or different. We then solve that problem for them.”

Marcotte also receives Canadian Government R&D funding through IRAP (Industrial Research Assistance Program), which is granted for specific projects that conform to a strict range of criteria.

“We’re currently working on a new design of wet shotcrete sprayer, with money from IRAP for the engineering work. The sprayer solves many of the problems that currently occur in the field, and uses a robotic arm rather than a straight boom.”

Traditional boom-style sprayers have always been prone to damage from rebounding rock or operator generated accidents. The new arm solves this by being highly maneuverable and having fewer vulnerable external parts. Encrustation with cement during operation was also a significant problem as it made it very difficult to grease the old style boom.

The hydraulic design of the new arm means it doesn’t require greasing. “As a result, there will be huge savings in downtime and maintenance with this new system,” Rienguette said. “The project is complete now, and we have a number of potential customers bidding for the first one. So now it’s just a waiting game.” Once the bidding is complete the factory will swing into action and the first model will be built within 24 to 28 weeks.

The design of this new product has benefitted from one of the company’s more recent investments— AutoCAD Inventor. Acquired and implemented just two years ago and boasting many sophisticated features, it has revolutionized Marcotte’s engineering and design capabilities. “In this instance, we have been able to apply stress analysis on a variety of places along the robotic boom, and to simulate its

Marcotte Mining Machinery

use over a period of time,” Rienguette said.

The results of the simulations have informed many engineering decisions. “It was a big investment at the time, but it’s certainly turned out to be worthwhile.”

One of the real challenges of operating in the mining industry is it unpredictability. “The market is a rollercoaster, going up and down in cycles with the stock market. It crashed after 9/11 and crashed again during this recession,” Rienguette said. “We have a lot of knowledgeable people in the company who have also been investing in us by remaining with us. And of course I didn’t want to lose any them.”

His strategy to avoid redundancies was to discuss how to reduce expenditure across the company. “We then put the money we saved into building stock equipment so that we could retain our employees during the downturn and we would be ready when things began to pick up,” he explained.

“That decision could have gone either way, of course. And we could have been stuck with stock for a very long time. But that hasn’t happened. We’re well on the way to offloading it.”

Now that the global economy is picking up, Rienguette is examining the markets for opportunities for growth. “We’re looking for opportunities to diversity into products and industries that are not affected by mining, to cover ourselves when the industry dips down again. We’re also always looking for new ideas to introduce into the mining industry.”

But that is not always easy.

In a competitive market, however, innovation does not remain fresh for very long. “Once a new product is introduced, everybody picks it up and begins to produce it,” says Rienguette. But with innovation built into the fabric of the company, Marcotte is well placed to ride the rollercoaster. www.marcotte-inc.on.ca BE

Manufacturing

55

20

Vision

The first new aluminium smelte has become a catalyst for indus Oman an attractive destination 56

Manufacturing

Sohar Aluminium

020

r to be built in the Arabian Gulf in 25 years strial growth in the region, helping to make for multinationals to locate facilities

Manufacturing 57

58

Manufacturing

Sohar Aluminium

A

luminium must be a very satisfying business to be in. The most widely used non-ferrous metal, its uses are virtually endless thanks to its versatility, light weight, comparative strength and infinite ability to be recycled.

Worldwide demand continues to grow as new applications for this incredible metal are discovered. Used in a vast variety of applications from transportation to packaging, its versatility stems from its unique properties.

Manufacturing

59

Sohar Aluminium

Abdul Ghaffar Hussain Trading LLC Abdul Ghaffar Hussain Trading LLC (AGHTL) is a leading stockist and distributor within Oman of a wide range of products to service the building, utilities, irrigation, power, water, oil, gas and several other industries. AGHTL is backed up by Hepworth PME Group Dubai and partners, who are capable of supplying plastic pipes, fittings, valves, special fabrication, site service, installation equipment, adhesives and turnkey solutions. AGHTL has been closely associated with all the local plumbing piping requirements for industries such as municipalities, hospitals, schools, water-sewage network projects, manufacturing firms, commercial and residential complexes, airports, and oil & gas fields throughout Oman for over 25 years.

AGHTL is managed by a team of skilled professionals capable of understanding customers’ requirements, addressing technical queries and responding with techno-commercial proposals. Our stores facility in Muscat holds a sizeable stock of fast-moving products to cater for walk-in customers through the retail outlet RTD. Products at Hepworth factories are manufactured under strict quality control and conform to international standards.

AGHTL, along with its partner Georg Fischer, a dominant manufacturer in the field of plastic piping systems for all industries, has contributed actively in installations of polyethylene (PE), polyvinylidene fluoride (PVDF), polyvinylvhloride (PVC) and chlorinated polyvinylchloride (PVC-C) piping, along with valves, fittings, automation and jointing technology. P.O Box 117, PC-130, Azaiba Tel: 24490911 Fax: 24492310 hepworth@ omantel.net.om

Aluminium has a low density, is non-toxic and has a high thermal conductivity together with excellent corrosion resistance. It is also non-magnetic, non-sparking and is the second most malleable metal and the most ductile. It can be easily cast, machined and formed and is used in any industry where

Manufacturing

61

62

Manufacturing

Sohar Aluminium

strong, light, easily constructed material is needed.

Its low-density conductivity is invaluable and its alloys are used in many applications such as the aerospace and automotive industries.

The sultanate of Oman, the eastern-most of the oil-rich GCC (Gulf Cooperation Council) states, is home to the first new aluminium smelter to be built in the Arabian Gulf in 25 years—and it is already planning to double its capacity. With political unrest in much of the Arab world, Oman enjoys a stability others must envy. “There is some dissent in Oman,” says Henk Pauw, CEO of Sohar Aluminium, “but the government is much more progressive here than in many Arab countries. There are already plenty of plans and initiatives in place to improve living conditions for Omani people. The fact that it maintains good

relations with both Palestine and Israel says a lot about its style and modernity.”

The Omani government has been working to a 25-year development strategy called Vision 2020 which spans the period 1996 to 2020. One cornerstone of this extensive plan is to reduce dependence on oil revenue by developing a strong national industrial base capable of generating income and jobs.

It was out of this vision that the concept for Sohar Aluminium was born—a project that took three times longer to discuss and plan than it did to build. The economic thinking behind the scheme was based on the ready availability of energy in the form of natural gas, combined with an opportunity to grow

Manufacturing

63

Sohar Aluminium

a whole range of allied industries and diversify the national economy.

“Aluminium smelting is a process that requires vast amounts of energy,” says Pauw. “At least one third of the cost is for energy, and in Europe that figure would be as high as 40 per cent. So it’s attractive to countries such as Oman, which can convert the energy it has into aluminium production.

The gas used could be sold in the normal way but that wouldn’t add value or provide work. The Sohar plant, on the other hand, created jobs for 1,000 people, 70 per cent of them native Omanis.”

Oman’s relationship with Iran is a key ingredient in Sohar Aluminium’s current expansion plans. Cheap natural gas is a great attraction for multinationals to locate manufacturing facilities in Oman, and Sohar

Technical Supplies International Company LLC Technical Supplies International Company LLC (TECS) is a leading distributor of electrical, mechanical and oil & gas products, and a quality electrical power systems service provider within the Middle East.

TECS is based in Muscat, Sultanate of Oman and has been certified ISO 9001:2008 by the leading certification body Bureau Veritas for adherence to the International QMS Standard. TECS has been given a low risk rating (2A3) by Dun & Bradstreet which indicates robust overall health of the company and encourages business transactions with international partners.

Manufacturing 65

Sohar Aluminium

Muscat Pharmacy & Stores LLC Muscat Pharmacy & Stores LLC would like to extend its best wishes to Sohar Aluminium for all its current and future endeavours.

Aluminium is but one of several major players that have massive expansion plans, as long as they can secure additional gas supplies.

There were hopes earlier this year that Qatar’s Dolphin Energy might provide additional natural gas to Oman to accommodate these expansion plans, but the Qatari government declined that option in May. In June, however, an announcement was made that a deal had been signed for Iran to supply gas to the sultanate through an undersea pipeline by March 2012.

Sohar Aluminium’s ambitious plans to double aluminium output are now very much on the cards. The company was formed as recently as September 2004 through an alliance between three well established businesses, each of them bringing a significant level of expertise

Manufacturing

67

Sohar Aluminium

Hydraulic Systems Centre LLC Hydraulic

Systems

Centre

LLC

(HSC)

was

established in 1997 as a leading supplier of hydraulic and pneumatic parts and equipment. It also manufactures hydraulic and pneumatic seals, and carries out crimping of hydraulic hoses in the Sultanate of Oman. HSC is the first company of its kind in the country, and because of that it has been able to employ and retain highly professional engineers, project managers and technicians who have created an extremely competent team unlike any in the market. HSC supplies more than just high-quality products—it is also keen on providing continuous technical support and an aftersales service that is second to none in the industry. HSC achieved ISO 9001:2000 certification in 2004 and upgraded to 9001:2008 in 2010.Â

and knowledge to the project. Oman Oil, which owns a 40 per cent share in the company, is a commercial body wholly owned by the government of Oman and charged with pursuing investment opportunities in the energy sector, both in Oman and further afield. TAQA, 51 per cent owned by the Abu Dhabi National Energy Company PJSC, another government body, has a further 40 per cent share in the company, and the remaining 20 per cent is provided by Rio Tinto Alcan, the aluminium division of the

Manufacturing

69

Sohar Aluminium global mining and metals group, Rio Tinto.

Based on an initial investment of $2.4 billion, the Sohar Aluminium plant is strategically located for easy access to one of the world’s most rapidly growing deep sea ports as well as the region’s rich natural gas reserves.

At the heart of the complex lies a state-of-theart 1,000MW combined-cycle captive power plant.

GAC Oman LLC GAC Oman was established in 1971, originally as a shipping agent, handling vessels at Port Sultan Qaboos located in the capital city of Muscat. Since then GAC’s portfolio of services has grown, and today GAC is one of the leading shipping and forwarding agents in the Sultanate.

MSTA Mutrah Shipping & Trading Agency LLC (MSTA), a 100 per cent locally-owned shipping and trading company, was established in 1974 to provide shipping agency services for shipping lines which were calling at the port of Muscat to offload with break bulk and project cargo. We have since moved on, and today one of our major activities is the agency representation.

Equipped with the latest Alstom 13E2 series gas turbine, the plant was designed to meet the stringent requirements of Oman’s environmental agency, MECA, and achieves close to 50 per cent efficiency in converting gas energy into electricity. In addition to this, the site boasts a seawater pumping station that delivers cooling water for steam condensing as well as a desalination facility that supplies the required quality of water to the smelter and power plant sites.

The smelter itself is currently the most modern plant in the world as it was the first smelter to implement Rio Tinto Alcan’s benchmark AP36 smelting technology, generally accepted to be the most energy efficient and productive smelting process available. Boasting a single pot line measuring 1.2 kilometres, it has the world’s highest known capacity ingot casters capable of operating at 27mt per hour. Meanwhile, the plant features the most innovative elevated walkways, traversing the

entire site and keeping man and machinery separate except when absolutely necessary.

The production cycle begins with refined alumina being landed at the plant’s own dedicated port facilities which are operated

by Sohar Industrial Port Company, a joint venture between the government of Oman and the Port of Rotterdam. Here, vessels of up to 75,000 tons can berth to offload raw materials and export primary aluminium. As well as bulk materials handling systems there is enough storage space for 120,000 tons of

Manufacturing

71

Sohar Aluminium

alumina plus 30,000 tons of petroleum coke and liquid pitch—the raw materials needed to make the anodes used in the electrolytic conversion of alumina into aluminium.

Another milestone in Sohar Aluminium’s progress came on 25 May 2011 with the arrival of The Jewel of Shinas from Gove, Australia on its maiden voyage to Sohar.

The Jewel of Shinas is one of two ships commissioned to transport alumina and petroleum coke from Australia to Sohar Aluminium.

The five hatch supramax bulk carrier will be operated

by Oman Shipping Company on a 15 year lease. The second ship, The Jewel of Sohar is expected to be

delivered during the first quarter of 2012.

After energy, anodes are the largest consumable component of aluminium refining. However, not every smelter has its own anode manufacturing facilities, and the

Manufacturing

73

Sohar Aluminium

one at Sohar is in itself noteworthy. The Rhodax crusher installed on site is one of the highest capacity machines in the world. Anode manufacturing is an area of the business that Pauw knows intimately, having arrived at Sohar from an anode making concern. “To put the scale of Sohar into context,” he says, “this one plant uses more anodes than my previous business supplied in total.”

With that kind of manufacturing background, Pauw is keen to introduce more modern ideas into Sohar. “We are the most modern plant at the moment,” he says, “but already technology has moved on. We ourselves are considering doubling

Manufacturing

75

Sohar Aluminium capacity if we can guarantee energy supply, and when we do, the plant will be designed to AP41. So our current advantages will certainly be short lived.

Take out the low cost of energy and our performance is not that productive.”

Starting this year with a small pilot plant in an area he knows will show immediate benefits, Pauw plans to introduce the concept and practice of lean manufacturing. “The Omanis are keen to work and to learn but they don’t have the industrial heritage that

company was presented with an award for the “Most Inspired Dashboard” during the Infosol Business Intelligence Seminar (IBIS) conference in Dana Point, California. The dashboard is a graphical tool that has been implemented as part of Sohar Aluminium’s manufacturing execution systems (MES) project, and the award is a remarkable achievement considering the fierce competition from 60 companies worldwide.

exists in the West. Middle management in particular needs a different mindset. We shall be working from the top down so that the momentum will carry everyone along.”

Sohar Aluminium’s pursuit of world class status has already been rewarded in another category, however.

In a ceremony held on Monday, 20 June 2011, the

Sohar Aluminium’s MES system is used to produce shift reports on production and other key indicators. The dashboard has been designed using Xcelsius software with an easy-to-use graphical interface that provides management with up-to-date information on all aspects of the plant such as production

Manufacturing

77

Sohar Aluminium

figures, cost, power consumption, local spend and much more. The award is another milestone in the company’s vision to be the best smelter in the world.

Output from the Sohar factory comes in three forms: 27.3kg ingots, 700kg sows and hot metal. Currently, solid metal output at the factory is exported, but the liquid form of aluminium is made available directly to downstream partners located around the plant who then benefit from reduced energy costs in comparison with competitors who have to melt the aluminium ingots or sows prior to processing.

Manufacturing

79

Sohar Aluminium

The sultan’s Vision 2020 contains goals for increasing the number of downstream users of locally produced aluminium, and this is being boosted by a global trend in the aluminium industry. The ready availability of oil and natural gas in the GCC states and the resulting supply of low cost energy means the region is rapidly becoming an attractive destination for many high energy industries.

And there has been a measurable exodus of aluminium manufacturers away from high cost regions such as North America and Europe.

In 2009 construction began on a new $40 million aluminium rod mill and conductor plant for Oman Aluminium Processing Industries (OAPI), on a site adjacent to the smelter.

Manufacturing

81

82

Manufacturing

Sohar Aluminium

This was opened in July 2010 and is already running close to capacity using liquid aluminium directly from the smelter. Currently some 50 per cent of the rod mill’s output is in semi-finished wire rods which are exported to the electrical industry in Europe and the other GCC states. The remaining 50 per cent

continues through the conductor plant and is converted into electrical transmission cables for the local market.

Meanwhile, the regional market for transmission cable is booming. Driven largely by increased revenues derived

Manufacturing

83

84

Manufacturing

Sohar Aluminium

from the rising price of oil, many of the GCC states are increasing their levels of investment into power infrastructure. The aluminium industry in the Sohar region is therefore likely to expand considerably over time. There are already further users of the smelter’s liquid aluminium setting up in the vicinity who are likely to come online in the next few years; and OAPI also has expansion plans on the table.

If Sohar Aluminium’s expansion continues as planned, some 600 direct jobs, 1,500 indirect jobs and 7,000 construction jobs will be created, enabling the company to meet its

Manufacturing

85

Sohar Aluminium

objective of being a major contributor to the national economy and supporter of social development.

It already has a considerable track record in this respect, having achieved an impressive 70 per cent Omanization across all levels of the organization and overcoming the difficulties of a largely inexperienced workforce in the field of aluminium smelting.

Manufacturing 87

88

Manufacturing

Sohar Aluminium

The Omanis are keen to work and to learn but they don’t have the industrial heritage that exists in the West. Middle management in particular needs a different mindset. We shall be working from the top down so that the momentum will carry everyone along

After just three years in operation Sohar Aluminium has clearly established an enviable reputation for excellence, but continuous improvement is the goal. The company’s development mirrors that of the Sultanate of Oman as it emerges onto the world stage, supporting industrialization and developing the skills and lifestyle of its people. The two are closely linked, and the company’s vision is to become a global benchmark smelter and to play a key role in contributing towards the sustainable development of Oman. www.sohar-aluminium.com BE

Manufacturing 89

Winds

cha

Andrew Bellamy, CEO of Austal, one of the wo shipbuilders, talks to Jayne Alverca about the blowing in the wake of a major defence contra 90

Manufacturing

Austal

sofÂ

ange

orld’s leading aluminium winds of change that are act with the US Navy

Manufacturing 91

92

Manufacturing

Austal

A

ustal, headquartered in Henderson, Western Australia, is the largest builder of aluminium fast ferries in the world, with a customer base that spans the globe. The company has reached this level of success in just over 20 years—an achievement that CEO Andrew Bellamy attributes to three key factors.

“First and foremost, we have a wonderful team of some of the most highly skilled and dedicated people to be found anywhere in the industry,” he states. “Secondly, we have always cultivated a culture of innovation, excellence and continuous improvement. Thirdly, we have developed great skill in customisation: we strive to understand the requirements of our customers from the outset and customise a solution to fit their needs.

If you define a problem well, it becomes much easier to find the right solution.”

Manufacturing 93

94

Manufacturing

Austal

ZF Services Australia Your

partner

for

complete

and

innovative

propulsion systems for all types of ships.

ZF Services Australia distributes the full range of products and services from ZF Marine, a world leading system supplier of marine propulsion systems for all types of vessels. Products include gearboxes, bow thrusters, POD systems, shafts, propellers and control systems, and the company offers a comprehensive aftersales and service network throughout Australia and the Asia Pacific Region.

ZF Services Australia takes pride in being the system and component supplier of choice to Austal ships, one of the world’s leading shipyards for commercial vessels.

Bellamy believes that Austal now has the most efficient aluminium ship-building processes in the world. “We have adopted a modular build process according to lean manufacturing principles.

However, because of our focus on customisation, these processes have to be inherently flexible, which demands a lot of additional time and up-front investment in the initial design phase,” he explains.

Austal’s team of naval architects make use of a full array of advanced computer design tools including computational fluid dynamics (CFD), sea keeping analysis, three dimensional modelling and detailed global finite element analysis. Data is transferred electronically from the start of the design process from complex three dimensional models used for resistance and hydrostatic calculations into structural analysis and then translated into final definition and cutting instructions. This preserves accuracy in design, minimises wastage and reduces lead time.

The company’s strong focus on customisation can be attributed to its expertise in the technical complexities of designing sea-going vessels.

Austal’s design team work closely with the client throughout the design process, and can customise almost every aspect of the vessel to best suit

operational requirements and comply with regulations ranging from environmental noise and emissions through to safety and ergonomic standards. The interiors of the vessel can also be fully customised, including the ceiling panels, carpet and flooring, bulkheads, cabinetry work and seating. Austal employs a team of skilled craftspeople to provide customised furniture from state-of-the-art facilities, with close liaison throughout the production process ensuring that the individual requirements of each client are taken into account.

