Tuesday, July 24, 2012

The continuously innovating mindset

Business Times: Tue, Jul 24

EVERY business owner wants to do well. So when times get tough, it is not an option to just "sit, complain and expect to be spoon-fed". As Pauline Shu, director of surface finishing firm Cel Coating Industries (Cel), tells it, that was certainly the group's firm belief.

When it became clear in the early 2000s that the hard disk drives segment, which used to make up half of Cel's revenues, would eventually ship out of Singapore, she and the firm's management put on their thinking caps and got down to making bold changes.

Internal research and development began in 2004 and from 2006, Cel branched out into new lines of surface engineering. In seven years, the firm transformed itself from a supplier to just two sectors - electronics and hard disk drives (HDD) - to one providing higher value finishing of parts to the biomedical, beauty and cosmetics, automotive and aviation sectors.

The "blood, sweat and tears behind bringing in new businesses" has paid off and Ms Shu is now confident that they made the right call. The group of 20 to 30 players which used to supply parts to hard disk makers has shrunk to just two; Cel's revenue from HDDs shrank from 50 per cent to zero.

Prior to this transformation, Cel had already made one leap from its earliest days of surfacing bicycle parts and plating oil drum caps, upgrading to serve the multinational HDD makers.

But its latest round of diversification, which became critical as HDD's diminishing returns and quarterly drops in prices grew evident, required more than process innovation.

Knowledge was needed to break into new markets too, says Ms Shu.

To mine that knowledge, the firm needed researchers, its first of whom was seconded to Cel in 2004 from an Agency for Science, Technology and Research (A*Star) institute. Under the Technology for Enterprise Capability Upgrading (T-Up) programme, the scientist's salary was partly funded by the government for two years.

He chose to stay on after the secondment and now heads Cel's R&D team, the only in-house R&D team among local surface finishing companies. Since then, Cel has had two other scientists seconded from A*star and has hired others to beef up its team too.

To keep the key management team stable, Cel launched a share option scheme five years ago. All staff offered share options then are still with the company today.

Building that talent has been critical, says Ms Shu, 33, who now spearheads business development.

"I think my team has been very stressed," she laughs, explaining how Cel chooses not to say "No" to clients' requests for services out of its current expertise, on the basis that all demands are worth evaluating in case any present a compelling business case for fresh expertise.

"That's been a big factor in how we've managed to broaden and diversify our business base," she says. "I don't want to do what my competitors are already doing."

To serve the biomedical sector, Cel developed its own method of coating with teflon, the guide wires used in heart surgery to push stents through long blood vessels. It is a high-volume, consumables business, for which Cel currently has no competitors in the region.

New business lines can also be bought. Earlier this year, Cel brought over the production lines of the once-listed Wepco, after real estate firm HSR's reverse takeover of the electroplating company.

"We acquired the business because I love their customer base. They do a high-mix low-volume business, but more importantly, it gave us access to an entirely new customer base and a foot into the aviation sector," Ms Shu says.

To Cel, raising productivity demands continuous innovation. "You're really competing on a global scale. If you don't innovate, improve your cost structure, you'll lose out to someone else somewhere," she says.

The greatest hurdle to clear is mind-set. "I'd say the challenge was in getting the team out of its comfort zone and into one where they are continuously inundated with new challenges on a weekly basis," she says.

Cel runs multiple improvement projects each year. Its annual water and electricity saving projects trim utility bills by about 5-10 per cent, offsetting the rise in utility prices. Processes are changed so that chemicals stay clean longer and can be used for more cycles, saving expenses on chemicals and waste disposal.

In March, Cel launched a project to automate and redesign its work flow with funding support from Spring Singapore under the Capability Development Scheme. This included automating the production lines it transferred from Wepco to its Benoi Place premises.

By designing and customising production lines itself, Cel could use space more efficiently and ensure that each stage of production links seamlessly to the next. It estimates 50 per cent savings overall in transport time and factory space.

While Cel took over Wepco's full production team of 17 workers - bringing its total Singapore staff strength to 98 - it uses only half the number of workers previously needed to man each production line.

Ms Shu says workers feel less tired and are more productive. For instance, they no longer do the backbreaking work of manually sorting 30-40kg barrels of finished parts into 10kg nets which they then lift in and out of water as part of a rinsing process.

That has been replaced with a suspended moving hoist that lifts and lowers batches of parts as it moves down a row of water containers.

Work environment matters greatly, so Cel's fume scrubbers are strong enough to ensure that its factory floors are well-ventilated. They are also brightly lit and as far as possible, air-conditioned. "We want our workers to be healthy and safe. We want good workers to come and stay," Ms Shu says.

Its job-rotation system trains workers to operate all of Cel's production lines. "They can upgrade their skills and I'd be happy to pay them more. I want to have a stable workforce, that's very important," Ms Shu adds.

This is especially so, given that the government has further restricted fresh hiring of foreign workers. As both a Singaporean and a business owner, Ms Shu says she empathises with views on both sides: that Singapore's social infrastructure cannot cope with greater influx of foreigners, but also that they are a crucial labour pool for businesses. Policymakers are now "in a Catch-22 situation - damned if you do and damned if you don't", she says.

Retaining workers

Cel hires a wide range of nationalities - from China, Bangladesh, Myanmar, the Philippines and Indonesia - so its workers have had to adapt to work together. But some have worked here long enough to take up permanent residence and even citizenship. Developing, upgrading and retaining workers helps, Ms Shu says.

"To me the writing was on the wall. It's going to be tougher to get workers and the higher levy is here to stay. But while the policymakers have done this, they've also done their best to help companies," says Ms Shu.

In her experience, government agencies are happy to help if there's a genuine, deserving case for help. "You cannot sit there and complain and expect to be spoon-fed. If you've done your best and still can't survive, that means your business strategy is wrong, I'm sorry," she adds.

But she can also see how very small enterprises, helmed by first-generation owners 5-10 years from retirement and with no succession planning, may need further assistance with grant applications.

Cost savings and grants aside, Cel has received affirmation of its innovation efforts from customers. One German MNC, which outsourced the plating of the sensors it makes here to Cel in the late 1990s along with plating know-how, had one of its bosses visit Cel last month. When he saw the inexpensive innovations made to the production line here, he asked that Cel replicate these for the plating line back in Germany too. "To us, it's a validation of how much we have grown as a company, so we're actually very happy to share with them what we've done," Ms Shu says.

It's work that will continue. "I believe in manufacturing in Singapore. I believe it's here to stay, especially for the higher value-added items," she says, pointing to how Germany's economy has held up better than its eurozone peers thanks in part to its manufacturing sector.

"For Cel, I want us to be manufacturing and growing in Singapore, for at least the next 10 years," she says.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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