It is one of the biggest packaging industries. As far as packaging, everybody
knows that there are 6 or 7 categories ? glass, metal, flexible, paper, plastic,
etc., and then the corrugated worldwide has been growing 3% to 4% per annum.
In majority of the South East Asian countries, the corrugated industry started
only after Second World War, when there was demand in the market especially
for exports. In Hong Kong now, the requirement of corrugated packaging is very
minimum. Majority of them are manufacturing in Southern China. In China, if
I remember in 1984?85 the total consumption for corrugated cartons was less
than 2 million tons. But today, after about 15 years, the figure has gone up
to 8 million tons. At one time the growth rate was 15%, 20% or even 30%. But
recently it has come down, may be about to 9% or 8%.
In Indonesia, the industry started only in the late 60s and as a matter of fact
the first real corrugated company started only in 1972. The name is called R
P. Group. That is our company. The growth rate in Indonesia is very fantastic,
especially in 1991?92. Even after 93, we have 10%?12% growth per annum. When
we come to 95?96 the figure went up to 20% per annum which is over a million
tons. But unfortunately in 1997 when the financial crisis creeped in Indonesia
it got hurt the most. The demand has suddenly dropped about 40%. Fortunately
in 2001 the figure has gone back to million over.
In Malaysia, the corrugated industry started in mid 60s. There were about six,
seven Corrugators. Because of the strong demand, a lot of new entries came in.
Today there are about over 60 Corrugators ? out of which 53 are in the market.
The Philippines, though also affected by the crisis, but in terms of demand
it is not dropping so much as the other countries. There is still about 5%?6%
growth. As per the information I got ? in 1998 they still have something about
500 thousand tons per year.
In Singapore, the first corrugated manufacturer was in 1953 by an Australian
company called ? ACR Company. The real demand grew after Singapore became independent.
The government gave lot of incentives to foreign investors to set up their manufacturing
units in Singapore. The market has grown. The base was small in 70s. If we summarise,
there was about 15% growth. When you come to the 80s, even Singapore had negative
growth. But as the corrugated field grew a little bit, we have about 8% to 9%
growth. When you come to the 90s, up to 94, in five years, they still had about
5% to 6% growth. But unfortunately after 94 starting 95-96, the market dropped
a little bit. We have negative growth about 5 or 6% per annum. This was even
before the crisis. Today the market is about one fifth of what we had in 1994,
approximately 230 thousand tons.
In Taiwan, the market is quite okay. Today it is close to almost 2 million tons
consumption. They too have computer related industry over there.
Thailand also has been growing because of their quite big size and population.
There, manufacturing costs are also very competitive but only the shortfall
I personally think is, they have infrastructure limitations. If you know Thailand,
there is only one port that can reach you to Bangkok. Today, their consumption
of box requirement is getting back to 900 thousand tons. This is very briefly
about the situation, the local demand and past brief history of the industry
in South East Asia.
We go back again to the impact on the corrugated industry. In the manufacturing,
corrugated industry has been changing. There is reduced market demand. Everyone
is using lighter weight. Only USA is maintaining heavy grammages. But in Europe,
it is now down to about 510?520 gsm. 2?3 years ago it was 550?570 gsm. Imagine
550 to 500 is 10%. Even if you grow 2?3% in terms of area, that offsets in terms
of tonnage.
In Indonesia, market has grown. But the price is still competitive. Because
the added capacity is faster than demand. In China, box demand is very high
? 15% to 20% per annum constantly, for the last 6?7 years. But the box makers
in China, now should be very efficient to make money.
Philip Wong,
Founder President, ACCA
[ back ]
The expectations for us are to do better job. Our quality is still very high. The customer still wants us to do better and better. Also better service. One issue is JIT, Just In Time. It started with Japanese. Now customer still expects the impossible I order today. You deliver yesterday!!
There is another issue ? Safety. For example, recently one of the Japanese toys ? was exported to United States. And that was detachable. One boy swallowed a part of it and got choked to death. And that company was sued. The toy may be 5 dollars and the fine is one billion US dollars. Where do you have the billion? One of the things if you use toxic inks for the box, you are in trouble. Safety ? sooner or later it will come.