To date, the company has built over 220 vessels for its international clientele, ranging from high-speed ferries to patrol boats to leisure craft —all at the cutting edge of naval architecture. The recently completed 113 metre “Leonora Christina”, for example, is the largest catamaran to be built in Australia to date, and will shortly be in operation between Denmark and Sweden, transporting up to 1,400 passengers and 357 cars at speeds of up to 40 knots.

Austal’s success in the commercial

Manufacturing

95

96

Manufacturing

Austal marketplace has acted as a catalyst for penetration of an entirely different market. Earlier this year, the US Navy announced the award of a contract to build a fourth 127-metre trimaran independenceclass Littoral Combat Ship (LCS). It is a landmark contract valued at US$368.6 million, with the build programme to be executed at Austal’s USA shipyard located in Mobile, Alabama.

This is the second ship awarded under part of a larger contract announced in December 2010 for the design and construction of up to 10 Littoral Combat Ships for the US Navy. Once completed, these vessels will join the Austal-built USS Independence (LCS 2) which was commissioned in January 2010.

The 10-vessel contract will require Austal to more than double its US workforce to approximately 3,800 employees in order to fulfill the contracts, which have a total value in excess of US$3.5 billion.

During the programme, Austal will be working in partnership with General Dynamics Advanced Information Systems, a business unit of General Dynamics, which will act as the ship systems integrator, responsible for the design, integration and testing of the ship’s mission systems.

Bellamy is delighted at the contract and aware of the shift in focus that is taking place within the company. “We began by building relatively simple commercial vessels and now we are at the forefront of designing revolutionary defence vessels. We see it as a great accolade to our achievements and also as a great growth opportunity for the company.”

However, he explains that Austal’s commercial work will always remain a significant part of the company’s future plans. “Our commercial work is so important to us because it gives us the opportunity to extensively trial, test and develop viable prototypes. Working in the defence arena, we must have proven design concepts as our foundation. The nature of the applications for these vessels means that defence contractors don’t want anything but tried and tested technologies.”

He adds that the inspiration for the Littoral Combat Ships, which will be placed within the US Navy, came from a Fred Olsen 137 metre trimaran vehicle

OneSteel Aluminium OneSteel Aluminium is a distributor of aluminium industrial products and services, with a business strategy based upon price, quality, reliability and service. We provide innovative solutions to customers, with a particular focus on the marine, transport and general fabrication markets. Our products include aluminium extrusions, sheet, coil, plate and treadplate, and we offer customised solutions, sourcing expertise, product range and depth, and value-adding capability.

MTU Detroit Diesel Australia Total power solutions: MTU is the brand you can rely on for your specialised commercial marine needs. Offering total power solutions for high speed passenger vessels and ferries, from 261 kW to 9,100 kW, designed for heavy duty and continuous service. We add value with remarkable power, fuel economy and low emissions.

Manufacturing

97

passenger ferry, currently in operation off the Canary Islands. “The US Navy could see its performance in action and we were able to prove that the trimaran hullform could meet all their requirements.”

Looking to the future, Bellamy hopes that the contract will now enable Austal to gain momentum as a supplier of choice with other defence forces throughout the world. “I see it as a starting point for the further internationalisation of this business, which is in line with Australia´s growing role in the defence industry globally,” he says.

He also envisages geographic expansion through a regionalisation of Austal’s manufacturing base. “It makes sense to match our growing global footprint with a regional manufacturing strategy.

“The other facet of the business that we are working hard on is growing our regional service hubs. Already, there are Austal service points in Oman, Spain, Trinidad and Darwin, Australia, and we plan to add many more. That network will expand as our ships mature and need greater service and maintenance input,” he concludes. www.austal.com BE

98

Manufacturing

Austal

We have a wonderful team of some of the most highly skilled and dedicated people to be found anywhere in the industry

Manufacturing 99

Chang

Moving to a new country and taking over the run challenges for even the most experienced of ma 100 Manufacturing

Highveld Steel and Vanadium Corp. Ltd.

ging times

nning of a new company can throw up anagers, as Alan Swaby learns

Manufacturing 101

T

he CEO of Highveld Steel and Vanadium Corporation Limited in South Africa has been in the industry long enough to remember when vertical integration among steel makers was the norm. “Then businesses went through a phase of focusing on core activities,” says Scott MacDonald, “and steel producers divested their iron ore mining interests. Once again, the wheel is turning full circle but Highveld is already there. We never went down that route; we have always processed the ore we mined ourselves and benefited considerably in the process.”

102 Manufacturing

Highveld Steel and Vanadium Corp. Ltd.

Manufacturing 103

Highveld Steel and Vanadium Corp. Ltd.

“Highveld has considerable respect among end users and we have to take full advantage of that” One of the benefits is that in its 50 year history, Highveld has been profitable every single year and only ever lost money for the first time in the first quarter of 2010. “Our oxygen supplier had a problem,” explains MacDonald, “and failed to deliver for three weeks. Production was hit badly, not only because of the lack of oxygen but also the need for a gradual thermal build-up once the situation stabilised.”

In 2006, this long-standing record attracted the attention of Evraz, a Russian steel producer every bit as vertically integrated as Highveld but much

more global in outlook. In 2008, the sale of Highveld from Anglo American to Evraz was completed to go with its other world interests in the UK, the Czech Republic, Italy, Canada, the US and Russia.

MacDonald’s appointment coincided with one of the most volatile periods in the company’s history. “Like all steel producers,” he says, “sales have been hit badly and fell by almost half back down to R4.25 billion. When demand improves they’ll bounce back but

Manufacturing 105

Highveld Steel and Vanadium Corp. Ltd.

it’s my job to see that we have the structure and the strategies to capitalise on market improvements.”

No doubt the world perspective he gained from senior roles at Corus and Klöckner & Co will help considerably in structuring management, broadening the customer base and overseeing plant upgrades.

“For a business the size of ours,” he says, “we don’t have as much direct contact with customers as would normally be the case in any other industry.

Highveld has considerable respect among end users and we have to take full advantage of that.”

At the back of his mind will be the fundamental difference between South Africa and Europe in the relative relationship between steel and concrete.

In the UK, for example, 25 years ago concrete accounted for 65 per cent of the raw material used in construction projects, compared with 35 per cent for steel. Today, thanks to effective marketing by steel producers, that ratio has reversed completely. But in South Africa, concrete remains dominant. “It’s a long

Transnet Freight Rail Transnet Freight Rail and Highveld Steel have worked together

since

1957,

with

Transnet

supporting

Highveld’s growth and efficiency drives. Transnet Freight Rail is responsible for over 66 per cent of Highveld Steel’s inbound and outbound traffic, linking the mines to the plants by a rail network that helps ensure raw material arrives on time and healthy stockpile levels are maintained.

We

acknowledge

Highveld

Steel’s

importance

in

the domestic and export steel markets. The fleet of specialised steel wagons supports Highveld in transporting the finished products safely and according to customer orders.

Highveld remains one of Transnet Freight Rail’s key customers. Our mutual objectives mean we value and support the roles and interdependencies we share.

term goal,” says MacDonald, “but if we can convince architects and developers with the same sort of arguments used in Britain, that will have a considerable impact on sales.”

Manufacturing 107

Highveld Steel and Vanadium Corp. Ltd. Vesuvius SA The

Vesuvius

SA

team

works

in

a

successful

partnership with Highveld Steel, with the common objective to optimise total refractory performance in all the Highveld divisions. The latest Vesuvius materials and designs are continuously introduced in all areas.

Vesuvius development and service at Highveld is not only aimed at reducing refractory costs, but also improving steel throughput and quality.

That’s something of an understatement because Highveld is currently the only South African producer of heavy steel sections. The financial barriers for other suppliers to get into the market are high and not justified by the relatively small local market. So small, in fact, that the home market cannot take all that Highveld produces. But if demand picks up, Highveld might find it has competition in this sector.

Which turns the focus on the second part of MacDonald’s role. It’s 50 years since magnetite

Manufacturing 109

Highveld Steel and Vanadium Corp. Ltd. iron ore was discovered at the company’s Mapochs mine, 140 kilometres north-east of eMalahleni (previously known as Witbank) where Highveld’s steel plant is located. The high titanium content of the magnetite ore has necessitated Highveld developing unique processes for smelting and refining the iron ore but parts of the plant are now long in the tooth. Along with his COO and deputy COO, MacDonald has been charged with developing a three year investment plan which will have the greatest impact on productivity with the shortest payback period. “Part of this might involve adding new capacity or new products,” he says, “but most likely it will be a case of updating the plant.

And here, we have to assess whether to upgrade what already exists or whether to take a different approach.”

As well as changing the hardware, MacDonald also wants to change the mindset of the business. Dealing through steel service centres—steel merchants—the way it does, Highveld has little understanding of how

Mukundi Mining Resources An aspirant global leading mining company.

MMR’s vision is to create superior value and benefits on a sustainable basis for all its stakeholders, ensuring that everything we do and deliver today will enable others to realise their vision tomorrow. Striving for excellence and looking after our people are firm commitments in ensuring sustainable growth; and for us “excellence” is an attitude not a skill.

end users work and think. For that matter, MacDonald is not convinced his company fully understands steel merchants either. “We need to get closer at every level,” he says.

“It’s the only way we can understand and influence matters.”

MacDonald is on a mission to take cost out of the supply chain. He’s aware that the construction industry is very traditional and

Manufacturing 111

112 Manufacturing

Highveld Steel and Vanadium Corp. Ltd.

works today much the way it has for decades but the objective is to inject some philosophies from the automotive world. “Everyone involved with the supply and consumption of steel needs to modernise,” he says. “We’ll never really match the automotive way of working but our aim has to be to satisfy customers’ needs within days, not weeks or months.”

With steel having a reputation as one of the more polluting of industrial processes, MacDonald is torn between the desire to clean up the business he is in and the commercial dangers of doing so unilaterally. “The governments of fully developed European countries are keen to meet their targets of reducing carbon emissions,” he says, “but is the price acceptable? At Corus, we spent a lot of effort

Manufacturing 113

114 Manufacturing

Highveld Steel and Vanadium Corp. Ltd.

trying to explain that clean Western steel can never compete economically with Far East steel.”

On a personal note, as a newcomer to the country, MacDonald is impressed by the atmosphere in South Africa.

No doubt the World Cup has been a wonderful catalyst for cohesion and certainly moved on the infrastructure much faster than would otherwise have been the case. “Despite the obvious problems, there seems to be a vast reservoir of goodwill,” he says, “that surmounts even the most potentially damaging events that occur. Long may it last.” www.highveldsteel.co.za BE

Manufacturing 115

Reinforcin

grow

Rajhi Steel Industries t steel products each yea up, as commercial vice

116 Manufacturing

Rajhi Steel Industries

ng

wth

turns out more than one million tons of ar; but the round figure keeps cropping president Abdul Aziz Al-Hudaib explains Manufacturing 117

The principal market for our products is within Saudi Arabia, where there is strong demand from manufacturing and the construction industry

I

t was on December 31 2008 that the workers at the AlRajhi Steel plant in Jeddah knew they had hit their one million jackpot. They had vowed to have turned out by the end of that year one million tons of billet steel from the smelter that only started full production in June the previous year. It was quite an achievement given the difficult conditions in the steel market at the time, but the steel produced by Rajhi Steel does not have to be sold abroad and is all absorbed into the considerable demands of the Saudi economy, reducing the amounts that need to be imported and increasing the country’s proclaimed goal of becoming more self-reliant in strategic raw materials.

118 Manufacturing

Rajhi Steel Industries

Manufacturing 119

Rajhi Steel Industries Work on the $300 million steel plant began in June 2005 and it was completed in December 2006. This ultra-modern steel plant is designed to turn out 850,000 tons of billets annually, measuring 130 mm square and up to 16 metres in length. The bulk of the billets produced are consumed internally, feeding Rajhi Steel’s rolling mills in Riyadh and Jeddah, says commercial vice president Abdul Aziz Al-Hudaib. “The principal market for our products is within Saudi Arabia, where there is strong demand from manufacturing and the construction industry—there is not enough capacity locally to supply these customers.”

Demand is being driven, he says, by massive current investment in Saudi Arabia’s infrastructure.

“As one of the market leaders in the region it is our responsibility to provide these raw materials.

Saudi Arabia has a huge government project coming up that will require a lot of steel bar among

Eissa Trading We are considered to be one of the first companies involved in the trade and processing of scrap iron for factories, and we are one of the first dealers with Al Rajhi Steel.

We have the necessary capabilities to help with integrated performance. We have our own trucks and equipment for supplying any quantities of scrap that help the processing of scrap iron, loaded on trucks, weigh bridges, bailers and shredders.

We are committed to principles of quality, safety, and punctuality. We are one of the oldest suppliers in the Kingdom of Saudi Arabia in the trade of scrap iron and equipment. We are proud to deal with the Al Rajhi Steel factory, and are committed to procedures and controls enabling the best performance at work.

Manufacturing 121

122 Manufacturing

Rajhi Steel Industries

Vesuvius Vesuvius is a community of experts developing products and solutions and providing services in the molten metal, glass and renewable energy industries for its customers worldwide.

Vesuvius has been the major supplier of refractory

materials

to

the

Rajhi

Steel

Meltshop since start up in 2007. Through close collaboration over designs and materials and with the technical assistance of highly skilled supervisors,

global

refractory

consumption

figures reached world-class levels within six months of operation.

Vesuvius

has

10,000

manufacturing

plants

employees in

40

and

70

countries

throughout the world delivering “best in class” service to its customers in every continent.

other materials. King Abdullah recently announced a major development push in the country; part of that is to build 500,000 residential units and a simple calculation tells us that this will need about 20 million metric tons of steel bar just to reinforce all that concrete!”

Now Rajhi Steel is rising to the challenge of meeting this demand, while maintaining its supplies to the oil and gas downstream processing industry, also in a period of considerable expansion. The kingdom is highly focused on its programme of Saudization, which aims to maximise the number of jobs being given to Saudi nationals, the transfer of skills, and of course bring as much of the raw materials procurement chain within the country as possible.

Rajhi Steel’s rolling mills specialise in the production of rebar, which is simply short for reinforcement bar, the strengthening element in concrete structures.

Currently it supplies around 17 per cent of the country’s requirement for these products and about the same

amount of the industrial market for items such as steel tube, hot rolled sheet between one and 12mm, galvanised steel and sheet for industrial flooring known as chequered steel from its raised profile. “We are a major producer of steel rebar from 10 to 40mm with a current annual capacity of about 760,000 tons. This is produced at our three rolling mills.”

Two of the rolling mills at present operated

by Rajhi Steel are in Riyadh, where about two thirds of output is generated. The third mill, with a capacity of 260,000 tons, is at the Jeddah site, which is in the process of undergoing a massive transformation. The existing rolling mill is to be joined by a brand new, state-ofthe-art and environmentally friendly rolling mill that will produce a further one million tons of bar once it is opened in 2012.

Commitment was made to invest in the $200 million plant following a study Rajhi Steel undertook on the market and the market needs going forward, says Al-Hudaib.

“Apart from residential building, there is a lot of other expansion in hospitals, schools, social projects and industry that is going to take place over the next four years. There

Manufacturing 123

Rajhi Steel Industries is annual growth from five to six per cent in our national economy, and a marked gap between production and consumption. Our projections show a considerable shortfall over that period and that we will have the need to import a massive amount of raw material.”

The new rolling mill was commissioned as a turnkey contract from the Italian steel plant design and manufacturing group Danieli. “We could have secured a rolling mill at a lower cost, but we wanted to have the best performance, the greatest efficiency, the most reliable and the most environmentally sustainable plant that was available.” The plant is being constructed from the foundations up, on a space adjacent to the existing Jeddah melt shop, and it is due to be commissioned in April next year.

Clearly the new rolling mill is going to have to be fed. As part of the plan, the existing melt shop in Jeddah is being expanded from its current 850,000 to one million tons—that magic figure again—by the

Suez Steel Co. Established in 1997, Suez Steel Co. is a steel manufacturing company located in Egypt, Suez’s industrial area, overlooking the Red Sea Bay. Since the acquisition of Suez Steel in October 2006 by the Red Sea Group, the new management has invested in the plant and its people yearon-year. Today, it is a company of dedicated professionals, committed to quality products, efficient processes and continuous development.

Environmental

protection

is

significantly

important to Suez Steel Co. Investing in green technology is as vital as investing in steel production improvement.

Suez Steel Co. makes every effort to eliminate the adverse impact of steel production on the environment.

The

company

has

taken

the

necessary steps to meet environmental standards by

implementing

processes

and

additional equipment,

air

protection

including

dust

collection systems and high efficiency burners.

In 2010 more than one million tons of rebar was imported by Saudi Arabia. We are keen to replace that with locally produced product time the plant is commissioned.

Being one of the largest steel producers in the country carries a weight of responsibility, Al-Hudaib emphasises. “This is a strategic project for the whole country and the region and it puts more pressure on us to maintain ourselves as an industry leader, and to maintain and develop the market whether in raw material or finished product.”

The deal is that all the civil engineering, and as much of the engineered component of the rolling mill will be sourced locally, though the rolling mill itself will be imported from Italy and assembled on site. Closer to the time of completion, the company will start a recruitment effort to recruit and train workmen, engineers and plant operators.

In the past Rajhi Steel has positioned itself as a regional rather than a national supplier, and it still intends to grow its operations outside of Saudi Arabia. However, the domestic market must come first. “It is part of our plan to open up new markets in the region but we know that with all this growth there is market share to be taken both from local producers and from imported materials.

In 2010 more than one million tons of rebar was imported by Saudi Arabia. We are keen to replace that with locally produced product.

We are accordingly putting on hold our plans for targeting other markets, just for the moment,” he says. www.rajhisteel.com BE

Manufacturing 125

Success

through

ing

Technocraft Group is one of the largest e But its story doesn’t stop there—the com and opportunities, no matter what secto 126 Manufacturing

Technocraft Group

h

enuity

exporters of drum closures in the world. mpany is constantly seeking new avenues or they are in. Jane Bordenave reports Manufacturing 127

M

umbai-based Technocraft Group was founded in 1972 by Sharad Saraf and his younger brother, Sudarshan. The company began by manufacturing high-tech drum closures, exporting them to the global market from 1977. Since then it has added cotton yarn and garment production, steel tubing and scaffolding to its portfolio and exports 95 per cent of all its finished products. The second largest producer of drum closures in the world, it employs 3,000 people across its five business areas and in 2010 turned over $90 million.

Technocraft Group’s story is one of evolution, and it is the nature of this evolution that has been the key to its success.

For 22 years it maintained a pure focus on producing drum closures for manufacturers of steel containment drums.

But in 1994, the company acquired a facility that enabled it to produce cotton yarn, followed swiftly in 1996 by the purchase of a pipe mill, allowing it to fabricate steel tubes and pipes. Most recently, Technocraft has begun the manufacture of scaffolding poles.

Having such a diverse range of business areas and exporting on a truly global scale has allowed the company to pass successfully through the recent economic downturn.

However, the ride has not been easy, with some markets and areas of operations being worse affected than others. “The recession has had a very profound impact on our business,” explains Sharad Saraf, now Technocraft’s managing director.

“It is fair to say that scaffolding has been the worst hit. By December 2008 levels of activity in the construction sector in the US and Europe nosedived to the extent that they almost came to a complete halt. And the truth is, they still have not picked up, so the scaffolding side of our business suffered—and continues to suffer—very badly.”

128 Manufacturing

Technocraft Group

Manufacturing 129

According to Saraf, the only way of overcoming this severe slowdown in the scaffolding sector was to diversify again, this time into form work, and the manufacture of transmission line towers and structures for solar power plants. However, on the other side of the coin, some areas of business were barely affected at all. While the drum closure sector did go through a small two to three month decline, it was more of a dimple than a dive, swiftly recovering to pre-recession levels of demand and growth.

