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EIL to manufacturers: Get creative to survive
Caribbean manufacturers must find creative ways to overcome the challenges that they face.
What are some of the things that we can do to overcome some of those challenges? “Some of those things are within our control and some are not, they are government-related,” said Krishna Ramlogan, chief operating officer, Electrical Industries Ltd (EIL). He was speaking at a seminar entitled, Overcoming Challenges for Caribbean Manufacturers, at the Caribbean Investment Forum (CIF) two Tuesdays ago at the Hilton Trinidad hotel, St Ann’s. Ramlogan said the small size of the region makes the lives of manufacturers difficult.
“The challenges affecting manufacturers in the Caribbean is, firstly, economies of scale and small markets, together with import competition. The investment size and economy of plant relate to economies of scale. If you do a small plant, you don’t have economies of scale opportunities and cost of production,” he said. The overall focus of manufacturing as a driver of the economy is an area that Caribbean governments need to look at, Ramlogan said. “The Government needs to look at logistics and supply chain issues. It also needs to look at the support for the sector and, in the Jamaican case and in T&T, where manufacturing is less than ten per cent of growth domestic product (GDP).” Ramlogan said dealing with government agencies from which manufacturers seek approval for various aspects of their operations—Customs, the T&T Bureau of Standards—can be challenging.
Survivors and competition
Ramlogan used EIL as an example of a Caribbean company that has overcome many challenges which are peculiar to the region.
EIL is involved in the manufacturing of electrical cables, lighting and PVC products.
The range of products includes wire and cables, PVC pipes, buckets, tanks and packaging in ten Caribbean islands.
According to Ramlogan, EIL has grown significantly, even during the economic recession.
“So how have we overcome these challenges? We have had some of our best years in the last two years and we have grown the size of our business two times the size it was in 2008. Businesses that survive are the ones that are competitive.”
A competitive manufacturer is what will ensure survival, he said.
“This will determine your security of market and ultimately that is the golden rule. I think this goes to the heart of the manufacturing sector and what we should and should not be focused on. Are we looking at production and technology for products that are 20 years old and we have not invested in our plants and equipment, but still expected to be protected from manufacturers in China that are doing things at a fraction of the cost we are?”
Ramlogan said that productivity needs to be raised to ensure competitiveness. “Productivity is important. What is our labour force size? What are we doing to promote productivity? Those are some of the specific issues.” EIL employed five strategies to survive and stay competitive.
One: it employed more technology and upgraded its plants.
“First thing we did along those lines is used technology and upgraded our plants during the period 2005 to 2007. A lot of other companies have done that as well, but they did that in anticipation of doubling market size, significant growth and going into other markets which they did not match with those capacities. Investing in technology is important if you are building capacity. Then you also need to marry that with others things.”
Two: it sought out new markets.
“We also had a programme in terms of compliance starndards. It has positioned us to go into markets, both in the Caribbean and outside as well. We made a deliberate thrust to grow markets, so when the recession hit, we found new markets to grow our business.”
Three: It cut costs to be more efficient.
“We went on a cost reduction programme and made the business lean and mean. A lot of manufacturers and companies do this during difficult times. I think more companies should be doing this, even when times are good and have the very best production model possible.
“We moved from stock-for-order manufacturers to made-to-order manufacturers. We are dealing with products like copper and PVC, and we felt that we should not be carrying that risk and exposure and that our distributors should do that instead.”
EIL applied a scorecard methodology.
“In terms of management architecture, we found that by focusing on our execution strategy, we set deliberate targets for the business and there was a lot more delivery. We institutionalised the structure of the business, we had right people on bus, a focus on human capital and development and continuous learning.” And, fifthly, the company went on an acquisition drive. “We also decided we wanted to grow by acquisitions. We saw that we would diversify our risks, we would create synergy’s and generate security in terms of size and funds and strength in the marketplace, and, so we went form Trinidad Cable to EIL, then we acquired Century Eslon Ltd Williams Group. Apart from acquisitions, you can cluster by corporations or joint ventures. There are ways to create value and size.”
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