Globalisation ? it is definitely coming. You can see in our industry. Standardisation, is one. Everybody has a range. Don't misunderstand ? everything is same. You can make a very very strong and good looking box and on the other hand you find very very lousy box. But in the advanced countries people in Europe, USA they are about the same. The fluctuation is not that much. In Indonesia, if you buy paper from different mills the quality variation is very very high. In Europe, if you buy medium from anywhere ?even if you have not heard of the mill ? it is the same kind of paper. This is what is standardisation. Both in structure and appearance, now also cost pressure. When the paper price increases we cannot pass on to the customer, we have to try to sequeeze ourselves; cut our costs and make it viable. And with cost pressure, we have no choice but to go for higher productivity.
High accuracy ? you have to be more accurate. To be more accurate, you have to cut down on the waste. Waste is one of the biggest enemies to us. The average waste is 14% if you want to make decent automated packing. We need to be innovative. The resourcefulness ? even if you have every little resources, maximise it ? that is resourcefulness. We got to optimise, fully utilise your facilities. If you have one machine idling and there is no job either, find a job for that machine or get it out. There you have got to optimise. Human beings are part of the facility. As a matter of fact, the most important facility that we need.
Philip Wong,
Founder President, ACCA
[ back ]
We have to cut down our costs regardless of paper price increase. We have got
to deliver on time. We have got to be always amenable, friendly and another
one which is not so urgent but which is coming soon. We have got to think of
the safety. We have the responsibility to make sure our product safe for the
community to use. So all these are the difficulties for us but now there is
an opportunity and which has also popped because of the financial crisis. We
need to change.
When I first came to the industry, not being a box manufacturer, I told my boss
we have to change this and change that. Then someone complained. Wong do not
poke your nose into everybody's affair. We have been making money why the hell
we need to change? We are doing okay. We are making tons of money. So then I
asked my boss. He was at that time 55. He started as an apprentice in the box
plant walking to the factory, later on riding bicycle, then riding motor bike.
When I asked him how do you come to the factory, he said by car. Then I told
him you got to change and go back to bicycle. You cannot maintain your mercedes
benz, you have to go back to riding bicycle. But if you keep on changing, one
day you can arrive in helicopter to your office. If you don't change you have
to go for the bicycle at that time too old to ride. You have got to change because
of the crisis. We have to improve our efficiency when we are vulnerable. You
have to keep on improving.
Our industry has to make boxes as per order. Actually it is not manufacturing.
It becomes servicing sector more than manufacturing. So if we are being squeezed
by the order, there is no choice. Either you want this job or you are out of
this industry. But there is something, which is non?packaging ? where we make
our own product.
In this area, there is a big potential. But unfortunately we don't have good
marketing men. In the developed countries, all the goods, vegetables, whatever,
they are using corrugated but over here in India even in Singapore they are
using bamboo baskets or banana leaf to pack. There is plenty of potential. We
can change it, of course it takes time. A lot of people say well in Bangkok
for export they are using boxes, but for domestic transport they are using banana
leaf. Big baskets loaded up to whole lorry height but when arrived 20% cannot
be used, squeezed out. But in the corrugated box, you can maintain the freshness
of the fruits and you can take the fruit. One which, is just about to ripe and
better. You can market at a higher price. Cut down the waste, you can take the
boxes, But they don't see it. If they don't have that 20% waste or reject, the
price will collapse may be that is another point.
And then we get ready to recover from the crisis. When we are making money,
when we are busy, there is no pressure for us to change. We tend to relax. But
after this crisis the opportunity is being given to us. If we don't use the
opportunity, when we are busy again, we are not ready we have to go to position
ourselves. In short, we have to strengthen internally ourselves. You have got
to get ready.
I end with my so called slogan the future of the box requirement. You follow
these 5 letters QCDES. Quality, Cost, Delivery, Environmentally?friendly and
Safety. This one you should remember. You have got to know your past before
you know the future.
If you are committed, you can go places. All we need to have is patience and
work hard. The automation on the equipment. Depending on the situation, depending
on the own company's capability. You cannot do everything faster. What some
one does, you may not be able to do, you have to pace according to yourself
but one thing I recommend is you have got to have the basic quality because
you cannot get quality because of the machine. Then you have to change. When
you cannot get the productivity, if you are using more people then you are trying
to adjust, justify. Everything can be justified. Everything can be measured.
Then slowly change, you will have a very bright future.
Philip Wong,
Founder President, ACCA
[ back ]