Aside from the recession, the other significant challenge for Technocraft is in the shape of competition. As well as other Indian businesses, those in China, south-east Asia and particularly its neighbour Bangladesh are the company’s main competitors. However, Technocraft has come up with an innovative way to overcome these challenges: starting an operation in China itself. “In 2009 we set up our own company on a greenfield site in China, which started production in 2010,” says Saraf. “This is our first manufacturing plant outside of India, and it is making supporting components. In summer 2011 it will also begin producing drum closures and we expect to export at least 60 to 70 per cent of items manufactured there.” As well as adding to Technocraft’s overall capacity, Saraf

130 Manufacturing

sees this as a true investment in the future, giving it a foothold in the growing Chinese market.

As well as investing in new plants, innovation and technological advancement are also key areas for keeping Technocraft ahead of the competition.

“We are constantly looking for new developments and improvements and have a very strong focus on research and development, particularly when it comes to engineering,” explains Saraf. “This has allowed us to develop new machines and increase automation, which in turn is driving down costs through reduction of waste. This kind of investment and focus on improvement is important for business at any time, but has been particularly important in this time of global financial problems.”

For Saraf, training is invaluable if the company wants to continue innovating and diversifying successfully; and in this area, Technocraft takes a continuous approach. “While training is also offered to office staff, we put particular emphasis on increasing and upgrading the skills of our workers,” he says. “We have in place programmes that regularly identify tuition opportunities for them and this is done on an ongoing basis. We have taken the decision that it is better to train our people internally, so we do not send them on courses; however, the instruction we provide to our employees is so well regarded that we do have other corporations send their technicians to us to learn new skills.”

As well as taking care of it own employees, Technocraft believes that being a responsible corporate citizen is equally important. To this end, the company has implemented a state-of-the-art effluent treatment plant that releases zero waste into the local environment. “This has been a very large investment for us. We want to ensure that all our waste is properly treated and properly disposed of and this treatment plant will allow us to do that.” But this sense of responsibility goes beyond just ensuring that its factories are as clean as they can be. “We take a broader view on this and, as well as ensuring that our facilities are as green as possible, we also put money into sustainable forestry projects.”

While accepting that no-one is out of the woods

Technocraft Group yet when it comes to the recent recession, Saraf sees many opportunities for Technocraft in the future.

“China is a growing market and a growing economy which is recovering faster than much of the rest of the world. By already having a foothold there, however small, with our new plant, I feel that we are in a position now to explore that market more fully.

“Additionally, we see significant growth opportunities in our foray into manufacturing for the energy sector,” he continues. “Transmission line towers and particularly solar energy are future generation technologies and projects. We expect to see a great increase in revenue from them and, with the recovery of other sectors that were damaged by the recession, we anticipate doubling our current $90 million revenue within the next five years.”

Technocraft is a company where ambition

RONUK RONUK has been an established and well-known name in the metal finishing/electroplating field since the 1950s. The group strives to bring to Indian industry the latest in plating and metal finishing chemicals, plant and machinery. We have the full range of established and latest products in buffing/polishing compositions, cleaners, processes for general metal finishing like nickel, copper, zinc and chrome plating processes, trivalent chrome conversion coatings, phosphating, etc.

and dynamism truly come together, so such ambitious plans should come as no surprise—and nor should their fulfilment. www.technocraftgroup.com BE

Manufacturing 131

Learnin to bend withthe

Now one of BAT Group’s most modern and s South Africa has undergone a remarkable tr Bernd Meyer, demand chain general manage Gay Sutton about how he approached chang

132 Manufacturing

BAT South Africa

ng

wind

e

strategic plants, the Heidelberg factory in ransformation over the last three years. er for the Southern Africa area, talks to ging an entire company culture

Manufacturing 133

134 Manufacturing

BAT South Africa

M

ost successful change initiatives spring from sheer necessity, or from what the consultancy community colourfully calls a ‘burning platform’. For BAT South Africa (SA), the stimulus for change began with a new group-wide strategy. The vision was to move away from many small factories each located close to their local marketplace, and to centralise manufacturing operations to strategically placed, larger and more efficient factories.

Manufacturing 135

BAT South Africa

SWM SWM is a diversified producer of premium specialty papers for the tobacco industry. It also manufactures specialty

papers

for

other

applications.

SWM

and its subsidiaries conduct business in over 90 countries and employ 2,800 people worldwide, with operations in the United States, France, Brazil, the Philippines, Indonesia, Canada, Poland and a joint venture in China. For further information, please visit www.swmintl.com.

“At that time we had five factories in the Southern Africa area, one in each of Zimbabwe, Mozambique and Angola, and two here in South Africa. Our Heidelberg factory, near Johannesburg, was by far the biggest,” explains Bernd Meyer, demand chain general manager for the Southern Africa area. “Heidelberg was the factory chosen to take the volume resulting

from the closure of the factories in Angola and Paarl here in South Africa.”

The factories in Zimbabwe and Mozambique—with the capacity to produce 1.5 billion to three billion cigarettes a year— were retained to cater largely for their domestic markets. The Heidelberg factory, on the other hand, was to become a state-of-the-art facility. Today, with the transformation largely complete, Heidelberg produces around 26 billion cigarettes a year and has the capacity to ramp up to an output of 35 billion a year.

In addition, more than 10,000 tons a year of processed tobacco gets exported to other BAT factories or third parties within Africa and the Middle East. Not only does Heidelberg supply to the South African market, but it exports to more than 25 countries throughout Africa and the Middle East, and the strategy

Manufacturing 137

BAT South Africa

Datacentrix Datacentrix

is

a

leading

black

empowered

company that provides high performance and secure information and communication technology solutions to South Africa’s corporate and public services

sectors.

Its

comprehensive

offering

ranges from the core areas of IT infrastructure and integrated business solutions, to selective outsourcing, managed print services, resource provisioning

and

other

related

IT

services.

Datacentrix is well positioned as a strategic longterm partner of choice to its clients. The company listed on the JSE Securities Exchange in 1998 and operates from regional offices in Samrand, Cape Town, Durban, Port Elizabeth and East London, with service centres around the country.

going forward is to focus on growing those export markets’ volume.

In 2006, however, the decision to centralise much of the manufacturing at Heidelberg signalled the beginning of a journey of change for BAT SA, one that presented considerable challenges as well as opportunities. “The first challenge facing us was that, as a result of underinvestment and old technology, the Heidelberg factory was non-competitive with regard to technology and processes,” Meyer says. A 10 year masterplan was put together,

Manufacturing 139

BAT South Africa detailing the investment that would be needed to bring the factory up to the standard and capacity required for its new role in the region, listing exactly where the investment would go, the outcomes that could be expected with regard to capacity, productivity and the future shape of the business in 10 years. Once approved at a group level, the massive investment programme got underway.

“In all, we have invested more than £70 million bringing in the latest technology, the best-in-class processes and systems, and aligning our operations with the best in the group,” Meyer says. “At the same time, we undertook a 30 per cent expansion to increase the potential capacity of the factory.”

When expansion and refurbishment were well advanced at Heidelberg, the Angola factory was closed in 2007 and Paarl at the beginning of 2008, and some of the machines moved to Heidelberg.

“The greatest surprise of the exercise came when we closed the Paarl factory near Cape Town and moved production to Heidelberg near Johannesburg. We found we had completely overestimated the mobility and flexibility of our workforce at Paarl, and far more people than we expected preferred to leave the company rather than relocate.”

Manufacturing 141

BAT South Africa

In the end, fewer than 40 people out of a workforce of more than 500 at Paarl chose to stay with the company, and this left BAT SA with a considerable shortfall in staff, a difficulty compounded by the challenges in the South African labour market. To tackle the short-term skills shortage, Meyer drafted in a number of experienced and well trained staff from other BAT factories. He was, for example, able to fly in people from the Ukraine to work with his own personnel on the installation and commissioning of the new machines.

In parallel with this he went on a massive recruitment drive, and put the new employees through an extensive training schedule which included placements to other BAT factories around the world, where they were able to learn and practice the skills and knowledge needed to function at the highest level in Heidelberg. “This was really quite a success story,” Meyer says. “Over the years 2007 and 2008 they picked up the knowledge very quickly. So much so that since 2009 we have been completely self sufficient and nowadays we are even supporting other BAT factories

Manufacturing 143

BAT South Africa around the world with know-how and resources, such as Mexico, Nigeria, Kenya and Egypt.”

Today, Heidelberg is an impressive plant.

Productivity, on a like-for-like basis, has increased by 25 per cent over the past three years. Customer satisfaction too, which is measured regularly by mood tracker surveys, is reflecting significant approval and now tops 85 per cent. “But these improvements have not been driven just by relocating and replacing machines,” Meyer says. “I think the main change came in 2007, when we embarked on a complete culture change agenda.”

Prior to this, there had been little need for change at the factory. Production had largely been for the

Megafreight Megafreight is an international freight forwarder ranking among the top ten leading forwarders in South Africa and is arguably the second largest wholly South African owned forwarder in the country. The company, which specialises in air and ocean freight, customs clearing, project shipments, warehousing and complementary ground-based logistics has a strong heritage having operated under the same leadership for more than 30 years since its inception in 1981. Our dedicated team ensures that shipments are managed in a professional yet personal manner, based on our ‘Service you can Touch’ philosophy.

Manufacturing 145

BAT South Africa domestic market where demand was stable, and old habits and practices had become entrenched and unchallenged. Several factors were changing, though. With the expansion of output to incorporate the production volumes from the two closed factories, manufacturing had become much more complex.

“Before expansion we had around 150 stock keeping units (SKUs). Now, we have doubled that amount and produce around 300 SKUs.” In addition, the Heidelberg factory has been increasingly supplying products for export across Africa and to the Middle East. This has not only increased the demand for output but has added to the complexity within the manufacturing plant and the supply chain, and sharpened the focus on quality and customer satisfaction.

“The interesting thing about the change management agenda we initiated is that it was a multi-faceted exercise,” Meyer explains. “The starting point had been the installation of the new technology. Alongside that it was absolutely essential that we change the whole culture and attitude of the

“Since 2009 we have been completely self sufficient and nowadays we are even supporting other BAT factories around the world with know-how and resources, such as Mexico, Nigeria, Kenya and Egypt” people. The management style needed to change radically and our workforce had to receive the skills and the training they needed in order to improve.”

The change process began by adjusting the management structure, starting at Meyer’s level at the top of the ladder right down to the shop floor. Where previously there had been nine reporting levels, with a great deal of inefficiency in between, these were reduced to just five. “As a result, communications are now cascading downwards very efficiently, and our speed of decision has increased markedly.”

Several initiatives were introduced to provide an

Manufacturing 147

148 Manufacturing

BAT South Africa efficient route for communications within the factory. The first was the launch of a factory magazine, purely for the staff at the Heidelberg plant. Plasma screens were installed at strategic points around the site, and these are updated regularly with information on a wide range of topics that relate to the staff and operations. And finally, Meyer now holds regular staff business briefings and breakfast sessions.

Through a bottom-up approach with the implementation of an ‘open door policy’, any employee was encouraged to get in touch with management at any time.

Reward and recognition schemes were also used to support the cultural change in the factory, such as the introduction of a nonmanagement bonus system, weekly heroes awards and free lunch for all staff on safety records which also played their part in achieving a better EHS awareness across the factory. External recognition was also given through a local quality award in South Africa; and internationally, through receiving two global BAT EHS awards in one year.

Changing the culture within the organisation, however, has not been easy. Everybody in the organisation was put through change

“In all, we have invested more than £70 million bringing in the latest technology, the best-in-class processes and systems, and aligning our operations with the best in the group” management training, suitably entitled ‘future fit training’. “At the workshops they were able to voice their concerns, but they were also told that change is something that is part of life, and it was up to them whether they saw it as positive or negative. Essentially we were preparing them for the future.”

Manufacturing 149

150 Manufacturing

BAT South Africa

“Heidelberg was the factory chosen to take the volume resulting from the closure of the factories in Angola and Paarl here in South Africa” From 2008 onwards, Meyer introduced a completely new leadership team who brought with them a new set of attitudes and plenty of experience. By also utilising managers from other BAT countries, the increased diversity in the factory had a positive impact.

“This helped expand the horizons of local management, showing them that things can be done differently, and that it is crucial to

change.” Meyer then began to introduce a new style of management that would enable the company to function at a flexible world class level.

The key to achieving the necessary changes successfully, Meyer believes, comes down to ensuring that all managers follow the same agenda and buy in to it. They were being expected to change their management style,

Manufacturing 151

152 Manufacturing

BAT South Africa

to communicate reasons and expectations with staff rather than simply issue orders, and to give full and fair feedback on performance across the entire spectrum of behaviours, from recognising people for good achievement through to disciplining employees if they did something seriously wrong.

“The workforce, on the whole, found the changes very positive,” Meyer comments. “They were receiving the information they needed, they received feedback on performance, and saw that the disciplinary measures were not only executed on the lowest job grades but were also applied to management staff. And this made the system a lot fairer across all departments. Our biggest challenge was with the middle management. Some managers were just unable to cope with the new leadership style. And we have had to make some really tough calls,” he says.

A major element in bringing about improvements in performance has been the design and implementation of a comprehensive training regime, not only to provide the knowledge and skills to perform to world class level but to maintain performance at that standard. “And this is very much a long term exercise.

We’re currently investing heavily in developing our people across all areas of the business,” Meyer says. “We are, for example, sending staff abroad to the machinery suppliers for training. We’re also regularly sending staff to other BAT factories such as Singapore, Brazil and Mexico for training and experience. But most importantly we’re migrating from the old paradigm where operators would receive initial training and nothing more, to receiving refresher training on an ongoing basis.”

Recognising the importance of morale, Meyer has also focused on instilling a sense of pride and belonging among the staff. “I firmly believe that if people have a personal connection to their workplace and their job, they will give their best performance,” he says. He has therefore been investing a considerable amount

Manufacturing 153

154 Manufacturing

BAT South Africa

“Before expansion we had around 150 stock keeping units (SKUs). Now, we have doubled that amount and produce around 300 SKUs” in refurbishing the factory’s social rooms, upgrading and redesigning the canteen, and changing the look and feel of the factory by, for example, installing pictures of the staff on the walls. And he had a lot of ground to make up: staff morale had been dire.

In 2006 the Heidelberg staff had taken part in the Your Voice survey, a regular group-wide survey analysing the climate of opinion and morale among the staff at each of its sites.

“We recorded one of the worst results ever, within the group,” Meyer says. “Today, our staff score us higher than many other fast moving consumer goods international companies here in South Africa, which marks us as an employer of choice in the country. And that has been a

Manufacturing 155

156 Manufacturing

BAT South Africa Argha Argha is the pioneer in BOPP film manufacturing in Indonesia. Established in 1980, the company has expanded its production capacity and product range to keep pace with market growth and product technology development in the flexible packaging industry.

We have a long history of successful innovations, quality products, technical services and reliability, an accomplishment resulting from technical knowhow and a dedicated tobacco team embodying professionalism at its finest.

Our strong local and international presence in cigarette industries has enabled Argha to fulfill increasing demand from major business partners. The most prominent of these markets is BAT Group worldwide, which has been supplied for almost two decades.

Todwil The Todwil Group was formed in South Africa in 1947 and has had a proud association with BAT and its predecessors since becoming involved in the launch of Peter Stuyvesant in 1952. The much-evolved business is now one of the largest approved suppliers of retail marketing, POP & promotional items to BAT South Africa whilst also providing services to BAT end markets across the African continent.

massive culture change in just three years.”

Meyer is keen to avoid any sense of complacency, though, and is working to ensure the improvements continue. “We are well ahead of our original 10 year masterplan, but I believe we’re only about 50 per cent of the way to our final destination. We’ve made tremendous progress, which is fantastic.

Also by introducing IT systems like the MES (manufacturing execution system), scheduling tools and the warehouse management system, the processes and controls improved significantly in the factory and were a key enabler to deal with the increased complexity and at the same time improve product quality.

Now it’s a matter of fine tuning the processes, the performance, product quality and customer

Manufacturing 157

158 Manufacturing

BAT South Africa

service, and making it sustainable. And we’re still not as competitive as the top class factories in Latin America and Eastern Europe,” he warns, “so we still have room for improvement.”

For BAT SA, improvement and change are likely to remain an essential element of working life. The current group trend is to centralise many supply chain processes and management at a regional level. For the Heidelberg plant, that means reporting lines and processes such as procurement, production planning and logistics are being transferred to the regional supply chain in the UK. But with a flexible working culture and staff accustomed to taking change in their stride, Heidelberg is well prepared to implement the changes, adapt and flourish. www.batsa.co.za BE

Manufacturing 159

Back from

b

th

Jeff Daniels looks at o operating in one of th 160 Manufacturing

Tobacco Processors Zimbabwe

brink

he

one of Zimbabwe’s most successful companies he country’s most important sectors Manufacturing 161

W

hatever your opinion on the rights and wrongs of smoking, there is no doubt that certain countries would be in real trouble if the tobacco industry disappeared completely.

Zimbabwe is a case in point. Reliable and regular statistics have become hard to find since the 1990s but at the time, depending on who you believed, this southern African country was the largest or fourth largest exporter of tobacco in the world.

What isn’t in doubt is the contribution that tobacco makes to the country’s economy.

Historically, half of all agricultural exports came from tobacco and thereby accounted for nearly 10 per cent of GDP. At its peak, sales of nearly 250 million kilograms of tobacco brought almost US$600 million into the country and found employment for 170,000 farm workers, each supporting over 10 dependants.

Since then, due to changes in the agrarian policies ushered in in 2000, output has plummeted, bottoming in 2007 with just 48 million kilograms produced. However last year’s harvest saw sales bounce back, with the Zimbabwe Tobacco Industry and Marketing Board announcing sales of 120 million kilograms at the end of the tobaccoselling season in September. What’s more, tobacco seed sales suggest enough land will be planted this year to take the harvest back up to 200 million kilograms, should growing conditions be favourable.

162 Manufacturing

Tobacco Processors Zimbabwe

The role of TPZ is to convert the green leaf into the form that cigarette producers want

Manufacturing 163

Tobacco Processors Zimbabwe

All of which will be good news for Tobacco Processors Zimbabwe (TPZ)—the country’s largest processor of green tobacco leaf, accounting for just under 60 per cent of all production. At the height of the season as many as 1,000 individuals could be working on the Harare factory floor.

Next year, TPZ will celebrate its silver anniversary. It was created in 1987 by a group of three tobacco merchants: Export Leaf Tobacco (BAT), Inter-Continental Leaf Tobacco Company, and Standard Commercial (now part of Alliance One International).

The company is now wholly owned by three local companies: Northern Tobacco, InterContinental Leaf Tobacco and Tribac. While primarily there for its owners, TPZ can, and does, carry out processing for non-shareholder merchants, in order to maximize economies of scale and scope. The company’s structure is essentially that of a non-profit making organisation whose role is to enhance the competitiveness of its

Manufacturing 165

A modern plant such as TPZ’s can remove up to 99 per cent of the stem from the leaf and in so doing, 30 per cent of the leaf’s weight

166 Manufacturing

Tobacco Processors Zimbabwe

customers through quality and cost.

The role of TPZ is to convert the green leaf into the form that cigarette producers want. In the most simplistic terms, this means stripping away the nondesirable parts of the leaf and then drying, grading and distributing what’s left.

Tobacco leaves have a rigid stem running the length of the leaf which creates headaches for end users, as it is so stiff that it would punch holes in a cigarette’s paper casing if it remained in the blend.

At the tip of the leaf there is little or no stem, so this is removed immediately, leaving the rest of the leaf to go through several threshing stages in order to remove the stem. A modern plant such as TPZ’s can remove up to 99 per cent of the stem from the leaf and in so doing, 30 per cent of the leaf’s weight.

