With 2009 marking the 25th anniversary of German storage solutions specialist SSI Schaefer in Asia, Bob Gill takes a look at the evolution of a company that has stamped its mark across the region's warehouses.

 

Brian Miles knew he was in Asia when his business partner informed him that the warehouse in Singapore's Genting Lane, which was to be base for their new material handling distributorship, must not open until after 10 o'clock on the first day of operation - September 1, 1984.

 

"He had consulted a Chinese almanac, which said that it would be bad luck if we opened before that time," Miles now recalls with a chuckle.

 

Well, it seems that the almanac got it right, because that small Singapore distributor has over the last 25 years been instrumental in expanding and coordinating operations over a vast region - from the sands of the Middle East down to the Australian bush - as Asia Pacific headquarters for German storage solutions specialist SSI Schaefer, with Miles in charge as regional director.

 

The Asia Pacific arm is now a key part of a global company that for the past three years has taken the number one position in the league table of the world's materials handling systems suppliers, as assessed in the annual survey by Modern Materials Handling magazine (the US-based sister publication of Logistics Insight Asia).

 

In 2008, SSI Schaefer reported worldwide revenues of USS$2.51 billion, up from $2.41 billion in 2007, with the acquisition last October of systems integrator and software provider Salomon Automation helping the company to consolidate its lead at the top.

 

In its core business, Schaefer supplies a comprehensive range of products - from basic selective racking up to sophisticated automated systems for high-bay warehouses - to solve the storage problems of some of the world's leading companies.

 

GETTING STARTED

"I had been to Asia a few times before 1984 and I could sense the promise of the Asian Tigers, as they were called back then, and I thought that Singapore was the right place to be and a good springboard for the region," says Brian Miles.

 

His hunch proved correct, because within a few short years, aside from Singapore, business opportunities were appearing in Malaysia, Brunei and Thailand, driven mainly by multinationals attracted by the region's low labor costs and making major facility investments in Asia.

 

When establishing operations, foreign executives tended to prefer the quality systems that they were familiar with back home, and with the reliable and reputable storage systems from Schaefer falling into that category, its Singapore distributor was starting to see significant business growth.

 

"By 1989 we were getting quite stretched," admits Miles. And so with the welcome financial backing and support of the German head office, Schaefer was able to replace several of its regional distributors with its own companies.

 

"It was always my and Germany's philosophy to establish our own companies in Asia, because there's only so far you can go with distributors. So Schaefer
began to buy shares in the Singapore company, until by 1994, we were a wholly owned subsidiary."

 

The basic rule in deciding whether to set up in a particular country was straightforward - was there sufficient demand in that country to justify establishing a subsidiary? In most cases, the answer was yes.

 

Today, Schaefer has an Asia Pacific network of 17 regional offices operating in 13 countries, and Miles cites the "fantastic support" of the shareholders that enabled the company to grow to its current position.

 

RAMPING UP

While the foreign bases of some European companies are often kept on a tight leash, offering little more than basic sales and service, Schaefer gave Brian Miles and his team significant autonomy, even to the extent of designing and developing custom products for the Asia market.

 

A particularly significant decision was that to set up manufacturing facilities in the region. The Simpang Renggam factory in Johor, Malaysia, began operations in 1998, with a China factory, in Kunshan, following suit seven years later, in 2005.

 

Being able to design and now manufacture storage solutions at a competitive cost, the products were soon in demand across Asia, the Middle East, and even Africa, by companies that preferred the Schaefer brand - and its connotations of safety and quality - over lower cost, local offerings.

 

"In Asia, and especially in places like China, there will always be suppliers that are cheaper than we are. But with the lower quality steel that they use, is it worth the risk?" cautions Miles.

 

"We have a corporate product liability guarantee from Germany that covers all our factories, and we only supply equipment that has been designed in accordance with the strict European (FEM) guidelines. Hence, customers have the assurance that if the pallet racking is hit by a forklift, for instance, the frontal impact won't collapse the structure and endanger health and safety," he
affirms.

 

Aside from the good quality/competitive cost model, another factor that has contributed to Schaefer's longevity and progression in the region is a solid local presence. Establishing a company in a country implies a stronger and longer term commitment than is possible through a distributor, believes Miles, which can only be as good as its personnel, and whose performance can be highly sensitive to staff turnover and competing commitments.

 

"We are not going anywhere; we are directly in all these marketplaces and so can be very responsive in providing the planning, design, project management, and support for our storage solutions." Now, except for highly automated, AS/RS type systems, the vast majority of Schaefer products consumed in Asia are manufactured in Asia.

 

TECHNOLOGY CHOICES

While selective racking systems, which give 100 percent access to single-deep stored pallets in the warehouse, remain Schaefer's "bread and butter" product in Asia, more and more customers are realizing the benefits of more sophisticated systems which, for the right applications, can provide tempting return on investment numbers.

 

Mobile pallet racking is one such example. The selective racks are mounted on mobile bases which run on rails in-laid to the floor. The bases are power driven and can be operated via handheld remote controls.

 

On first glance, with a cost that can run to four or five times that of selective racking, mobile racks may appear to be a high-tech luxury option that few are willing to pay for. But a closer examination of the pros and cons, which Schaefer encourages, can reveal a much more attractive proposition.

 

For an operator looking to build and operate a new storage facility, selective racks, while certainly being a low cost option, generally  only give around 32 percent actual storage in the warehouse, as the ease of pallet access is traded off against low storage density.

