The automotive industry certainly suffered during the global financial crisis and the knock-on effect for many lower tier affiliates was devastating. Jackie Barclay, managing director at Acoustex, tells Andrew Pelis how reduced order volumes lead to a re-think on inventory strategy that saw the company ride out the storm.
The effect of Black Economic Empowerment can be felt across South Africa, with its reach now starting to have an impact on the Rainbow Nation’s automotive industry— and nowhere more so than at Acoustex.
Established back in 1969, the Port Elizabeth-based business has long supplied the OEM market with sound deadening and insulation components; but it came to a watershed in 2005. Managing director Jackie Barclay, who had joined the company a year earlier, takes up the story.
“Acoustex was originally owned by a group of companies culminating in Formex Industries; but they had a focus on bottling soft drinks in South Africa and adjoining countries for one of the world’s major soft drinks and decided to leave automotive component manufacturing,” he explains. “At that time, Black Economic Empowerment programmes were coming to the fore across the country and Ukuvula decided this was an opportunity to gain entry into this market.”
Ukuvula Investment Holdings is a black-owned investment holding company also based in Port Elizabeth, which has a diversified investment portfolio ranging from automotive components, textile technology, hospitality & leisure and construction, to medical and healthcare products and services.
By purchasing Acoustex for R20 million, Ukuvula became the first BEE company to enter the automotive fray on a first tier basis and according to Barclay, they have since acquired several other automotive component manufacturing companies to strengthen their hold.
One of Acoustex’s most attractive assets was its involvement in the development history on Melt-on pads and PU insulators since 1969, not to mention an impressive list of customers including Mercedes-Benz, BMW, Toyota, Nissan,General Motors and Volkswagen.
“We are 99 per cent focused on automotive,” affirms Barclay, “although there are also markets outside of automotive for our products, including possibly the manufacturing of bitumen roofing sheets.”
Barclay joined the company in 2004 to help prepare the business for a buyer. “We had the customer base in place already and our involvement with Black Economic Empowerment is now helping us to compete for new business. Without a doubt, given the incentives within South Africa for BEE, we have gained a commercial edge on our rivals and at the same time, we are encouraging our suppliers to become BEE certified.”
Acoustex has thus far achieved a BEE Rating of 3; and Barclay and his team are now acting as mentors for the company’s next generation of leaders, many of whom will come from previously disadvantaged backgrounds. “The idea is for people like me to find and mentor people and to nurture them so that eventually they can manage operations. We have a few ladies that we put through university, and we have already promoted people through our business,” Barclay explains.
Training also aims to improve everyone’s performance and Barclay says that the average employee has been with the company for over 10 years—experience that allows the training to focus on new skills, like technology and statistics. “Through our goal alignment training each employee can learn what to do and how important quality is; and we see the results of our efforts from the customers,” he asserts.
The last two years have been anything but straightforward for Acoustex, however. As 2008 unfolded, it became apparent that the automotive industry was taking a large hit from the global economic crisis and as a Tier One supplier that had a damaging effect on the business. “Today we operate with around 120 employees but that figure was much nearer to 200 before the automotive market crashed,” says Barclay. “While we did not lose our customers, we did lose volume of orders and turnover reduced by somewhere in the region of 35 per cent during this period—although we are now slowly starting to see an increase in business again, helped by Volkswagen’s launch of a new Polo model.”
Aside from the inevitable job casualties, shifts reduced from three to one. This was a time for reflection—for Acoustex to look closely at all aspects of its operations. “Before the problems, it was common for us to operate our factory with R6 million to R8 million of inventory, but we now operate a system that means we only hold around R1 million at any time,” Barclay says. “It is a constant challenge to reduce our product cost while maintaining margins; and we have looked to buy materials direct from the suppliers rather than using middleman agents, which has reduced our costs on materials like EPDM rubber, bitumen and ferrite.”
The move was part of an ongoing lean manufacturing effort at the 9,500 square metre facility, which still sees regular training for the workforce. “We have adopted both lean and six sigma, and we run mission directed work teams that educate all of our employees in goal alignments and targets. We now carry little stock and operate single flow processes with a pull system focused on order and delivery date and an emphasis on 5S for our staff.”
It is efficiency that relies on suppliers delivering on a just-in-time basis—and the quality of each vendor is equally important to Barclay, who says that Acoustex expects the same of its suppliers as the OEMs expect of them. “Our customers expect us to be rated on quality and the same applies to the supplier,” he says. “To that end, the company is TS16949 accredited, meets the most stringent customer requirements and has been certified to ISO14001 standard.”
Barclay feels that the automotive sector is on the road to recovery—an assessment that is reflected by his current market valuation for Acoustex. “We are now back to roughly the value we were bought at in 2005, but we are aiming to get to quote on additional new business of around R35 million shortly. We have confidence that the final quarter of 2010 will see increased revenue and that this will also continue into 2011.”
Barclay says that the future could open doors to new opportunities like seat foam and felt-type insulators, which he concedes will be more technically challenging to manufacture, although he is confident that the facility is more than capable of achieving this. “We are determined to be acknowledged as a world class supplier of sound deadeners and insulators, PVC and rubber extrusions, and extruded sealants, by focusing on the tenets of quality, speed, cost, safety and morale.
“We have been in this type of business for 40 years and focus on producing parts at the right price, the right time and of the highest quality, which is our main focus and our greatest advantage,” he summarises. www.acoustex.co.za