At each stage of threshing there is a complex process of conditioning the tobacco by means of heat and moisture, both supplied by saturated steam from industrial boilers, to encourage the product to become soft and pliable—necessary in order to reduce breakage of the leaves to a minimum. The threshers use a system of fixed and rotating knife blades (teeth) to separate the stem from the leaf. Air blowers, known as classifiers, are used to separate the ‘lights’ or the stem-free tobacco from the ‘heavies’, where the stem is still attached.

It can take as many as five passes through the thresher before all the stem is removed, so the skill derives from the process of achieving this with as little damage and stress to the tobacco as possible.

Once threshing is completed, all the retained leaf material passes through a dryer where heat from above and below the conveying apron extracts excess moisture from the leaf until the precise specification is reached.

The factory is designed to process 500 tonnes per day and is made up of two 10-tonnes-per-hour threshing lines, plus a separate loose leaf/bundle line. The lines have sophisticated PLC controls to govern the speed and TPZ is currently installing new visual impurity

checking equipment to be included in the line.

Although the TPZ factory is one of the most modern in the country, it will probably come as no surprise to learn that the work is still highly labour-intensive. For example, tobacco arrives from the plantations in bundles which have to be carefully opened and sorted—work that can only be done by hand. With so many of the workers being casual seasonal staff, surrounded by complex and often dangerous machinery, there is considerable risk of accidents. As such, TPZ and the various strata of managers have safety as their highest priority. TPZ has been recognised by the government body that oversees safety aspects to be one of the foremost companies in promoting a safe and healthy workplace. At one stage, TPZ also won an award from BAT for completing five million accident-free hours of operation.

By the same token, conservation of the physical environment is also high on the agenda. To this day, TPZ has put measures in place to ensure that the environmental impact of its operations is kept to a minimum. In line with this, the company has implemented an integrated management system which combines quality issues with environmental considerations. As long ago as 2002, TPZ received certification for both ISO 9001:2000 and ISO14001:2004 after being audited by SAZ (the Standards Association of Zimbabwe).

Like many companies operating in the tobacco industry, TPZ is working on a number of social responsibility projects. TPZ itself is cooperating with BAT in encouraging its growers to adopt environmentally friendly farming practices.

It is also taking part in BAT’s re-forestation and conservation programmes in Zimbabwe and is providing gardening services to a local hospital as part of its own contribution to the community. www.tpz.co.za BE

Manufacturing 167

A

sweeter

Continuous improvement is not just a m company Cosumar is making improvem agricultural practice through to custome

168 Manufacturing

Cosumar Morocco

rtooth

manufacturing issue. Moroccan sugar ments across the company, from er service. Ben Sansom reports

Manufacturing 169

T

here is no doubt that the world is developing a sweeter tooth, and Africa is playing its part in boosting demand. Global figures show that over the past few years, the increase in sugar consumption has outstripped the growth in production; and in Africa, these figures are even more impressive. Between 2000 and 2008, consumption increased by 30 per cent, while sugar imports soared by 73 per cent, with the largest consumers being Egypt—also a major producer—as well as Nigeria, Algeria and Morocco.

Although there is a long history of sugar production in Morocco, the cultivation and processing of sugar cane reached its zenith way back in the ninth century, largely centred around the regions of Souss and Chichaoua.

Following a period of steady climate change which affected the region’s ability to grow sugar cane, however, the industry declined and eventually production ceased completely.

It wasn’t until 1929 that the tables began to turn. The first refinery in Morocco (COSUMA) was founded by a consortium of foreign investors, and took the first step towards revitalising the Moroccan sugar industry, opening a refinery to process imported raw sugar. Investments in advanced technologies and the construction of new facilities, along with a policy of continuous improvement, ensured steady company growth. The company was part-owned by the state in 1967 and became Cosumar, the Moroccan Sugar and Refining Company. The government opened a range of new sugar mills within different perimeters of Morocco and began promoting the return of agricultural land to sugar cane

170 Manufacturing

and beet production. Ownership by Omnium North Africa (ONA) in 1985 ensured Cosumar remained in a position to play a key role in the continuing expansion of the sugar industry in Morocco.

Today, the company employs some 2,500 permanent staff and is once again independent.

With the privatisation of state interests in the sector, Cosumar acquired the four public sugar companies, a move that elevated it to the position of Morocco’s sole national sugar company. Producing over 1.2 million tons of sugar a year, the company currently has the capacity to produce over four million tons of beet and cane sugar cultures, which leaves ample capacity for expansion.

Cosumar partners with some 80,000 beet and cane producers located in five well irrigated agricultural areas of Morocco: Gharb, Doukkala, Loukkos, Tadla and Moulouya. Operating as five companies with nine industrial sites, the company produces some 45 per cent of the national sugar requirement from nationally produced crops. Some 80 per cent of this output is from sugar beet and 20 per cent from sugar cane. A further 55 per cent of the national requirement is refined at the Cosumar plants from imported raw sugar.

Since acquiring the four national companies in 2005, Cosumar has been working closely with the government and the Moroccan Interprofessional Sugar Federation (FIMASUCRE) and is participating in the national Moroccan Green Plan—a scheme which aims to promote food security, improve farmers’ incomes, protect and conserve natural resources and integrate agriculture into the national and international markets.

The Cosumar contribution to this plan has been enshrined in the Indimage 2012 business plan. “As part of Indimage 2012, we have allocated a total investment

Nordic Mines Cosumar Morocco

Manufacturing 171

172 Manufacturing

Cosumar Morocco

of 3.6 billion dirhams to continue the modernisation of our industrial facilities, the optimisation of our agricultural performance and business efficiency, and the service to our customers and partners,” said CEO Mohammed Fikrat.

Launched some five years ago, the programme is targeted at modernising the sugar industry across the country and improving productivity, efficiency and quality by implementing industrial and agricultural best practice.

In 2009 alone, the company invested two billion dirhams into expanding the sugar refining unit in Casablanca and modernising its operations to international production standards. Forty million dirhams has been spent on implementing an integrated management system for quality, security and environment, which will not only monitor product quality, but also environmental performance. As a result of this, the company has already achieved substantial energy savings by identifying and implementing improvements such as changing the crystallisation method used in the refineries.

Meanwhile, efforts continue to be made to limit the impact of manufacturing and agricultural activities on the environment, with projects including the investment of 1.6 million dirhams to improve waste treatment units as well as for the introduction of clean technologies across group operations.

At Suta, the Oulad Ayad plant has also been extended to increase sugar beet processing capacity from 6,400 to 8,000 tons a day. The work included the commissioning of a tower diffuser and a thin juice decalcification unit. Meanwhile, a new bagasse boiler costing 50 million dirhams has been installed at Sunabel Mechraa Bel Ksiri. Using a by-product of sugar cane as a biomass fuel, the new boiler produces steam to process the beet, and optimises energy consumption by replacing coal with a by-product which would otherwise be a waste product of the site.

“As for the upstream agriculture, we encourage and

support farmers in improving their performance through the promotion and widespread use of good practice,” Fikrat said. And this support was much appreciated during 2009 when after a period of water scarcity heavy rains caused widespread flooding and disruption to the sugar growing cycle.

One of the challenges for the agricultural sector in Morocco has been a shortage of labour. Cosumar has addressed this by introducing mechanisation into the sugar growing process, and has seen crop production improve significantly. Both the Doukkala and Tadla areas have enjoyed a clear breakthrough in beet harvesting capacity through the introduction of mechanisation, while the use of mechanical harvesting at Loukkos increased from 58 to 90 per cent between 2006 and 2009.

As the final strand in the Cosumar strategy for business improvement, the company has been sharpening its customer focus.

A customer satisfaction survey showed satisfaction levels varying between 50 and 80 per cent, depending on subsidiary. Improving customer satisfaction to over 80 per cent in every subsidiary by eradicating the causes of dissatisfaction is now a primary companywide target. In addition, the company has begun a pilot scheme to explore the feasibility of forming contractual relationships with its customers, particularly with the wholesalers who represent around 80 per cent of the sugar market.

“These projects have not only allowed us to build a better medium term profitability, but also to better serve our customers and partners, thus promoting a sustainable performance for our business,” Fikrat said. www.cosumar.co.ma/site/index.asp BE

Manufacturing 173

A refreshin

appro

Mahmood Ismail, managing director of Shore the importance of innovation in his business 174 Manufacturing

Shoreline Beverages

ng

oach

eline Beverages, tells Jane Bordenave about and how to compete against the big boys Manufacturing 175

176 Manufacturing

Shoreline Beverages

F

o unded in 2003 by a number of former Coca-Cola employees, Shoreline Beverages produces some of the most popular soft drinks sold in the province of KwaZulu-Natal, South Africa. Its Coo-ee brand has an approximate 20 per cent share of the soft drinks market as a whole and a 35 per cent share of the flavour drinks market. Mahmood Ismail took over as managing director in 2004, when the founding partners stepped down, and the company remains a family-owned, private business to this day.

While the first 12 months was spent building up the company, it was when Ismail became head that the business really started to take off. “When I took up the position, I made the decision to move away from the brand that the founding members had been marketing at the time in favour of a longerestablished one,” he says. “I had acquired the Cooee brand, which has a long history in KwaZulu-Natal going back to the 1940s. I felt that, although it had been dormant for a couple of years, its history and familiarity among the local population would make it more successful.”

Manufacturing 177

178 Manufacturing

Shoreline Beverages The brand was relaunched in 2004 with a fresh new look and has since succeeded in consistently increasing profits year-on-year. It now counts among its clients all the major supermarkets including Shoprite Group, Spar Group and Massmart, as well as a large number of independent stores and forecourts.

One of Shoreline Beverages’ key strategies is to only market and sell its products in bottles made from PET (polyethylene terephthalate, which is commonly recycled). “We have been very aggressive on this issue,” says Ismail. “Right from when we first started, PET had been the preferred packaging material for all

SIPA SIPA is one of the world leaders for the supply of plastic container production systems, filling equipments and end-of-the-line solutions for beverage, food and non-food producers.

SIPA and SIPA Berchi have more than 30 years’ experience in the Southern African market.

Shoreline is one of our best partners and we are very glad to be part of their success with the supply of three complete lines.

Manufacturing 179

By using plastic containers for all our produc we simplify things for our clients while still using material that is recyclable by the end consum 180 Manufacturing

cts, ga mer

Shoreline Beverages

our customers, as opposed to returnable materials such as glass, which they would then have to dispose of. They also don’t have to handle crates, which glass comes in, or worry about fragility,” he explains. “By using plastic containers for all our products, we simplify things for our clients while still using a material that is recyclable by the end consumer.”

While all packaging is PET, the company seeks to provide extended choice to consumers in terms of packaging size. Shoreline’s products are available in sizes from two litres through to 300 ml, with 300 ml being an innovation by Shoreline. “At the time that we launched our

Manufacturing 181

300 ml bottle, there were no other companies offering a non-cola soft drink product of that size,” explains Ismail. “We identified this as a perfect product size for children to have during their lunch breaks or recess; and the popularity of the product has proved that we were right. It was an idea that really helped to set us apart in the marketplace.”

As well as its packaging strategies, Shoreline strives constantly to differentiate itself in the market by identifying niches and producing new products to fill them. “We are a very innovative company and currently offer a range of 20 flavours of beverage. In this market, we are up against international behemoths such as Coca-Cola and Pepsi, so it is important to be able to offer something new and desirable to consumers in order to compete effectively.”

One of the company’s innovative successes is the introduction of apple-flavoured drinks into its line. The number of apple-flavoured beverages in the soft drinks market was very limited, and so the apple-flavoured Coo-ee products were hugely popular, as they were by and large the only drinks of that flavour that people could buy across the province.

182 Manufacturing

“We identified this niche in the market and it really took off. Our main competitor, Coca-Cola, had no apple-flavoured product in its stable, so we were virtually without competition. Coca-Cola has now started selling its own apple-flavoured product, but Coo-ee is still the market leader.”

The recent economic downturn has by no means proved disastrous for Shoreline; but it has had the effect of shifting sales levels between product sizes.

“The most important effect of the recession has been to make people downsize, by which I mean that people who had been buying a two litre bottle are now choosing to buy a 1.5 litre bottle—and those who had been buying the 1.5 litre size are now buying one litre, and so on. That is the main change we have seen,” says Ismail.

However, as a ‘premium economy’ brand, the company has also seen an up-tick in consumers converting from big name brands to Coo-ee.

“Premium economy means that while our products are on a par with the big international companies in terms of quality, our prices are more affordable. So there is a swing from premium products with higher prices towards a trusted product and name like ours, which we feel offers better value.”

Naturally, when Ismail considers the future of Shoreline Beverages, innovation is at the heart of

Shoreline Beverages his plans. “We are always looking to improve on our current products and develop new ones—and our highly skilled, in-house research and development team works on this constantly. By the end of 2011 we will have launched a new ‘fusion range’ of mixedflavour drinks, with flavours such as blackcurrant and cranberry or mango and granadilla. Once again, this is a pioneering step—no-one else produces mixed-flavour beverages in this way.”

The company also added a completely new production line in October and has recently acquired another well established local brand—Crerars— along with its production plant. In total, Shoreline Beverages is now capable of producing in excess of 100 million litres of soft drinks per annum.

Over the next five to 10 years, Shoreline Beverages hopes to expand into canned beverages, as well as breaking out of KwaZulu Natal and into the rest of

South and indeed southern Africa. Ismail foresees this success being achieved through a continuing combination of R&D, tenacity and self belief: “As a company, we are not afraid to take on the massive multinational brands; we have always been able to identify a niche and successfully fill it, as our track record shows.

“To anyone reading this article and thinking of setting up as a small business I give them this advice: if you have the courage to do it and have everything in order then you need not be worried about the conglomerates. Being a small company allows you the flexibility to be able to react to the market in a way that they can’t—which has ultimately been the key to our current and future success.” www.shorelinebev.co.za BE

Manufacturing 183

A

f

a

Chicken is a valuable requires a well-oiled

184 Manufacturing

Tydstroom Fresh Farm Chicken

resh

approach

e and popular source of protein; but its production machine, as Alan Swaby discovers

Manufacturing 185

186 Manufacturing

Tydstroom Fresh Farm Chicken

L

et’s start with a guessing game: how many chickens do you think are consumed in your country every week? Whether your guess is accurate or not, the numbers will certainly be enormous and probably far greater than you imagined.

Manufacturing 187

188 Manufacturing

Tydstroom Fresh Farm Chicken

Take South Africa, for example, where the top two largest chicken producers alone account for eight million birds a week. The fourth largest in the country is Tydstroom Fresh Farm Chicken, whose output from its Durbanville plant to the north of Cape Town

is around 800,000 birds a week.

In 1995, Tydstroom—a division of Pioneer Foods, South Africa’s second largest food producing company—bought a small private abattoir handling 160,000 chickens a week.

Three years later, a second plant half the size was bought and from this base, Tydstroom has quadrupled the business to what it is today.

By focusing on the Western and Eastern Cape Provinces, Tydstroom has established itself as a big player in a relatively small game; but from the beginning of February, it has taken a step towards becoming a truly national supplier by taking over a 200,000 bird a week plant in Johannesburg, serving the country’s largest region.

“We are very excited about this acquisition,” says Dawid Koen, general manager of Tydstroom. “The plant has considerable potential for improvement

Manufacturing 189

Tydstroom Fresh Farm Chicken

and we consider that with a little help from new management and a modest amount of investment, throughput will be 50 per cent higher within six months.”

There is another, commercial reason why the Johannesburg plant is an attractive proposition. For historical reasons, most of the chicken processors there produce frozen meat, and Tydstroom’s research has shown there is an unsatisfied demand for fresh chicken. “Killing birds for the frozen market,” explains Koen, “is a cheaper, more forgiving way of working. The birds don’t have to be handled with the same degree of care associated with fresh produce—a process which requires more people and far stricter controls on chilling carcasses.”

Tydstroom’s current strategy, therefore, is to concentrate on fresh produce, with

only 40 per cent being frozen. There is the usual range of whole birds, pre-packed and individual portions. Less usual and currently exclusive to Tydstroom is the sale of a whole bird which has been de-boned —making it an ideal ingredient for the BBQ. With chicken representing the cheapest form of meat protein available to a population of 48 million—comprising large numbers of people with a low disposable income—cost is a critical factor. Unsurprisingly, then, local suppliers have to do all they can to compete with chicken meat imported from Brazil, at 30 per cent cheaper than local prices.

“The Brazilian market,” says Koen, “is enormous compared to ours but there is a very favourable fit between the two countries.

In Brazil, consumers like white meat, while South Africans prefer dark meat. Brazilian

Manufacturing 191

Tydstroom Fresh Farm Chicken

“At the managerial level, we offer apprenticeships to young men and women studying animal sciences” producers get top money for the breast and are content to dispose of the unwanted drumsticks and thighs at knock-down prices.”

Like all major players, Tydstroom is a vertically integrated business. It has the South African rights for a breed of bird with the most un-colourful of names: Cobb Avian 48. It’s a breed that does well in South African conditions and achieves the desired killing weight of 1.8kg in 34 days, after which its rate of growth falls away. Avian 48 is also a prolific egg producer, giving Tydstroom all the chicks it needs to feed the machine: Tydstroom hatches chicks which are then reared by specialist subcontractors until the

birds are ready for slaughter just over one month later.

Even more considerable than the challenge of cheap imports from Brazil is maintaining the health of the birds. All rearing premises are electrically ring fenced to keep out wildlife that may carry disease; while all human visitors must go through a thorough process of showering and changing into sterile clothes before they ever get anywhere near the birds. Tydstroom is also trying to eliminate contamination from airborne diseases by shading bird houses with trees which filter out

Manufacturing 193

194 Manufacturing

Tydstroom Fresh Farm Chicken bacteria. Last year 6,000 trees were planted and another 6,000 are going in this year.

Incoming vehicles are sprayed and the parent birds tested every week to ensure they haven’t acquired any illnesses. Inside the abattoirs themselves, the risk of cross contamination is controlled by strict hygiene standards coupled with all processing work being carried out at temperatures of zero degrees.

Tydstroom is also proud of the development work it does with its employees. “We currently have 1,300 staff,” says Koen, “nine hundred of whom are female. We have full time clinical sisters to look after their health concerns and welfare officers to help with any other problems that may be bothering them. We constantly work to improve their skills with various training programmes and

incentives. And at the managerial level, we offer apprenticeships to young men and women studying animal sciences.”

Traditionally, chicken processing has been a water intensive business, requiring 15 litres of water for every bird killed. Tydstroom has already got that figure down to under 13 litres, and new plants will have recycling systems that reduce consumption to a target 10.5 litres.

Similarly, everything consuming electricity is equipped with proximity switches to cut consumption when not in use.

However, with this quantity of birds being processed on a weekly basis, there is very little time when the plant is not busy—good news for Tydstroom, and for its customers, whose insatiable appetite for chicken shows no signs of abating. www.tydstroom.co.za BE

Manufacturing 195

cook Fortune

Britannia Industries started as a Calcutta biscu Vinita Bali tells John O’Hanlon about the respo

196 Manufacturing

Britannia Industries

kies

uit manufacturer in 1892. Managing director onsibilities of a food manufacturer in India today

Manufacturing 197

“S

ince Vinita Bali took over, Britannia has delivered its highest ever growth rate and been rated as India’s favourite food brand reaching more than 50 per cent of Indian homes.”

Expected words, perhaps, from a growing manufacturer in the business of fast moving snack foods, but on this occasion they were spoken by President Bill Clinton, who invited Britannia’s managing director to address the closing plenary at the annual meeting of the Clinton Global Initiative (CGI) in 2009. Established in 2005, the year before Bali took up the reins of the listed Indian food group, CGI convenes global leaders to devise and implement innovative solutions to the world’s most pressing challenges. It gathers government officials, business leaders, and nonprofit directors from all over the world, creating opportunities for them to collaborate, share ideas, forge partnerships that enhance their work, and undertake commitments to action.