 

Double-deep racks up the storage density to 43 percent, while drive-in racks can extend this to 50-60 percent. Both of these options, however, reduce pallet storage flexibility and case picking opportunities.

 

By only using one aisle to service four, five or more double entry, mobile racks can take the storage density up to the 60-70 percent levels, i.e. double that of the selective pallet racking option.

 

For a 3PL, that translates directly to more revenue, since more customer goods can be stored in the same facility. And for a manufacturer, it means being able to store the same amount of pallets in a much smaller facility, something especially significant for expensive to build-and-run cold storage
warehouses.

 

"So you need to look at the total capital expenditure picture, not just the price," emphasizes Miles. "When you take into account the land cost, the building cost, the operating cost, mobile racking can work out to be a much better investment decision for certain customers and applications than just selecting on rack price alone."

 

In order for customers to reap the benefits of the more advanced solutions, they should consult Schaefer at a very early stage in the planning cycle, before the facility is designed and built, Miles recommends, so that the storage technology choice can have an input to the building sizing decision.

 

As for industries that deal with high volumes of compatible product and limited SKUs, such as soft drinks and edible oils etc, the Schaefer Satellite System (SSS) provides high density storage while enabling significant forklift handling and travel time reductions compared to drive in racking systems.

 

In the SSS, the satellite mobile trolleys run on rails and shuttle pallets to the correct location within the racking, which can run to more than 50 pallets deep. Once a satellite reaches its destination, it stops and lowers the pallet down onto its rack position, before returning to pick up the next pallet. With the aid of
an RF controller, one forklift driver can operate multiple satellites.

 

The system was implemented by an Indonesian tobacco producer looking to increase storage density. Taking out the aisles that were required for the previous drive-in racking system, it was able to increase storage by some 30 percent with the SSS.

 

In June 2008, Korean children's' clothing manufacturer Dreamsco introduced the Schaefer Satellite System to its new 3,400 pallet warehouse in order to deal with the very high throughput volumes inherent in peak seasons.

 

When it comes to item-picking technology, Schaefer has seen particular success with it's "A Frame" product. After installing the first system - for Australian Pharmaceutical Industries (API) - in 2003, it remains the only supplier of this technology in Asia.

 

The A Frame is geared towards sectors characterized by limited piece picks and high order frequency, which is why pharmaceutical manufacturers have been keen adopters. Instead of the pharmacy retail outlets keeping a full range of stock, they can order from the warehouse and have the drugs delivered to them within a few hours.

 

At API , the A Frame has enabled fast order picking at rates in excess of 7000 units per hours, low picking errors, and a high throughput of 23 orders per minute, all of which translates to full and on-time delivery to customers.

 

ASIAN ADVANCES

Looking further ahead, perhaps to the next 25 years, Miles points to continuing societal changes in Asia that are more than likely going to help drive Schaefer's business further in a positive direction.

"In Southeast Asia, you've got Indonesia, the Philippines, Thailand, and Vietnam, all of which have huge populations and great growth potential. Increasing industrialization and prosperity translates to higher disposal incomes, which is what drives the lifestyle changes that trigger the demand for things like convenience foods, lUxury goods, houses, hotel stays, etc.

 

"Just think of all the items that are required for a new hotel to go into operation ," says Miles. "These all have to be stored at least at some point on their supply chain journey."

 

Seemingly unrelated business dynamics also have an impact on Schaefer. For instance, whereas not so long ago it was the manufacturer that had the power in the relationship with retailers - I am going to supply you with this much product and you have to have a warehouse to carry all the stock - now, it's the retailer that's king.

 

Today's manufacturer is told by the retailer: if you want me to sell your product then you have to deliver it to my store when I say. That's when he is likely to turn to a 3PL that operates a multiuser warehouse and has the systems and technology to make frequent, on-time deliveries.

 

"Just take a look a 7-11 - and there's thousands just in Thailand - they have 2000 line items in a 200 square meter store, and these need to be eplenished twice a day. So you can imagine the upstream picking activity that's required in the distribution center.

 

"And its factors like these that are driving our business in Asia, and driving market development to bring out more sophisticated storage solutions," says Miles. "So going forward, I am extremely positive about this region for Schaefer as there is still many more opportunities for us to exploit."

 

CONSTANT CHALLENGE

The Schaefer chief is proud of the highly localized nature of the company's Asia human resource base, which is a contrast to the early days when a high number of Western expatriates were required to come in and fill senior positions. Today, all country managers are domestic nationals with limited expatriate support.

 

"Storage is not a particularly sexy industry but we find that people do tend to stay and have pretty long careers at SSI Schaefer," says Brian Miles. "I think that what keeps people going is that every customer is different and every customer requirement is different."

 

"So there's this constant challenge - what can I do here, how can I solve this problem. And there's satisfaction from seeing the whole cycle through - the initial consultation, the design, the build, the installation, and right through to a fully working system."

 

At SSI Schaefer, there is no mandatory retirement age for employees. Indeed, back in Germany, 85-year old Gerhard Schaefer reportedly still goes into the office every day.

 

I don't know whether Brian Miles will still be keeping his keen eye over the business in another 25 years, but as of today, he and all of the many, many staff across Asia Pacific who have contributed to the company's success in establishing itself as a force in storage solutions, can look back on a quarter century of considerable achievements and much success.

 

 

Article written by Bob Gill, Logistics Insight Asia

 

For more information on SSI SCHAEFER, our product and service offerings, please visit us @ www.ssi-schaefer-asia.com