Chinese quality

24 April 2008

You never know where small, seemingly insignificant events will lead. That is what Braden Murrin, one of two directors of Advance Scaffolding in Australia, might have thought of an enquiry his co-director, Maurie Botte, made at a hardware trade show in Cologne, Germany a few years ago.

Mr Botte asked an exhibitor from China, William Li, if he could make castors for the scaffolding towers Advance then manufactured in Australia. Within three years, Advance’s entire product range was coming out of Advance’s 100%-owned factory in Guangzhou in southern China. The consequences of that show enquiry for Advance, which sells, rents and installs aluminium and fibreglass scaffolding, are still evolving.

Successful manufacture in China of castors led to tubing, which led to transom assemblies, which led in turn to container loads of components arriving in Sydney for assembly. Three years ago Advance closed its Sydney factory and moved all manufacturing to the factory in Guangzhou, owned by subsidiary Sino-Advcorp. And, yes, Mr Li is still very much in the picture; he is its general manager.

Mr Murrin says the shift to Chinese production opened the world. “We could see that the world market was there for the taking,” says Mr Murrin. “The product coming out of China was far superior in terms of quality.”

Mr Murrin stresses two features contributing to product quality. One is a wall thickness is 2.6 mm, giving benefits of both more rigid structures and longer frame life, “the reason most rental companies buy our equipment.” The other is fully TIG (tungsten inert gas) welded joints, the basis for the company’s life-time guarantee of its frames. “We’ve had no returns, no joint failures, in all the time we’ve been manufacturing,” he says.

As important as quality undoubtedly is, it can sometimes be perceived as a benefit only in the future. Purchase price is a different matter. Advance found that it could offer its 3 m aluminium towers out of China in the Sydney market for A$2700. The competition’s price was 30% higher.

The news gets better, or worse, depending if you’re a buyer or competitor. Mr Murrin says the company sells 3 m towers directly from its China factory for US$1200. The competitive advantage of that price, even with equal quality, has allowed the company to turn its marketing sights on the rest of the world. The company sells in Finland, Italy, Russia, Germany, the Baltic countries, The Netherlands, the US, Singapore, Fiji, New Guinea, Malaysia, and Vietnam.

The drive to the cost/quality position that appears to explain its rapid growth came about slowly, and was actually triggered by competition from China. Chinese companies were selling lightweight scaffolding that was undercutting Advance’s bread-and-butter 2600 series. Advance responded by bringing out a lighter weight product, the 1600 series, that is built to Australian and New Zealand’s strict occupational safety and health standards - and cheaper.

Although the company’s success might seem overnight - going from A$600000 turnover when Mr Murrin and Mr Botte took over the company seven years ago to A$15 million today - its move into China was gradual. Castors, tubes, weldments, assemblies, and then complete, ready-for-sale product. Note, too, Mr Murrin’s words: “Our expansion was slowed by dollars; we had to fund our own growth. Scaffolding companies in Australia have had a ‘shady past’. That made it difficult for banks to accept us.”

Consequently, “we have said, ‘we are not a scaffolding company. We are a first and foremost a manufacturing company.’” The effort to cast off the image included changing the company name six months ago to Advcorp, and the company trades under several brand names, including Advance Scaffold and Alscalf, which has the motto: Scaffold the World.

Has perception of quality of Chinese manufactured goods been a factor in sales?. “Yes”, responds Mr Murrin, “but I’ve had no resistance in the past 12 months.” He continues; “Because it is our factory, we determine how things are done, we determine when things are ready to ship, we determine the quality.”

On top of the A$10 million of revenue from Australian operations, it gets A$5 million internationally. Where is it all going? Mr Murrin says they plan to triple international sales in the next 12 months, mostly in Europe and the US, which he sees as an “untapped” market. The company is negotiating with a couple of large scaffolding companies, ones that sell, rent, and erect. “They could buy a lot of equipment from us,” he says.

He seems equally optimistic about Europe, pointing out that buyers there understand the benefits of electrically safe, non-corrosive fibreglass equipment. Advance is one of the few companies in the world to make fibreglass scaffolding. Italian company Genex is the other big player in this market - although not named directly by Mr Murrin - but he says Advance offer price-quality benefits.

Recent orders

Supporting his optimism, he told AI that they “received today the order for the fourth 40 ft container of fibreglass scaffolding from Clow Group Ltd.” Clow is Advance’s UK and Ireland dealer, and a company they met for the first time in January this year.

Advance has also found some success in mainland Europe, having just sold a US$167000 container load of fibreglass scaffolding through Clow to Boels Rent of The Netherlands, destined for use on the German railways.

In the US, meanwhile, MidStates Distributing has just ordered a container load of its Speedy product. Sales activities in the US began to bear fruit at the end of September, capping an effort that Advance started 3 ½ years ago. “The US is our hardest market. The European market already knows aluminium and fibreglass scaffolding. It loves it.”

“Most scaffolding in the US is lightweight steel. Our aluminium scaffolding is about 30% more expensive to buy, but it has a 30-year service life. Steel’s is about 10 years. We have scaffolding in our rental fleet that is twenty years old.”

Is the price advantage long-lasting? Mr Murrin expects prices for his scaffolding to remain stable, unaffected by rising labour costs experienced, perhaps, by others manufacturing in China. “Cost of labour in China will not rise. Thirty workers knock on the door of our factory every day looking for work,” he says. “The only thing that could affect price is the world market for aluminium.”

What about changes in product quality? “Chinese workers are the greatest in the world. They are keen to learn how a new product goes together and how to make it.” Given the implied motivation of all that, as you might expect, changes to better exploit the Chinese operation are planned, although Mr Murrin will not provide details at the moment. A move to widen the product range would seem the most obvious conclusion to draw.

Advance isn’t working in complete isolation. Mr Murrin says Advance has met some of its bigger and more established competitors to explore sub-contracted manufacture. These companies, he says, have tried to manufacture in China and failed. “Ours being 100%-owned is the difference,” he says. “The hardest part was to find the right suppliers and to get the right materials.”

“We are negotiating with a couple at the moment. We don’t exactly hide the fact that we are in China or our prices or our quality.” He adds, “the majority around the world are talking about what we’re doing. There is opportunity to form alliances and, when the time is right, to help each other and work together.”

Do those alliances include the possibility of entering the business of powered access? “Not for Advance,” says Mr Murrin, “A lot of people said powered access would take over, but we see increasing demand for scaffolding.”

So a chance meeting in Cologne sparked a revoultion at Advance. Many people say the benefits of trade shows would decrease as information technology links the world more easily, but one suspects you’d have a hard time to convince Advance of that.

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