198 Manufacturing

The c our po and m sectio

Britannia Industries

challenge is, how do we take ortfolio and make it relevant meaningful to a large cross on of the Indian population?

Manufacturing 199

We partnered with the G for Improved Nutritio develop biscuits that ta were also carriers o

200 Manufacturing

Global Alliance on in Geneva to asted good and f micronutrients

Britannia Industries

Britannia’s commitment to action in 2007 was to impact five million Indian children in an attempt to tackle malnutrition. “I suspect this was rather a modest ambition,” Bali says, referring to the sheer size of the problem. India has 100 million children under five, and of these 47 per cent are malnourished, the largest single deficiency being of iron. Sixty per cent of schoolage children in India are estimated to suffer from anaemia.

However, Britannia has a remarkable degree of market penetration, with half the nation’s households purchasing at least one Britannia product every month. “We partnered with the Global Alliance for Improved Nutrition in Geneva to develop biscuits that tasted good and were also carriers of micronutrients,” Bali explains. “And we partnered with an NGO in the southern part of the country to make these fortified biscuits available to 150,000 schoolchildren every day.” The pilot was validated, and now 10 million packs of Britannia fortified biscuits and bread are sold across India every day.

Manufacturing 201

202 Manufacturing

Britannia Industries Bali is a businesswoman through and through, having worked her way up through the ranks of Coca-Cola and Cadbury. Since joining Britannia, she has proved that ethical business can be profitable business. Under her leadership the company has enjoyed the fastest growth rate in its history and compound annual growth has been better than 20 per cent. “The company is more than twice the size it was; we have a presence in more markets; and we sell a richer and more diverse portfolio of products and snacks. During this time we have doubled our dairy business and quadrupled some of our nascent businesses—bread for example. We have pioneered new segments, the most recent being the launch of diabetic friendly cookies.”

It was in 2002 that Britannia diversified into dairy foods by forming a joint venture with the world’s second largest dairy company Fonterra, buying out Fonterra’s interest in 2009. In 2007 it entered the bakery retailing market, an extension of its core biscuit ranges, Bali says, by taking a controlling share in Bangalore-based Daily Bread. In 2009 Daily Bread became a wholly-owned company within the group. “Our goal is a simple one: to sell more of our brands to more people in more places more times! We are in the food business, and the challenge is, how do we take our portfolio and make it relevant and meaningful to a large cross section of the Indian population?”

Her vision is to accompany the typical Indian consumer through their day. “Most people consume cereal and cereal-based products, and then milk and milk-based products at different times during the day. As a company we have a strong portfolio in both sectors.”

That is simple diversification; what is different is the increasing introduction of functionality into the product ranges, she says. “We have just launched a whole range of breakfast foods under the Britannia Healthy Start

Manufacturing 203

umbrella. If I look at it from the point of view of the Indian consumer, typically they wake up in the morning and have that essential first cup of tea with a Britannia Marie or arrowroot biscuit perhaps. At breakfast they have a choice of Britannia bread, cheese, butter, milk and, with the recent launch of Britannia Healthy Start, breakfast foods like multigrain porridge or traditional Indian cereals like upma or poha.”

The need for healthy foods is clear; and demand is growing rapidly. “I think health is a big trend and we are well positioned to jump on to that opportunity. We have taken some concrete actions to drive that position forward. For example we are the only biscuit company in India to have removed transfats from all our formulations and recipes.” The CGI commitment was a step further. “Fifty per cent by volume of everything we sell is now fortified

204 Manufacturing

with micronutrients. Both these ranges and the more ‘indulgent’ foods like chocolate biscuits and filled snacks are growing at a double digit rate,” she adds.

Britannia is forging partnerships with the UN’s World Food Programme, for which it manufactures special products, and GAIN, the Global Alliance for Improved Nutrition because being a food megabrand in India carries with it awesome corporate social responsibilities. Innovative thinking has been applied here, too. “We challenged our business to come up with profit improvement programmes every year that would finance the incremental cost of the micronutrients we add so that the consumer would not have to pay anything extra.” That is good for the consumer, good for the children, and good for the company too.

Business excellence is pursued through a number of ongoing programmes, says Bali. “Each year we set rigorous targets on efficiency and effectiveness.

We operate programmes like TQM and kaizen, not

Britannia Industries only in manufacturing but in other processes in the company and our supply chain. At any one time there are several hundred projects to improve process parameters, output ratios or effectiveness in the marketplace. You have to have those programmes, otherwise it is tough to compete in a market where margins are not that high.”

Britannia exports five per cent of its products to 35 countries; manufactures and distributes its brands in the Middle East and Sri Lanka; and is so dominant in India that it could now be said that its health is directly linked to the health of the nation. Bill Clinton clearly thinks so: just three companies are chosen to present at CGI out of 1,500 contenders. “It was quite some recognition of our work,” Bali admits. www.britannia.co.in BE

Huhtamaki-PPL Huhtamaki-PPL is India’s leading manufacturer of primary consumer packaging and labelling materials. Huhtamaki Group has operations across 35 countries with revenues of US$3.2 billion.

Huhtamaki-PPL has been in the complex world of designing and producing packaging solutions for over 75 years. It is perhaps this experience that places Huhtamaki-PPL in a unique position to understand customer needs and design optimum packaging solutions. Huhtamaki-PPL is a true onestop-shop offering innovations across flexibles, specialized pouches, labelling, specialized cartons, packaging machines, laminated webs, holographic options and premiums & promotions.

Manufacturing 205

Serio

do

Bridor is thriving by adapting European breads, c as Pam Derringer learns from vice president Pier 206 Manufacturing

Bridor

ous

ough

croissants and pastries to North American tastes, rre Martella Manufacturing 207

L

ouis Le Duff arrived in North America from France some 30 years ago with an entrepreneurial spirit and a passion for food, looking for opportunity. He found it. More accurately, perhaps, he made it.

The newly arrived Le Duff discovered that the families in the Quebec university community where he resettled had an unquenchable appetite for European breads and pastries but liked them slightly different from those he knew. Croissants, for example, had to be sweeter and have a more curved shape than they have in France. And North American croissants are more likely to be consumed as part of sandwiches rather than enjoyed as pastry.

Although Bridor makes a great sandwich croissant, it would certainly want to add excitement to the croissant experience, according to marketing vice president Pierre Martella. “Our goal is to help North Americans discover the pleasure of a cup of coffee and a hot croissant on its own,” he says.

Another regional difference: Bridor’s North American baguettes, though identical in appearance to European versions, are softer without being spongy, he says. In both cases, Bridor adapted the original recipes to local tastes, and that has been the key to its success.

208 Manufacturing

Bridor

Manufacturing 209

00 www.bus-ex.com MARCH 10

210 Manufacturing

Bridor Today, privately owned Bridor has more than $100 million in annual sales in Canada and the US, four North American plants with a combined workforce of 350, plus the US-based La Madeleine country café chain and the Brioche Dorée restaurant chain for a total of about 3,000 employees. The forecast: strong growth ahead, especially in the US. “It’s all about innovation and quality,” Martella says.

At the heart of Bridor’s steady growth is Le Duff, who still sees business opportunities all around him and remains president and actively involved in Bridor operations today. Le Duff has never been afraid to invest whatever is needed to make sure a new venture gets off to the right start. And he never compromises on quality.

The history began in 1980 with a Montreal bakery, which grew so fast that Le Duff opened the first of four bread and Viennese pastry plants four years later. With a growing restaurant business and more retail clients, Bridor added a second Canadian plant in 1995. A third bread plant, creating a beachhead in the US market, was opened in Vineland, New Jersey, in 2002. Au Pain Doré, a 50-year-old Montreal plant that makes artisan baguettes and specialty breads, was added earlier this year.

Now Bridor breads and pastries are served in highend restaurants in Canada and the eastern US and sold in supermarket bakeries, where the par-baked breads can be removed from the freezer, ready to serve after only five minutes in the oven. Bridor set the industry standard with the installation and operation of the first production line for par-baked, frozen breads, as well as for frozen and proof-&bake Viennese pastry in North America. Par-baking simplifies and shortens the remaining work for retailers and allows them to order in bulk but bake loaves only as needed.

While many companies describe themselves as innovators and their products as high quality, Bridor means what it says. Bridor is continuously developing new bread and pastry products in response to changing tastes, including its new Advantage bread, which is white in color due to a specific milling

RLS Logistics RLS Logistics is one of the northeast’s leading temperature-controlled

logistics

providers

offering superior transportation, warehousing, packaging, and distribution services. RLS has three frozen and refrigerated distribution centers in the northeast, one being a dedicated facility that is managed for Bridor USA. RLS Logistics is a privately held, family-run organization with the third generation of the Leo family currently managing the company.

With a professional logistics management team and experienced support staff, RLS has the flexibility to create and implement customized supply chain solutions to meet your specific requirements and enhance your profitability.

process and healthier because it’s made with whole wheat, Martella says. Made with ConAgra Ultragrain flour, Bridor will roll out four Advantage bread products soon to restaurants and retailers.

In addition, Bridor has broadened its ethnic flavors from just French to European, including Viennese pastries and Pugliese Italian loaves. The latter were created by a long-time Italo-French baker on Bridor’s in-house staff. “Offered in various shapes, Pugliese bread is made with olive oil and, while crusty, melts in your mouth,” says Martella. “We distributed small samples to our sales teams and they all wanted it NOW.” Other segments such as Portuguese and Hispanic breads are being developed to better fill the needs of the eastern US market.

In addition, new equipment has been added to the Vineland plant to enable it to make the popular ciabatta Italian loaves and other artisan breads. But it’s not just the innovative methods and variety that set Bridor apart. It’s also the quality of the staff, first and foremost, as well as the ingredients.

Manufacturing 211

212 Manufacturing

Bridor Right from the start, Bridor has enjoyed closer ties with established European bread bakers than other North American competitors because Le Duff himself is a French native, Martella says. By remaining in constant contact with its European counterparts, Bridor is able to retain its authenticity and seek help when problems arise. In addition, when European bakers introduce new products, Bridor is the first on the other side of the Atlantic to know about it.

Another key Bridor differentiator is its own in-house staff of bakers, about two per plant, and a chef. They not only preserve Bridor’s distinct French ethnicity but also spur the innovation of new products and help provide assistance to stores and restaurants, Martella says. “The chef and bakers can explain our product, experts to experts, and also provide important customer feedback to us.”

Chefs and bakers in Bridor’s research and development labs are encouraged to “play with dough” and come up with new ideas, the best of which, when ready, are transferred to production.

“Bread products are very sensitive to environmental conditions, and only bakers know how to knead and shape the dough until it is perfectly adapted. You have to work with the bread by hand, allowing for different temperatures and humidity levels, and let the bread rest,” Martella says. “Only a real baker can do that.”

Finally, a word about ingredients. Flour is a natural product, with harvests of varying quality, and Bridor is very cautious about what it buys. Bridor insists on specific protein content and other specifications and therefore buys flour from different regions in order to obtain the same quality year-round.

Butter, too, varies considerably in quality, so Bridor only buys from specific producers and regions and always uses fresh butter—never frozen—even though the latter can be cheaper, Martella says.

With sales growing faster in the US, where the Vineland plant has been in operation only nine years, Bridor has set ambitious growth goals. “Our goal is to double sales in the next five years,” says Martella. www.bridor.com BE

Manufacturing 213

FMCGs,

Egy

Egypt’s retail scene has barely changed in deca from trying to help modernise from within, as A 214 Manufacturing

Procter & Gamble Egypt

yptian-style

des; but that hasn’t stopped Procter & Gamble Alan Swaby learns Manufacturing 215

216 Manufacturing

Procter & Gamble Egypt

I

t’s hard to imagine many homes in the West that don’t have at least one product from the Procter & Gamble (P&G) stable. Across the three business development areas of beauty and grooming, health and well-being, and homecare, P&G has over 300 different brands bought and used by over four billion people worldwide.

And since the establishment of P&G in Egypt in 1986, the message has been spread across wide swathes of Africa, the Middle East and into Asia. Not all of the 300 brands are available from Cairo—in fact, P&G concentrates on just 18 of the most popular products, including Ariel detergent, where the Egyptian factory has become the main producer for all of the Middle East.

In 2011 the company is celebrating its 25th anniversary, and the development of the business is nothing short of remarkable. With an initial capital of just US$2.1 million and two brands—Camay and Crest—P&G’s investment has grown over 100 fold. Even more remarkable is that P&G Egypt is now the country’s biggest exporter of packaged goods and one of Egypt’s top-10 exporting companies dealing with more than 34 countries in Africa, Asia and Europe.

Manufacturing 217

Procter & Gamble Egypt Orascom Construction Industries Orascom

Construction

international

Industries

construction

is

contractor

a

leading

based

in

Cairo. OCI provides engineering, procurement and construction services on a range of large, complex and demanding projects across North Africa and the Middle East.

Recognizing

OCI’s

tradition

for

excellence

and

achievement, Procter & Gamble Egypt established a decade-strong relationship in 2000 with the construction of P&G’s factory in 6th of October City, Egypt. This partnership has grown to encompass several projects in Egypt and Nigeria, including P&G’s current landmark EGP 250 million expansion project at its plant in Egypt. OCI aims to continually deliver excellence throughout our partnership with P&G.

What began with 50 employees has grown to around 1,200 and all but a handful are Egyptian nationals. In fact, the last two general managers in Cairo have been Egyptian and more than 30 home grown managers have gone on to leading positions in P&G worldwide.

At the heart of the process is a 100,000 square metre factory (actually five minifactories) featuring the largest synthetic detergent tower of its kind in the Middle East where Ariel is made. Productivity at the plant has continued to meet all targets and has encouraged production to the extent that a second plant twice the size of the first is being built just four kilometres away.

It marks a huge step up in P&G’s investment in the Near East. Whereas €1.9 billion was invested in the first 24 years of operation, €1 billion is being invested in the next three years alone. With 250,000 square metres of new capacity, it will effectively triple production capacity in Cairo. Initially the facility will exclusively produce Pampers nappies and won’t be finally completed until 2020, but it comes on stream in 2011, employing a further 500 or more staff.

Manufacturing 219

Procter & Gamble Egypt

There are now 80 multinationals in Egypt and the P&G plant has itself attracted five new investments as P&G suppliers open local operations to feed the factory.

Unemployment can vary from nine per cent to 20 per cent or more, depending on whose figures you believe, but that doesn’t tell the whole story. Even among those with supposedly regular employment, significant levels of disposable income are low, making it difficult for all discretionary purchases.

Compared to a virtual 100 per cent penetration in Europe, no more than one in five of the Egyptian population have tried disposable nappies.

It’s a developing country but the retail scene is still more traditional than modern. “There are international retailers operating here,” says Farag. “Carrefour, for example, and Metro Cash & Carry. But supermarkets account for no more than 13 per cent of retail expenditure. The vast majority goes through kiosks or small stores, of which Egypt has 270,000!”

The lack of disposable income and the retail

structure of the country are not conducive to rapid adoption of western shopping patterns.

Nor do poor transport links and inadequate infrastructure help. The seven distributors who buy and sell on P&G products are doing their best; but Farag estimates that they are literally reaching no more than half the total retail outlets.

Surprisingly, perhaps, P&G’s US parentage seems not to play a great role. “Occasionally,” says Farag, “at times of tension, there is talk of boycotts but this business has a very local face and is seen to be contributing to the overall welfare of the population. We are showing that commercially driven decisions can have a meaningful social impact.”

One such programme is the Mokattam Nonformal Education Project, also known as the recycling school. Mokattam is a Cairo slum and home to one million scavengers who

Manufacturing 221

222 Manufacturing

Procter & Gamble Egypt scour the waste dumps for any item of value.

Children are forced to help their parents and consequently miss out on schooling. When P&G became aware that discarded shampoo bottles were being cleaned up and then passed off as genuine products, it developed a novel solution to deter the bootleggers and give young children an education.

Surrendering old bottles earns credits to attend school. By linking basic skills to recycling activities, children are taught to count (the number of bottles returned); to read (the labels on the bottles); do calculations (the value of what they’ve recycled); and even computer skills so that the data can be presented on a spreadsheet.

Since 1837, P&G has worked to a set of principles and values aimed at improving life for its customers. It takes its social responsibilities seriously and perpetually develops partnerships aimed at improving the lives of the next generations. Among others, it supports programmes that provide valuable vitamin supplements and pure water to children.

In 2009, P&G was recognised as one of the best ten employers in the Middle East by international HR consultants Hewitt Associates and it holds the prestigious National Award for Excellence in Quality, awarded by the Ministry of Trade and Industry’s Industrial Modernization Centre.

Behind the scenes, it applies similar thinking to sustainable methods of operating. The new Pampers plant, for example, will aim to recycle all rejected nappies by reducing them to their constituent parts and reusing the raw materials, while detergents are being made in concentrated form—reducing volume and all the associated costs that follow.

Future progress for P&G will be linked with the fortunes of the country as a whole; but it has demonstrated that the right level of investment can make a return and a valuable contribution. www.pg.com BE

Manufacturing 223

More than

skind

The L’OrÊal Group cares about more tha Vishal Sahgal, industrial director of the to Jayne Alverca about the importance o 224 Manufacturing

L’OrÊal India

e

deep

an making women beautiful.

Pune manufacturing facility, talks of promoting sustainable development Manufacturing 225

F

e w consumer brands are better known than those of the L’Oréal Group. The portfolio of 23 global brands including household names such as Maybelline, Garnier and Biotherm, as well as the L’Oréal Paris brand itself, are all at the forefront of their market, whether it be for cosmetics, skin care, fragrance or hair care.

Headquartered in Paris, L’Oréal has over a hundred years’ experience in bringing out the best in women of all ages and races. Today, the group has a presence in 130 countries and its 65,000 employees were behind sales of €17.5 billion last year.

L’Oréal’s presence in India dates back to 1994. “L’Oréal has a strong belief in the value of manufacturing close to its markets,” explains Vishal Sahgal, industrial director of the company’s Pune manufacturing facility.

However, India did not begin a programme of liberalisation for foreign companies until the early 1990s, so at first, manufacturing was undertaken by a sub-contractor. “In 1998 we were finally able to move into direct production, driven by the belief that no one has more expertise than L’Oréal in the manufacture of the products that we are famous for,” he adds.

226 Manufacturing

L’Oréal India

Manufacturing 227

L’Oréal India

Sales of L’Oréal products in India have been meteoric. “We not only give products that are better in terms of quality and safety, we have also been instrumental in creating new markets. For example, hair colouration was revolutionised by L’Oréal when we introduced fashion shades which women had never used before. Our Colour Naturals brand is very accessible, costing close to €2, and it offers an international quality standard that was never available before. Similarly, we introduced Indian consumers to conditioners for the first time and they have quickly taken over from traditional hair oils,” he comments.

Since 2004, manufacturing for hair care, hair colour and skin care lines for L’Oréal’s Consumer Products division and Professional Products division has taken place at Pune. “We need to attract and retain the best talent in order to grow; and our first location was simply too remote,” Sahgal explains.

“Pune is where all our operations are now based and we have up to 600 people working for us

at any one time.”

Sahgal explains that promoting sustainable development is a fundamental tenet within all plants and distribution centres that operate under L’Oreal’s umbrella.

Environmental sustainability and corporate social responsibility (CSR) are the twin pillars that support this broader aim. Even within the vigorous framework that all L’Oréal manufacturing centres operate, Sahgal believes that the achievements of the manufacturing facility at Pune are something special. “Our Pune factory stands out within the group for its environmental achievements,” he asserts. “The state government of Maharashtra where we are based awarded the Pune factory first prize in the Excellence in Energy Management category in 2009 for its various energy conservation projects.”

Manufacturing 229

L’Oréal India

Galaxy Surfactants Limited Galaxy

Surfactants

Limited

has

developed

numerous

specialty products in the field of UV filter, mild surfactants, conditioners, betaines, protein, protein derivatives and botanicals. Galaxy has acquired a deep pool of knowledge that enables the company to anticipate and meet the needs of customers all over the world. The ultimate aim of our innovation is the product efficacy and how that benefits customers worldwide. Today we have our manufacturing operations in India and the USA, and new plants are being erected in India and Egypt to cater to the growing customer needs across the globe. Galaxy is truly a “Global Supplier to Global Brands”.

Within the L’Oréal Group, the Pune site has won a number of accolades. “We won the internal award for the best environmental project in 2007 for a project that involved using 320 solar cells, rather than expensive diesel oil, to heat water for washing in our processes.

Two years latter, we again picked up first prize for a project that uses vermin culture to convert chemical sludge into useful fertiliser. This led to the proportion of waste being recovered from the site to increase from 95 per cent to 99 per cent,” he says.

At corporate level, the company’s Indian headquarters in Mumbai has achieved a rare synergy between its core business, which is beauty and good citizenship. A project aptly named ‘Beautiful Beginnings’, which is implemented together with the French NGO Aide et Action, aims to help girls from marginalised communities who were unable to complete their normal education to train as beauty therapists and achieve financial

Manufacturing 231

L’Oréal India

Weener Empire Plastics Weener Empire Plastics is a reputed rigid packaging supplier from India and has a JV with Weener Plastics Packaging Group from Germany. They have six factories in India serving the requirements of prestigious clientele like L’Oréal, Johnson & Johnson and Ranbaxy amongst many others. With a wide range of molding and decoration techniques in-house they help fulfill the needs of the rapidly growing Indian FMCG industry.

independence. “It is expensive and quite complex to organise so it is done centrally, but at present ‘Beautiful Beginnings’ is operating in Mumbai, Pune and Hyderabad and it represents wonderful opportunity for the girls involved,” he says.

L’Oréal also believes that the world needs science and science needs women. The L’Oréal India For Young Women in Science scholarships programme, with the support of the Indian National Commission for Cooperation with UNESCO, has helped young women passionate about science to achieve their dreams and aspirations of pursuing a career in science. Established in 2003, it reaches out to deserving female students from Maharashtra and scholarships worth Rs.250,000 each are given to five young girls to pursue graduate studies in any scientific field. Thirty-five scholarships have been awarded to date.

The Pune factory itself has recently picked up another prize, this time the internal Citizen of the World Award, for its approach to good citizenship within the community where it is based. “We do not like one-off donations and look for long term projects which will have a long term impact in the communities around Pune, where many of our staff come from,” he explains. “‘Project Care’, which won us the first prize, is an integrated project that looks at safety, health and hygiene, the environment and child education, which we deal with in turn on a quarterly basis with the aim of raising standards and improving the local quality of life. We rely on a mix of professional trainers and our own employees from these villages

who feel a huge pride in our work and whose voice is sometimes more acceptable to local communities than outsiders.”

The project is ongoing and includes facets such as free medical check-ups for the elderly and a scheme to support schools with redundant laboratory and IT equipment that still has relevance in the classroom. The company is also involved in a partnership that will provide two new classrooms to a local school—at present the children have to study outside.

On the procurement side, L’Oréal extends its values by insisting on a very specific vetting process. “Suppliers must pass our stringent quality requirements and also a Safety and Social Audit. We use external consultants like Intertech who will monitor for unacceptable practices such as child labour, ensure that minimum wages are paid and that there is no requirement for excessive working hours. The government has labour laws, but not all companies comply. We only want to work with those that do.”

Meanwhile, Sahgal believes that the factory’s steady expansion creates a virtuous cycle in the local economy, as at least 50 per cent of staff are recruited from surrounding villages. “Last year we grew our capacity by 30 per cent and there is still enormous scope for L’Oréal in India. It is very important that as we grow, we give something back to the society that has contributed to our success,” he concludes. www.loreal.co.in BE

Manufacturing 233

From

p

sack to

234 Manufacturing

Afrip Afric talks from

Afripack Pty Ltd

m

pack

pack Pty Ltd is today a leading player in South ca’s flexible packaging market. CEO Arnold Vermaak s to Jayne Flannery about the company’s evolution m being a simple manufacturer of paper sacks Manufacturing 235

236 Manufacturing

Afripack Pty Ltd

A

fripack was founded in 1933 and CEO Arnold Vermaak is keen to point out that this makes it one of South Africa’s oldest packaging companies. The company began life by creating a niche in a small segment of the packaging market, namely cement sacks for industrial usage. Over the years came a steady process of consolidation and expansion. This was fuelled firstly by organic growth and then more recently by diversification and acquisition, which culminated in the acquisition of the flexible packaging division of Astrapak in 2009.

Manufacturing 237

238 Manufacturing

Afripack Pty Ltd The R184 million deal effectively doubled Afripack’s turnover overnight and created a powerful new contender in South Africa’s R11 billion per annum flexible packaging industry. The company is now positioned as one of the most diverse flexible packaging operations in South Africa with a strong intended orientation towards what Vermaak describes as high end, added-value products.

He attributes the company’s transformation to a three pronged strategy centred on market focus, advanced technology and developing and motivating the best people in the business. Here, he takes up the story, beginning with the company’s expansion into consumer markets: “Although we were very successful in industrial markets, particularly as a sack manufacturer, we knew we were missing an opportunity if we did not develop a presence in consumer packaging. Our

Airconditioning Amalgamated The owners of Airconditioning Amalgamated, Mr. Stuart Jenkins and Mr. Gordon McRae, have 60 years of experience between them in the air conditioning and refrigeration industry. Some 14 years ago, a project came about with Plastop in Prospecton that, after its acquisition by Astrapak, has grown into further contracts, many requiring unique solutions, with the Astrapak Group/Afripack. The scope of projects/capital business has run to in excess of R40 million and has been underpinned with Group maintenance contracts. Furthermore, at the Group’s Annual Award Dinners, the company has consistently received awards for its innovative solutions and service delivery.

aim was to diversify, but to retain a very clear focus on flexible packaging. We were not looking for something the size of the Astrapak division, which included a total of

Manufacturing 239

Afripack Pty Ltd

five companies, but it was too good an opportunity to pass over,” he explains.

The acquisition of Astrapak’s flexible packaging division was finally concluded in August 2009 and Afripack has now succeeded in integrating Astraflex, Cape Wrappers, DLC, Tamperpak and Astra Repro, as well as Standard Labels in Mauritius.

The new corporate entity is known as Afripack Consumer Flexibles, or ACF, and its formation has also entailed a radical rethink of how the much bigger business should be structured. The new organisation centres on two primary clusters—flexibles, which

includes the former Cape Wrappers and Astraflex— and secondly, a dedicated labels division.

The ACF Flexibles division features two dedicated consumer flexible plants situated in Durban and

Bigfoot Express Freight Bigfoot Express Freight prides itself on 100 per cent PDI ownership and conforming to BEE requirements.

Superior service and excellent customer care further distinguish our company from our competitors; and our commitment to quality has led us to obtain ISO 9001.

Our strategically placed branches provide an extensive national footprint. A process-driven and constantly monitored operation combined with highly skilled staff enables us to offer a reliable, speedy, secure and costeffective freight solution. We have a fleet of 170 gps tracked vehicles, which are maintained by the relevant agents. Services such as internet track and trace and in-house solutions further benefit our clientele.

Paarl. The division has a total of eight flexographic presses, including an F&K gearless press, numerous modern slitters and several Nordmechanica laminators.

Manufacturing 241

242 Manufacturing

Afripack Pty Ltd The ACF Labels division has three narrow web consumer flexibles plants—DLC in Durban, Standard Labels in Mauritius and Tamperpak in Gauteng. This division has several Aquaflex and Mark Andy narrow web flexographic presses, slitters, a Stanford shrink sleeve line and a Seamer. The new division has pioneered the development of shrink sleeve labelling and has received numerous awards for its innovative use of films, inks and coatings for premium brands.

At the time of the purchase, Vermaak stated clearly Afripack’s view that the purchase represented the best in people and technology, with an excellent combined customer base and strong supplier commitment. “It has given us the perfect platform from which to grow a highly successful consumer

Cartonal Italia Cartonal Italia is a reputable and well-established supplier of flexible packaging material in RSA. Among others, Cartonal has supplied Afripak for almost 15 years. The essential principle guiding this longterm business collaboration is the commitment to professionalism, integrity and quality.

Cartonal built its reputation on financial strength, stability, experience and continuing relationships, with technology also playing a significant role in improving its efficiency in communications, logistics and management.

Cartonal employs bright and innovative experts from a variety of fields, giving the company flexibility and a wealth of experience. This allows it to offer an array of resources that can be tailored to the individual needs of each customer.

“We were not looking for something the size of the Astrapak division, which included a total of five companies, but it was too good an opportunity to pass over” flexibles business,” he says.

The Consumer Flexibles division, known as ACF, now offers an extremely broad product portfolio geared towards premium product offerings with the flexibility to tackle both long and short run work. There are various wax paper products and a wide range of both solvent based and solvent free laminated packs. Tamper-proof banding is a particular growth area and Afripack holds the South African licence for the Fujiseal system.

A fire at the ACF KZN plant in Durban was quickly turned into an opportunity to improve the ACF facilities even further and resulted in another tranche of investment in state-of-the-art plant. The ACF Cape plant in Paarl has been augmented with an Uteco gearless press, as well as an upgrade of the existing F&K gearless press to 10 colours and GPS computerisation, making it arguably the premier flexographic press in the country.

Already, the Cape plant has won many printing and packaging accolades, notably the FTASA Print Excellence and Gold Pack Awards. Equally telling, Afripack is a packaging supplier of choice to the

South African operations of a number of leading global brands, including Unilever, Nestlé and Cadbury.

“It is our technological advantage within ACF that enables us to print on such a wide range of flexible materials including cellulose films, PVC, polyester, polypropylene and poly-ethylene, as well as on a variety of paper substrates and their coated and metallised counterparts,” Vermaak explains.

The other plant in the Consumer division is based at Durban and this now has a new Rotomec gravure press from Italy. “We see the quality of our technology as a very important differentiator,” he continues.

“From a technological perspective, these are First World investments which is big news here and the most significant addition to South Africa’s overall printing capability in a number of years.

“Strategically, we made a decision a number of years ago that the quality and waste reduction benefits derived from

Manufacturing 243

244 Manufacturing

Afripack Pty Ltd Covinil Films

Fima

The company has always been known in the market

Fima currently serves the Afripack Group from its

for the development of speciality films. Covinil has

plant in Chamdor, South Africa and has been servicing

developed different films for the Twist wrap market

them for many years with a range of packaging and

coming from PVC, CPP and now introducing the

labelling products. At Fima, we live for innovation

new products manufactured in the new PET line.

in the packaging industry and working closely with

Afripack and Covinil have always worked together

our partners like Afripack, who also succeed to be

in the R&D field in order to create possible solutions

innovative, we work well together to produce products

for their clients.

beyond those of our competitors.

leading technology justified the higher upfront investment,” he continues. “We have chosen to buy the best brands from the best manufacturers in the world. We may not be the largest player in the flexible packaging marketplace, but with the new gravure press we can offer the best equipment in South Africa.”

Afripack has further strengthened its position through strategic alliances which

give access to an even wider range of packaging solutions—all of which share Afripack’s commitment to high-end offerings manufactured to the highest standards using the best technology available.

In 2007, an agency agreement was signed with Mondi Coating Zeltweg (MCZ) in Austria, an international producer of extrusion-coated and laminated consumer packaging materials which targets the food, pet-food, non-food

Manufacturing 245

Afripack Pty Ltd and pharmaceuticals industries. As a result, ACF can supply the local market with a wide range of laminated packaging solutions. MCZ has state-ofthe-art extrusion coating technology which lends itself to a complete product portfolio ranging from polyethylene coated papers to highly sophisticated multilayer laminates and high-end direct coated aluminium foil and polymer films.

Henkel South Africa Afripack Consumer Flexibles and Henkel South Africa have enjoyed a highly successful business partnership since the late 1990s. Henkel, as the world’s leading supplier of laminating adhesives under the Liofol brand, ensured that Afripak remained at the cutting edge of technology through the adoption of ‘Smart Cure’ technology. Henkel strives to partner with innovative companies looking to constantly add value to the supply chain.

Manufacturing 247

Afripack Pty Ltd

The partnership with Mondi went a step further when ACF entered an agreement with Mondi Consumer Flexibles Europe. The company has extensive experience as a manufacturer and supplier of film extrusion products and flexible packaging solutions from film extrusion and printing to the converting of films and flexible packaging solutions.

It means that Afripack can offer another new range of high performance solutions, including for the first time, new products like stand-up pouches to the local market. These pre-made, stand-up pouches constructed from high-performance laminates and barrier materials were previously unavailable in South Africa and represent a new and very convenient, user-friendly packaging format that is chemically and physically durable and can also be sterilised.

The other big partnership which has supported Afripack’s rapid penetration of the consumer market is with promotions company Autopack, which

supplies promotional items such as stickers, tattoos and scratch cards. The company is located in Pablo Podesta in Argentina and has more than 100 blue chip clients, including Unilever, Avon Cosmetics, Wella and AGFA. Again, the emphasis is on providing a continuous stream of innovation. Autopack’s laboratories are engaged in a continuous quest to design new cutting edge campaign proposals and product offerings, constantly experimenting with different techniques and materials to achieve maximum impact on the consumer.

The overall range and scope of Afripack’s product portfolio may have a distinctly sexier new edge, but Vermaak is keen to point out that the company’s former industrial business has also been carefully nurtured. “We are still a very strong player in our original sack

Manufacturing 249

Afripack Pty Ltd

market, with leading edge technology and long standing exclusive supply relationships to local cement companies like PPC and Lafarge. We realised some time ago though that this was far too narrow a focus and that there were other opportunities in the industrial packaging market. In 2004, we started to take these opportunities seriously when we invested in a reel-to-reel plant with two gearless eightcolour flexography printers and an extrusion coater, enabling us to supply the paper industry with ream wrap. We have since gone on to develop extensive supply relationships with paper companies Mondi and Sappi,� he says.

Sack manufacture takes in many complex equations. From handling in the distribution chain, from the point of filling the bag to delivery at the end user, the sack is subject to many distinct forms of stress. Even the flow characteristics of the

product that will go into the sack and the type of filling machine to be used bring an influence to bear on how manufacture should

Manufacturing 251

Afripack Pty Ltd be approached. Afripack has close to a century of experience in optimum sack construction—knowledge that has been complemented by investment in stateof-the-art plant.

Afripack has spent in the region of R175 million over the last decade in enhancing its industrial capability. The result is Afripack Industrial Flexibles (AIF), which is now recognised as a leading player in the industrial flexible packaging market, supplying multi-wall paper sacks and flexographic printed and extrusion coated products. The plant operates 24 hours a day, seven days a week, and relies on two fully automated, high speed sack lines supplied by Windmoeller and Holscher of Germany.

These have a massive combined capacity of 140 million sacks per annum.

However, the finest machines in the world are only as good as the people tasked with operating them. Vermaak is convinced that the best long-term sustainable advantage in the marketplace is derived from having empowered and motivated people. “Our people are our most fundamental asset and we have to have the right culture in place before we start adding other elements, such as technology,” he states.

Black Economic Empowerment is a vital part of both the company’s past and its future. Until 2004, Afripack was wholly owned by Pretoria Portland Cement (PPC). The following year, the company completed a BEE transaction and the current shareholding is now dominated by Nozala, a broad-based black female group with major secondary holdings in the hands of PPC, South Africa’s largest cement company and a management consortium. All take an active interest in the company’s development.

Vermaak believes that the cultural values that have become embedded in the organisation have a particular South African slant. “Our culture is characterised by empowerment, ownership and a high degree of transparency and trust. As an organisation, we have a distinct culture and style. It features flat organisational structures and fast decision making

and all of our people are involved in the dayto-day running of the business. We have total transparency when it comes to results and performance and our people understand that they are wholly accountable for the results they produce. At every level of the organisation we are performance driven and everyone shares the same belief that giving long term sustainable value to customers is what really matters,” he says.

An acquisition of the size of Astrapak’s flexibles division could not have happened without the unqualified support of all shareholders—a large portion of the purchase price was funded by shareholder funds. The Afripack motto “SISONKE”, or “we are together” seems particularly apt in this instance. Meanwhile, the new business is in the fortunate position of having funding available for further growth opportunities.

Vermaak believes that while the integration of Astrapak’s flexibles business and subsequent restructuring has effectively created a powerful cohesive entity with a single, shared vision, it is only an interim step.

“We are a progressive, far-sighted company which still has much more to achieve,” he concludes. www.afripack.co.za BE

Manufacturing 253

Eyes on

fu

the

Having digested and integrated a wave of acquis it an even stronger force in the wireless world, P future growth. Operational excellence, a careful techniques provide a solid foundation for leaders 254 Manufacturing

Powerwave Technologies Inc.

uture

sitions to broaden its product lineup and make Powerwave Technologies is eyeing long-term supplier strategy and low-cost procurement ship in the wireless revolution

Manufacturing 255

256 Manufacturing

Powerwave Technologies Inc.

S

ince it was founded in 1985, Powerwave Technologies has evolved and changed dramatically along with the wireless industry itself. Originally a provider solely of power amplifiers for analog land mobile radio wireless networks and firstgeneration cellular systems, Powerwave executed an aggressive diversification strategy that saw it acquire a host of firms and technologies that in turn expanded the scope and breadth of the company’s product offerings.

From the 1999 purchase of Hewlett-Packard’s radio frequency amplifier business to the 2004 acquisition of LGP Allgon and the 2006 purchase of filtering product lines from Filtronic plc, Powerwave impressively grew its footprint and its reach. Purchases such as that of UK-based Toracomm Ltd. helped provide it with intellectual property in the radio frequency, digital signal processing, system design and system simulation realms, while the 2005 pickup of Kaval Wireless of Ontario, Canada, helped make it a major player in the inbuilding wireless coverage space, which today is seen as a booming part of the market.

Manufacturing 257

258 Manufacturing

Powerwave Technologies Inc. The buying spree left Powerwave with a much larger revenue base—and a product array that made it a favored one-stop shop for its network carrier customers. But it also left the company facing a sizable integration challenge that spanned the globe, according to chief operating officer Marvin MaGee, who has been with Powerwave for three and a half years and in the technology industry for more than two decades.

“There was a lot of demand from our customers for more solutions, so we used our amplifier strength as a platform to acquire antenna solutions, filtering solutions, coverage solutions, tower-mounted amplifiers and even software solutions,” MaGee says. “The strategy has worked extremely well in terms of enabling us to provide a one-stop shop for operators and one of the most complete and wellintegrated and consistent product and service lines that network operators could use.”

The strategy helped grow sales dramatically during the early part of the last decade, and starting in 2007, Powerwave, which is headquartered in Santa Ana, California, sought to accelerate the process of aligning culture and management teams and then drive a consistent supply chain and supplier strategy to create a single, simplified platform. Back-end systems were attacked, with a common IT platform that used standard applications suites from Oracle, PeopleSoft, Microsoft and Agile, among others, and helped support a single strategy around everything from procurement and financial tracking to human resources.

“As we approached consolidation, we kept in mind the business strategy we were trying to accomplish with each acquisition,” MaGee comments. “There is always a larger business reason for it. There is the toplevel value proposition around acquiring products and technology and diversifying a product line, but also a subset of skills that a company or entity brings to your operations. You may buy a company that makes filter products, but behind those products lie technical competence and market knowledge that are really the core of the competitive advantage they bring. You need to go about integrating in a way

Syrma Technology Syrma Technology has a rich legacy of providing innovative

manufacturing

and

supply

chain

solutions for premier high-technology companies, including Powerwave Technologies. Syrma, with the additional resource depth of the Tandon Group companies, offers global OEMs unparalleled partnership potential and the ability to rapidly profit from the numerous opportunities afforded by the emerging India market.

The Santak Group Our company specializes in producing precision machining components. Our services include mold making, die-casting, precision machining and

turning.

We

also

provide

integrated

assembly for customers that require complete solutions. The industries we serve include fiber optics, mobile communications, wireless communication devices, hard disk drives, and consumer electronics, etc.

that protects that intellectual property and that brain power that made those companies acquisition targets in the first place.”

A major part of the integration strategy was to align the supply chain to take advantage of low-cost sourcing as much as possible.

Engineering is largely concentrated in India, for instance, and suppliers are located around the world based on both quality and cost considerations.

“The site selections we consolidated to were guided to a significant degree by performance capability,” notes MaGee. “A big part of it from the production perspective is the supply chain.

We wanted to remain close to the customers we were gaining as a result of the acquisitions and keep those eyes and ears but also look at how we could gain a competitive advantage on the cost side as well.”

Manufacturing 259

Powerwave Technologies Inc. The buying spree made it necessary to consolidate the supply chain, and through an extensive supplier selection process the supply chain was revamped to source from low-cost regions of the world whenever possible. “We wanted to protect the quality and value proposition we offer while also driving for low-cost execution capability at every turn,” MaGee says. “We feel very comfortable with the operating structure we have in place now, in terms of both cost and performance measures as well as our ability to scale.”

Powerwave uses a host of techniques to ensure its operations run smoothly and continue to improve

UTi We at UTi have been associated with Powerwave Technologies for over three years. The services we offer to Powerwave are warehousing, testing, packaging, transportation and distribution of antennas across India. This is ably supported by IT system WMS4000, which provides real-time visibility and makes the transaction smooth.

We offer these services to our clients PAN India, where we have 22 locations supported by 400 people offering forwarding by air freight, sea freight - export & import, brokerage, warehousing and distribution.

Venture Venture is honored to be a strategic partner of choice of Powerwave over the last decade.

From the early years of manufacturing PCBA, Venture has moved up the value chain to become an

end-to-end

solutions

provider,

building

scale, competencies and capabilities across its operations to support the business. Venture is inspired to build new levels of excellence to reinforce Powerwave’s pursuit of innovative nextgeneration products.

over time, including lean—kaizen events are staged regularly at its production and assembly facilities—and six sigma.

Being able to scale quickly if necessary is critical because Powerwave believes it has itself positioned to enjoy a strong stretch of growth as consumer demand for wireless devices—and the bandwidth they demand— continues to grow in established economies such as North and South America, the Far East and Europe and as emerging nations begin to build telecommunications infrastructure that relies heavily on wireless technologies.

Powerwave, which was founded in 1985 and went public in 1996, not only helps carriers operate networks but helps address issues

Manufacturing 261

Powerwave Technologies Inc. that are emerging as more people are adopting wireless as their first choice for telecommunications.

For instance, amplifiers that help signals reach into and out of buildings are a major growth area in markets such as North America. Powerwave’s products address both traditional wireless networks as well as emerging and next-generation 4G technologies such as WiMAX and LTE. Powerwave addresses those markets with a workforce of 2,200 from 20 locations around the world, including main regional offices in Hong Kong, Sweden and California and a direct presence in some 14 countries. It relies heavily on suppliers and contract manufacturers, performing mainly subassembly and finishing work, as well as some engineering and product design.

“Everybody in our company is excited by the wireless markets we serve, and the opportunities we find in such a fast-paced environment require a rapid response capability. We have lean pull systems in place and an integrated logistics system—all of which are critical for responding to week-by-week demand changes,” says MaGee. “Responding to growth also requires flexibility, and we spent a lot of time thinking about that when we designed our production and fulfillment network. We feel we have facilities we can scale, and we hand-picked supplier partners that can grow with us in a market that we anticipate will continue to expand for some time to come.”

Powerwave is constantly working on new products as well as making improvements to existing technologies, using its sales and service force to return feedback that is funneled through productline-focused business units. The process starts with ongoing market analysis and an internal review that constantly seeks to balance where R&D funds are spent to maximize their value.

From there, the product development journey includes reaching out to the supplier community as well as internal manufacturing capabilities and then continues with concurrent engineering among all parties with the goal of arriving at a common platform. “From there we have what I think is a fairly

NXP Semiconductors NXP

Semiconductors

N.V.

(Nasdaq:

NXPI)

provides high-performance mixed-signal and standard product solutions that leverage its leading RF, analog, power management, interface, security

and

digital

processing

expertise.

These innovations are used in a wide range of automotive, identification, wireless infrastructure, lighting,

industrial,

computing

mobile,

applications.

consumer

Headquartered

and in

Europe, the company has approximately 28,000 employees working in more than 25 countries and posted sales of USD 3.8 billion in 2009. For more information, visit www.nxp.com.

standard process of tollgate checkpoints to evaluate how we are progressing through the development cycle,” MaGee says. Alpha and beta modeling and prototyping work is done in development centers—concentrated in India—and then production ramp-up begins with pilot programs. “From a systems engineering and product requirements point of view, we really have tried to keep the experts with that knowledge base close to the different markets we’re trying to address.

We try to make those product decisions as close to the markets as possible.”

Whenever possible, Powerwave will seek to have suppliers do the bulk of the production or enlist the help of contract manufacturers who can build specific components or platforms in a consistent way. Doing so enables the company to divert those dollars that would be spent building factory capacity into research and engineering, where the heart of its value proposition lies, according to MaGee. “In terms of investing our capital, our preference is to reserve it and expend it on higher-leverage value-added engineering and development,” MaGee says. “We’re a

Manufacturing 263

264 Manufacturing

Powerwave Technologies Inc. product and services company, and the core of our value proposition is that we have the engineering knowledge to enable customers to maximize what they are trying to do with their business by providing solutions that are best in class. Having operational excellence enables us to support that value-add by having responsive supply chain partners that can give us a technological and service leadership advantage.”

One innovation that customers crave—and Powerwave delivers—is to produce increasingly green or sustainable equipment. For instance, the company’s original main product line, power amplifiers, uses a significant amount of electricity to

the areas of building efficiencies, waste management and recycling, and our own social responsibility programs,” MaGee says.

“Like most companies, we’re constantly evaluating how we’re running our business from that perspective.”

Top-line sales growth was the norm at the company as its expansion and diversification strategy dovetailed with the booming wireless space. But 2009 was a difficult year for many companies, and Powerwave was no exception. Sales fell from $890 million in 2008 to $567 million as recession and financial crises battered many of its customers in

“We continue to see progressive and steady improvements in the energy efficiency of our products, and that remains a constant emphasis for us at the product level” help boost the strength of wireless signals. Over time, Powerwave has worked with suppliers to develop more efficient models, with power efficiency today more than double what it was a decade or so ago.

“Electricity is a large part of the expense profile and operating budget for wireless operators,” MaGee notes. “For that reason and because they all strive to be very responsible corporate citizens, they have very thoughtful green initiatives of their own in place. We continue to see progressive and steady improvements in the energy efficiency of our products, and that remains a constant emphasis for us at the product level.”

Dovetailing with that push for efficiency are efforts to make many of its products easily compatible with renewable energy sources, designing them to be easily integrated with supplemental energy sources, such as battery backup power, or even designing products with built-in solar panels or wind turbines to help complement main energy sources.

“We also have our own in-house green initiative that brings together all of our own efforts in

both the original equipment manufacturing space and network carriers themselves. Its exposure to emerging markets also meant it had to deal with significant issues such as currency devaluation as well.

“What was encouraging for us was that, given how much we had simplified and consolidated our business, we were able to reduce costs faster than revenues fell,” MaGee says. “So even though it was a very challenging year in terms of revenue, we were able to generate positive cash flow even in the face of a very tough economic environment.”

In fact, total operating expenses for 2009 were $144 million, a reduction of over 30 percent from the $212 million Powerwave spent the year before.

Global economic issues were still prevalent in 2010, but there have been signs of rebounding and a return of top-line revenue growth, as several major wireless carriers directed more of their own cash into their

Manufacturing 265

Powerwave Technologies Inc.

capital expenditure budgets. Carriers such as Sprint, AT&T and Verizon, among others, are investing hundreds of millions to build next-generation networks capable of delivering content at even faster speeds, each seeking its own competitive advantage in the process.

“The magical user experience created by iPhones and BlackBerries drives insatiable data demands that have really put a huge strain on the capacity of network operators,” MaGee points out. “If you look at the top level indicators, it appears the capital spending budgets of network operating companies have the potential to return to their historical growth trajectories.”

Because its business model has it relying heavily on third parties to supply components and technology, Powerwave works hard to ensure that all are on the same page regarding not only current efforts but what lies ahead as well. Each year the company gathers together a group of 50 to 60 of its top suppliers and key partners. “It’s a key part of our supplier strategy,” MaGee says. “We have representatives there from the semiconductor industry, electronic and mechanical equipment makers, and suppliers of logistics and inventory management services.

Those partners are a key part of our drive for market leadership and our strategy for execution.”

The opportunities abound. In emerging countries, wireless networks are often being built as a firstgeneration telecommunications infrastructure, with

the ability to provide even far-flung and remote populations with not only voice but data services. And in locations such as North America, with 70 percent of wireless calls or data requests coming from inside buildings, stadiums and other structures today, carriers are seeking technologies to help boost signals to get them through thick walls and other structures to keep customers happy with their service, MaGee points out.

The explosion of mobile content—music, video, news and applications—is also helping to drive network operators to build capacity.

With its long-term expansion and integration strategy, Powerwave is positioned to help carriers address those and other issues, and it will constantly seek to innovate to be ready for the next wave.

In addition to its products, Powerwave is aggressively growing the services side of its business as well in response to customer needs. The company provides engineering support and design advice on how best to set up networks, including where on a network to best place equipment or how to design a network to maximize revenue generation.

Post-installation work such as monitoring equipment performance and providing maintenance and upgrade support is another growth area. And before long, MaGee expects other opportunities will emerge that have yet to appear on anyone’s radar screen.

“It always seems that just as the industry gets adjusted to the current reality, another wave of technology comes along that people have a voracious appetite for,” MaGee says. “As a business we believe strongly in reinvesting the cash that we bring in. We continue to invest about 10 percent of our revenues into research and development, and we remain very excited about what we can do with that investment.” www.powerwave.com BE

Manufacturing 267

An high-techs

Africa

Tellumat Electronic Manufacturing is drawing on turnkey solution to high end industrial and consu

268 Manufacturing

Tellumat Electronic Manufacturing

an

solution

its distinguished heritage to offer a full umer equipment developers

Manufacturing 269

270 Manufacturing

Tellumat Electronic Manufacturing

T

ellumat emerged from the sale of Plessey South Africa to Didata in 1998. Plessey’s roots in Cape Town go back to 1963 and since then it has seen a number of transformations. One thing that hasn’t changed, however, is that this is a company with a lot of credibility and experience in electronic systems development and manufacturing. It is particularly associated with cutting edge defence systems like radar, navigation and avionics, as well as high end communications products and solutions.

Manufacturing 271

272 Manufacturing

Tellumat Electronic Manufacturing

“We made a strategic decision to move into contract manufacturing, and as part of that decided to adopt an organic and acquisition growth strategy” This is specialised stuff, and Tellumat Electronic Manufacturing maintained its 9,000 square metre factory in Cape Town as a centre of excellence for producing the low to medium volume high-tech products required by the defence, aerospace and communications industries in Southern Africa and beyond.

About 10 years ago, says managing executive Murison Kotzé, the facility was focused mostly on supporting the systems developed by its parent company, but it was always the intention to optimise its world class skills and facilities by making them available to external customers too. “We made a strategic decision to move into contract manufacturing, and as part of that decided to adopt an organic and acquisition growth strategy.”

South Africa may not be the first place one thinks of for outsourcing the production of electronics, or EMS (electronic manufacturing services) as Kotzé prefers to call it. Turn over any item in your house; it’s rare to see anything other than ‘Made in China’. The same is probably true if you dismantle an aeroplane or a car, but Tellumat can tick all the same boxes that international EMS companies do, and quite a few more besides, says Kotzé. “In brief, we have world class product development and manufacturing capabilities here, low labour costs and excellent communications with Europe.” In addition to that, South Africa’s time zone is close to Europe’s, people speak English and there is a robust legal

Manufacturing 273

structure. This last item is very important to companies worried about securing their IP in the outsourcing process, he adds.

Tellumat set out on a policy of organic growth and strategic acquisition. In May 2007 it bought Rhomco, a well established, highly respected Cape firm with an impressive customer base, good production capacity, skilled staff and excellent management with experience in contract manufacturing. Rhomco’s operations were moved from Diep River to Tellumat’s premises in Retreat (Cape Town), increasing at a stroke its customer base, its capacity (by some 40 per cent) and its flexibility.

Following the Rhomco acquisition, Tellumat still felt the need for another piece to be added to the jigsaw for the final picture to emerge. The company was still mostly focused on batch manufacturing of high end electronics for niche customers, largely in defence, telecoms and industrial automation.

It wanted to gain some capacity and expertise in volume manufacture. Accordingly, in June 2010, Tellumat purchased the assets of Tedelex Manufacturing from Amalgamated Appliances. Tedelex manufactured its own branded products but crucially had a contract manufacturing relationship with Sony.

This time the plant, a 24,000 square

274 Manufacturing

metre factory in Atlantis, an industrial area to the north of Cape Town, was retained. Tellumat subsequently signed a contract with Sony to manufacture its Bravia range of LCD televisions for the local market. “It’s a great advantage, when entering the field of consumer electronics, to be associated with a world class brand like Sony,” says Kotzé. “Now we have a very close working relationship with Sony, and we have also started producing Tedelex branded TVs again.”

Now Kotzé found himself with two rather different, though complementary, production plants under his wing. His next priority was to optimise the strengths of each of them. “The Cape Town factory is basically a high end batch operation, with quality and effective product development at its core, and defence and aerospace industry accreditation in addition to its ISO 9001/2008 rating. The Atlantis plant is an excellent volume operation supported and approved by a world class electronics manufacturer. I got the two management teams together, and it was great to see how well they dovetailed.”

The Cape Town team came over to Atlantis to gain more insight into the principles of high volume manufacturing—what Kotzé describes as industrial engineering at its best. Conversely, the Tedelex team benefited from their new colleagues’ expertise in quality control processes and the lean manufacturing and continuous improvement programmes that had been implemented in Cape Town. It helped recreate Tellumat’s Electronic Manufacturing Division as a new entity, capable of engaging with any kind of customer from a defence industry supplier requiring complex low volume product to a consumer electronics company dealing in tens of thousands of units. “There is still a line between the two plants, but it is getting greyer,” he says.

At the time of the latest acquisition, Tellumat invested in additional SMT (surface mount technology) automated pick-and-place capacity.

If customers need any additional or specialised production equipment, the company will be happy to invest even further, says Kotzé. However, for now, he is ready to go out to the market and plead the

Tellumat Electronic Manufacturing case for people to come to South Africa for their EMS requirements. “Whether it is an industrial corporation or a research based developer who wants to get his product to market quickly and effectively, we have the experience and the capacity to take the product from concept to delivery. We have an excellent product development team, the capacity to optimise design for manufacture and of course to do the actual manufacturing. We can then package the product and deliver it to the end customer—you could call it a turnkey solution or a one-stop-shop, but it results in peace of mind for the customer.”

The ability to manufacture in quantity opens up new markets. South Africa is on the verge of switching over from analogue to digital TV and recently committed to fund distribution of four million DVB-T2 set-top boxes to poorer households. Tellumat had already developed a DVB-T version before the Department

of Communications upgraded its chosen technology, and is in a good position to be chosen as a technology and manufacturing supplier. Once this happens Tellumat will also propose to licence the product and transfer skills to emerging manufacturers, creating jobs in the sector as a whole.

“We are excited by this,” says Kotzé. “We are now positioned to attract a lot of new business both within our home region and internationally as a reliable contract manufacturer.” It can be intimidating to outsource to a large and faceless manufacturer half way around the globe, he points out. These days a company’s IP is its life blood: Tellumat is a safe pair of hands for the technology, the customer has a direct line to the shop floor and it’s still a low cost partner compared with any part of Europe. www.tellumat.com BE

Manufacturing 275

New

w

Stephan Vitus, project development manager of radical new approach to building the iconic supe 276 Manufacturing

Icon Yachts

wave

f Icon Yachts, talks to Jayne Flannery about the er yachts that the company has pioneered Manufacturing 277

W

hen Icon Yachts was created in 2006, its founders, Wim Koersvelt and Jen Wartena, had a clear vision for the Netherlands-based business. Firstly, they wanted to apply their many combined years of experience to the highest end of the market for luxury super yachts. But in a radical departure from the traditional yard-based approach, they set out to challenge convention and apply a totally new approach to building the finest yachts afloat.

“The principle on which we founded Icon Yachts was to develop a technical platform hull that any exterior and interior design could be built upon within the limits of technical feasibility and naval architecture boundaries,” explains Stephan Vitus, Icon Yachts’ project development manager.

“Although it is an astonishingly simple and obvious concept, it was a revolutionary approach towards a market that demands exceptional levels of customization and something which had never been tried before.”

278 Manufacturing

Icon Yachts

Manufacturing 279

Icon Yachts For Icon’s clients, it means a totally unique signature in terms of styling, design and finish—but at a much lower cost and with much shorter lead times than other yacht builders can offer. “Essentially, what we do differently is to move processes, materials handling and men hours off the ships into more efficiently equipped and located workshops or factories, which can be on-site or at co-maker and supplier facilities,” explains Vitus. “The formula we apply is termed ‘modular engineering and construction’, which means that all the components of a super yacht can be broken down into pre-engineered sub assemblies that can be constructed, primed, tested and in some instances pre-certified before final assembly. These modules are then ready to drop into the ship when needed using the just-in-time principle.”

This lean approach to yacht building is complemented by an unusually open and flat management structure which Vitus believes is equally important. “We have exceptionally fast reaction times if the unexpected occurs. There is no need to penetrate six layers of management to get a decision and our structure allows us to be very flexible in the way we manage projects.

For example, a corporation which already has existing yachts will want a different project management style to a yacht destined for a single private client. However, what both will demand is a very close partnership based on a high level of trust and open and detailed discussion to inform good decision-making.”

Nothing illustrates the success of the formula better than the ‘Baton Rouge’. This was only the second super yacht built by Icon and was a 2011 finalist for the World Super Yacht Awards held annually

Cramm Yachting Systems Cramm Yachting Systems designs, engineers, develops and produces hydraulic yacht equipment such as boarding ladders; passerelles/gangways; deck cranes; sliding beam cranes; and stern, garage and other hull doors. Cramm Yachting Systems has its own service department which is a partner for service, maintenance and refit projects.

In short, Cramm Yachting Systems can cover all the hydraulics on board, so during the build period of a new-build project, Cramm can take care of all the hydraulic equipment and can be the only party to fine-tune with. Cramm Yachting Systems can offer a five-year warranty contract to the yacht, which also shows the quality of the equipment.

by Boat International Media in London. At 1,423 gross tons and measuring 62.5 metres, Baton Rouge is a six-deck full displacement motor yacht with innumerable customized features. Offering an incredible sense of space, the yacht’s features include a pool with jet stream, a dedicated sundeck (which converts to a party deck) and a beach club

Manufacturing 281

282 Manufacturing

Icon Yachts

lounge at sea level. Internationally renowned designers Redman Whitely Dixon were behind the sumptuous interior and Tim Heywood designed the yacht’s exterior. “Baton Rouge is our greatest achievement to date in terms of the strength of our brand and reputation.

It gave us international recognition for the quality of our work,” Vitus declares.

A typical project takes approximately 28 months to complete; and to date, three new yachts of 62.5 metres have been sold. Two are already at sea and the third is scheduled for delivery early in 2012. Although most yachts sold have been in the 60 metre range, Vitus is keen to point out that Icon’s strength stretches from 40 to 150 metres and from platform to completely custom projects to any client design. “Like most other yards, we have had to adapt to market changes and this has been done proactively, by broadening the spectrum of projects with regards to size but also with regards to type. For example, we are currently tendering for contracts ranging from 40 to 110 metres, with a concentration in the justbelow 500 grt (approximately 44 to 50 metres) and 3,000 grt (approximately 80 to 90 metres) volume and size range.”

The shipyard at Harlingen has many unique features, such as a 150 by 30 metre fully enclosed dry dock assembly building with a mast clearance of 28 metres and open deep water access. Vitus explains that the company is eager to leverage this asset more fully, with refits a growing element of the business: three refit projects are currently in progress.

“We had always planned to offer our clients high level yacht service facilities alongside the new construction business because of our convenient shipyard location and the high level of facilities available,” he continues. “Now, we also offer these facilities to other prestigious builders of sailing and motor yachts who want to commission and service their vessels here.

Manufacturing 283

284 Manufacturing

Icon Yachts Partnership projects with commercial shipyards have won us contracts to co-construct three large special purpose vessels stretching ahead into 2014.”

Other ship yards have begun to emulate the modular approach pioneered by Icon, but Vitus is not concerned. “We are at the forefront of the super yacht market and we will stay there because we are a market leader, not a follower. For example, we are already well ahead in the application of next generation technologies to our yachts. Detailed plans have been drawn up for electro-diesel propulsion systems which generate better energy efficiency and we are already installing new interior materials and LED lighting systems which require a smaller generator and use less diesel. Energy efficiency and ecological sustainability are becoming much more important to buyers,” he states.

“It is a challenging and changing world and our continued success shows that we are very capable of adapting to new demands. The economic crisis has made clients look much more carefully at the return on their investment and placed a greater emphasis on versatility so that a yacht has to be compatible with many more usage situations than might have been the case five years ago. Clients are becoming more discerning—and as ship builders and designers, we have to respond to that call,” he concludes. http://www.iconyachts.eu/ BE

www.bus-ex.com Travel & Entertainment 285 Manufacturing

A c custo

As Just Refrigeration gears up to expand its general manager Chris Turner talks to Gay S corporate footing, and implementing strateg

286 Manufacturing

Just Refrigeration

cool

omer

marketplace across Africa and Australasia, Sutton about setting the company on a firm gies for quality, efficiency and innovation

Manufacturing 287

288 Manufacturing

Just Refrigeration

T

here comes a time in any expanding company’s history when it outgrows the founding principles of a small enterprise. If growth is to be maintained, then change is inevitable. When familyowned Just Refrigeration entered business 16 years ago, it started out manufacturing refrigeration units for Coca-Cola. Today, it manufactures a wide range of units for a variety of markets including multinational brewers and bottling companies such as Pepsi and Coca-Cola, the hotel trade and big supermarket chains, as well as the many small lower level consumer stores.

Manufacturing 289

In recent years the company has been enjoying a steady growth of around 27 per cent per annum. And it has been the recent influx of foreign investment into Africa—for example the mighty Walmart which recently acquired a 51 per cent share in the supermarket chain Massmart—that has spurred this growth. Not only has this presented the company with both an outstanding commercial opportunity, but it has also been the driver for change.

“We had grown to a position where it was beyond the power of the two founders to control the business any more. So we set about formalising the company and turning it into a corporate organisation,” explains general manager Chris Turner. “And that has been my brief.”

The company’s core competency continues to be manufacturing, which it performs from a single facility in Durban. And the factory is undergoing significant investment and change to improve the quality of the product, reduce lead time, improve on-time delivery, and increase capacity at the plant to meet the growing demand.

“We into mon

290 Manufacturing

Just Refrigeration

e have been introducing the principles of lean manufacturing the factory. If you were to compare it to the way it was run 12 nths ago, it’s aesthetically and procedurally completely different�

Manufacturing 291

Just Refrigeration Quality and reliability are being standardised and embedded throughout the organisation, from the financial processes through to the supply chain, through the implementation of ISO 9001. “We haven’t finished with it yet, but we’re close,” Turner says. “We have also been introducing the principles of lean manufacturing into the factory. If you were to look at the factory today and compare it to the way it was run 12 months ago, it’s aesthetically and procedurally completely different. And that’s a real benefit.” Environmental conformance is also receiving attention, and the company is well down the route towards implementation of the ISO 14001.

With the introduction of so many new processes, a significant investment is also being made into appointing skilled and experienced staff to oversee the growing complexity of the operations. “We also have an aggressive training programme that includes lean manufacturing, and how to work to systems, processes and procedures. But the level of educational need varies,” Turner says. “With some people, we’re also teaching them to read and write, while others are being sent on advanced refrigeration engineering courses.”

Africa itself is a rapidly expanding marketplace.

“And the prospects are huge,” Turner says. “We want to dominate the African market—it’s as simple as that.” There are a number of multinational competitors already operating in the same space, but Turner believes Just Refrigeration has a significant market advantage. Many of the supermarket chains expanding through Africa are South African in origin, which creates an inherent advantage. Meanwhile, the South African rand, to which many other African currencies are pegged, tends to fluctuate significantly against the standard trading currency, the dollar. Competitors importing into Africa from Europe or Indonesia therefore find that the price of their goods fluctuates significantly, often on a daily basis. “Our advantage is that we’re on the doorstep of the African market and therefore the exchange rate does not affect the price of our goods.”

Currency fluctuations, however, can have a significant impact on the price of materials and

Resichem Resichem is a wholly owned South African company headquartered in Johannesburg, South Africa, with branches in Durban, Port Elizabeth and Cape Town.

With approximately 85 man years of polyurethane formulating and application experience behind us we are able to offer a comprehensive range of rigid and flexible PU foam systems to a broad sector of the SA industry and ensure its optimal performance in application. With the sub-Saharan licence for Ecomate® blowing agent and foam systems, it enables us to offer developing nations a cost effective and safe means of meeting all the environmental norms required of developed nations.

Manufacturing 293

Just Refrigeration

“Components shipped all the way from China to South Africa are still 40 per cent cheaper that those manufactured here” components, and this could potentially destabilise product prices. But Turner has taken steps to ensure prices remain stable and the product remains competitive. Firstly, product prices are based on the highest likely cost of supplies. Secondly, many components are now sourced from China. “This not only forces us to be much better at planning, but we also get far better quality and value for money from China than we do from the local market. In fact components shipped all the way from China to South Africa are still 40 per cent cheaper that those manufactured here. And thirdly, our own manufacturing efficiency improvements are making us much more competitive.”

As part of the formalisation process, the company has invested more than ever before on marketing, and the result has been a significant expansion of the geographical footprint throughout southern and eastern Africa and into Australasia. However, there is still a huge amount of room for growth.

Sales are managed through appointed agents with whom the company works very closely, but Turner believes it’s important to maintain a very hands-on approach with sales if the customers’ needs are to be met.

“This does involve a lot of travelling,” he admits, “but it ensures that our product is

Manufacturing 295

296 Manufacturing

Just Refrigeration

properly sold, and the customer gets value in what he’s buying.”

Quality, cost effectiveness and customer service will not be enough, though, if the company is to reach its goal of becoming a leader in innovation.

To that end, Turner has built a standalone R&D team that began with just two members of staff and stands today at 11.

Perhaps the most significant element of the change process, and the one that binds everything together, is the development of a company strategy. Elements such as legislative compliance and human resources are considered in the long term. “However, the market we operate in is very fluid and dynamic; therefore we define our operations and sales strategy on a six-

monthly basis. I’ve embedded this into the company and measure our progress toward those goals every second week.”

Turner has a very clear vision of what the company currently is and where he plans to take it. “Our aim is to be one of the five preferred companies to work for in South Africa by the end of the year 2014. We want to be industry leader, not by sales but by innovation. And I think that’s enough. If we can achieve those two things, by their very nature we will have achieved our profit targets and environmental standards, and everything else that flows from them,” he concludes. www.justfridge.co.za BE

Manufacturing 297

Dedic

develo

Research and development is not only th success but also its greatest opportunity discovers from commercial director and

298 Manufacturing

Karbochem

catedto

opment

he hallmark of Karbochem’s y for the future, as Gay Sutton chairman Dr Abraham Brink

Manufacturing 299

J

ohannesburg-based chemicals company Karbochem, the only manufacturer of synthetic rubber in Africa, has been operating since 1964, but a management buyout from global chemicals conglomerate the Dow Chemical Company in 2003 heralded the start of a new era focusing on new product development, process improvement and environmental best practice.

For the team that led the buyout—Dr Abraham Brink, Duncan Blackburn and Piet Steenkamp—the opportunities were irresistible. And interestingly, they were a reversal of the usual take on economies of scale. “Most global conglomerates like Dow will put a fairly hefty head office charge on their operating divisions,” explains Brink, now Karbochem’s commercial director and chairman.

By operating with a much smaller level of management, Karbochem has been able to operate under considerably reduced overheads, therefore increasing profitability while keeping prices pegged at competitive levels. “And we are certainly very pleased that things have turned out so well,” he continues.

“We’re not wildly profitable, but at this point in time we’re pleased to say we’re doing much better than we would have if we had put our money in the bank.”

The company is structured around three autonomous operating entities— Karbochem, Synthetic Latex Company (SLC) and Orchem Trading—which are drawn together under the umbrella of Karbochem Holdings. Of the 340 staff

300 Manufacturing

Karbochem

Manufacturing 301

We’re now expanding into believe we can gain a m 302 Manufacturing

Karbochem

employed within the group, some 320 work in Karbochem, but each of the three entities has retained its original identity since the buyout. “We have chosen to do this because each of our three product streams has a unique set of parameters requiring a dedicated marketing and management team. So each company

is managed independently and has its own board of directors.�

Karbochem, by far the largest part of the company, manufactures synthetic rubbers for mainly the tyre-making industry and operates from two manufacturing sites: one in Sasolburg,

o the paint market and we much larger market share Manufacturing 303

Karbochem

Free State, and one in Newcastle, KwaZulu Natal.

SLC manufactures styrene acrylates, pure acrylics and carboxylated styrene butadiene latices from the Karbochem facility in Sasolburg. Orchem, a trading company dealing in rubber chemicals and related products, operates out of Durban; however, the group has offices in Bruma near Johannesburg for the sales and marketing functions of each of the three companies.

Research and development (R&D) has long been embedded in the Karbochem operational ethos and is an essential element in the company’s strategy for growth. New product development dates back to the early 1990s when the company, then owned by Sentrachem, was unable to procure the technology it required to produce neodymium BR—a specialist synthetic rubber with highly desirable properties for tyre manufacture. The company resolved the problem by developing its own product and processes, and these have been so successful that the neodymium plant is running to capacity and cannot satisfy all the market needs.

In recent years, however, the focus of the R&D has shifted somewhat towards the needs of SLC. A significant amount of investment has gone into the primary R&D facility in Newcastle and a

H&R South Africa H&R South Africa is a sales and marketing company dedicated to the supply of speciality products originating from lubricant refineries. Our expertise is focused on blending these speciality raw materials to fulfil the needs of the various industries we service globally. The brand is synonymous with quality and consistency and a drive to build lasting customer partnerships. The H&R Group is proud to have an association with Karbochem and has fostered similar relationships with other major players in the international tire and rubber industry through the development, engineering and consistent supply of the full range of label-free process oils.

satellite facility at Sasolburg, and from here the company has developed a unique inhouse range of styrene acrylates and pure acrylics—binders used primarily by the paint industry. “SLC has always produced styrene butadiene latexes, but because the chemistries of the two new product ranges are very similar, we made the decision to focus our efforts on producing them all at the

Manufacturing 305

As far as the rubber side of the business is concerned, our long-term view is to optimise the capacity we have same plant. We’re now expanding into the paint market and we believe we can gain a much larger market share. The products also have applications in carpet manufacture, the construction industry, and to some extent in the manufacture of glossy paper,” Brink says.

“The gloss is essentially a very thin layer of rubber on the paper surface.”

The company continues with its programme of R&D, researching, producing and testing new products to meet specific market needs. And it is here that Brink sees the most significant opportunities for growth.

“As far as the rubber side of the business is concerned, our long-term view is to optimise the capacity we have. But because the major raw materials are imported it makes very little sense to expand significantly here in South

306 Manufacturing

Africa. On the latex side of the business, however, the situation is totally different,” he says. “We have ample capacity at the plant, and we hope to gain a much larger share of the paint and carpet markets.

Ultimately, we aim to reach full capacity.”

Considerable improvements have already been achieved on the rubber side of the business, through a programme of process optimisation and investment. The Sasolburg plant, for example had a designed capacity of 20,000 tons when initially commissioned. “Now, depending on product mix, we have a capacity of up to 35,000 tons,” Brink says.

“Meanwhile, our neodymium plant in Newcastle was originally producing 25,000 tons and we have increased that to 35,000 tons. Moreover, we believe that with some debottlenecking we could further increase the output to 40,000 tons. Our other rubber plant in Newcastle has the nominal

Karbochem capacity of 30,000 tons, but as we run such a large range of products it’s currently operating at about 25,000 tons.”

Quality has always been a strong focus across all operations. All plants are ISO 9001 certified, being regularly audited by the South African Bureau of Standards as well as by the global tyre producers who are the company’s major customers.

Since taking over the company, Brink and his fellow directors have also worked to improve the environmental performance of the manufacturing sites.

The boilers at the Newcastle plants are coal-fired, as is common in South Africa, and the latest technology has been installed at each to minimise the emission of gases and particulates into the atmosphere.

“We have also done a lot to rectify historical

problems at the plants, and we believe we have not created any new ones,” Brink says. For example, there were a number of evaporation ponds in use for the evaporation of effluent. “We have cleaned them out, physically removed them and banned their use in the future. At the Newcastle plant we have an installed effluent treatment system and are running almost effluent-free. At Sasolburg we’ve made arrangements for Sasol to treat our effluent at their huge treatment plant.”

Not only does Karbochem have bright prospects for future growth, it is also doing its bit for the environment. “We try to be a good citizen,” Brink concludes. www.karbochem.co.za BE

Manufacturing 307

f gr

Building

Brampton Brick has more than 100 years of hist manufacturing facility in the United States. Keith president of strategic planning how the company continued emphasis on quality and service to pa 308 Manufacturing

Brampton Brick Ltd.

for owth

tory in Canada and recently opened its first h Regan learns from the company’s new vice y plans to use diversification along with a ave the way for future growth

Manufacturing 309

310 Manufacturing

Brampton Brick Ltd.

A

century ago, Brampton Brick was producing bricks at its Ontario plant, a facility that today, thanks to repeated expansions and significant investment in automation, has the capacity to be the largest single brick-making facility in North America, capable of producing 300 million bricks and brick equivalents each year.

In 2008 Brampton opened a second manufacturing facility in Farmersburg, Indiana, a fully automated plant capable of producing 100 million modular blocks annually.

The production capacity and experience is part of the foundation of a strategic growth plan for Brampton Brick, one that includes diversification into concrete-based products such as landscape pavers and architectural accent pieces as well as a continued focus on operational excellence that will allow it to maintain high standards for quality and customer service.

“Our strategy going forward is all focused on growth,” says Frank Buck, senior vice president of strategic planning at Brampton. Buck joined the company late in 2009 after a decade with a competitor. “We’re looking at a diversification strategy to help us do that, and over time we’ll become more of

Manufacturing 311

312 Manufacturing

Brampton Brick Ltd. a masonry products business that provides a full array of concrete-based products as well as clay brick products. We want to grow our share of the wall out there.”

That wall includes a range of landscape and building settings, from residential and commercial to high-end institutional buildings—especially in the growing healthcare sector—where architects are increasingly embracing new products to add color and interest to buildings and also to help buildings earn LEED points as green buildings. “If you look at the greening of North America and the greening of construction industry products,” says Buck, “everyone is very interested in being able to qualify for LEED points, and there is a lot happening around recycled and reclaimed products and also about how well exterior materials perform in terms of energy efficiency.”

Brampton Brick’s geographic footprint includes large swaths of both Canada and the US, where it serviced the construction market even before it opened a US manufacturing facility. The weight of its products and the high cost of transporting them limits its range somewhat, though on some higherend products, the margins are robust enough to enable shipping to markets such as New York City.

The competitive marketplace, meanwhile, is crowded, and one of the challenges Brampton faces is to cut through the clutter. While there are fewer companies with the capabilities to make the range of specialty products Brampton offers, a typical distributor may carry bricks from as many as 20 different manufacturers. “Coming out of this recession, there will likely be fewer, but a lot of dealers carry many of the brick lines,” Buck says.

Brampton has long sought to distinguish itself on quality and service. “There’s no point in having great products if you don’t have the service to stand behind them,” Buck adds. “You have to back up quality with service. That means delivering the right product on time and being innovative in terms of size, color and texture.” Innovations include through-body colors instead of painted-

Manufacturing 313

00 www.bus-ex.com MARCH 10

314 Manufacturing

Brampton Brick Ltd. on surface color, for instance.

Brampton spends a lot of time and resources ensuring it is getting the most out of the costs it puts into its product and supply chain. “You have to be competitive on price, and at the end of the day that means being sharp on costs,” Buck says.

That means trying to reduce the two largest costs a brick-maker faces: labor and fuel. Clay brickmaking, in particular, is a “very punishing process” that requires a lot of fuel to create very high temperatures in the kiln over a long time. “We’ve done a lot of experimenting with using different

testing them to ensure they meet relevant North American standards, which in turns helps it meet code requirements when used in construction settings. The company also employs a ceramics engineer who works with a team of people who are dedicated to testing and checking the recipes and formulations used to make the finished product.

Managing the flow of production is another challenge, with Brampton making the 20 percent of its inventory that makes up 80 percent of its sales for inventory while also

“We’re looking at a diversification strategy, and over time we’ll become more of a masonry products business that provides a full array of concrete-based products as well as clay brick products. We want to grow our share of the wall out there” types of gases to fuel our plants, be it methane or pet coke or propane,” Buck explains. “You’ve got to manage your kiln properly, and that means a lot of maintenance to make sure there are no leaks and that your burners and valves are running as efficiently as possible.”

The industry has also embraced automation as a way of reducing labor costs. Traditionally, clay brickmaking has been a labor-intensive process, with bricks having to be bundled before they are placed in the kiln and again when they are done being fired. “The old days of having 100-plus people working in a brick plant doesn’t work in this marketplace.”

In fact, Brampton’s Farmersburg facility is “as modern as any you’ll find in the world today,” Buck states. Up and running just over a year now, the plant is fully computerized and automated, with the facility capable of being run by as few as a dozen workers, a number that would likely only double even if output was boosted by adding additional shifts when the market warrants.

Brampton also invests heavily in quality assurance, continually taking products out of production and

making other products to order. To help make that possible, Brampton relies on its field sales representatives to keep up to speed on the status of building projects for which it may be asked to bid on providing product.

“It’s a dynamic process,” Buck says. “You need to have sales reps in place who can provide a lot of market intelligence and have great relationships with contractors to make sure we’re in the loop and have good advance knowledge of when a contract might be coming onto the market.”

The economic slowdown and the construction recession in particular have hit the brick business hard. Residential housing uses the vast majority of brick and related products, and that market may remain depressed for the foreseeable future. “We’re using this time to do the up-front missionary work and let people know that we’re on the ground in the US now with clay bricks and concrete masonry products ready to service that market.” www.bramptonbrick.com BE

Manufacturing 315

316 Manufacturing