Specializing by Finding Niche Markets Has Been Effective for Some in Taiwan

Despite the widely publicized global financial crisis, with even the three major automakers in the U.S-GM, Ford and Chrysler-floundering and trying to acquire official bailouts, some OEM/ODMs (original equipment/design manufacturer) in Taiwan have effectively tapped into their most sought-after skills-tenacity, flexibility, adaptability and capacity to learn to upgrade and survive.

One reason that Taiwan's industrial OEM/ODMs have stayed relatively successful is their adaptability-able to change tack as the winds shift. For instances, they moved offshore to find more competitive manpower, land when local costs surged, and prudently began to target high-end segments when Chinese and other emerging rivals started to dump products to win market shares with virtually unbeatable prices. In addition, Taiwan's OEM/ODM suppliers are offering added-value-one form of which is design consultancy-by working with buyers in designing new products, which helps to retain client loyalty, a feat not easily copied by Chinese competitors, many of whom lack such expertise, and whose main winning strategy is volume production, rock-bottom prices based on cheap labor.

Made-to-order Production

One supplier that has successfully stayed in the fold is Shun Den Iron Works Co., Ltd., founded in 1976 in Kaohsiung County, southern Taiwan, who has found its niche by focusing on manufacturing fasteners as nuts and screws for various applications, including construction, shipping and machinery, for more than three decades.

Having started by manufacturing quick links and snap hooks, Shun Den then diversified into locks, nuts and screws. Eventually Shun Den evolved into a specialist OEM/ODM of fasteners, which are always made of high-grade iron and steels.

Operating a 1,990-square-meter factory at its headquarters, Shun Den has an ideal advantage that helps to cut cost-being a neighbor to the island's largest steelmaker-the China Steel Corporation in Hsiaokang, Kaohsiung City.

Shun Den president David Chang takes pride in having accumulated more than four decades of experience in developing forged and cast-iron hardware, adding: "We can roll out made-to-order specialty hardware. And we offer advice with an aim to boost product value for customers. Our professionalism and dedication have enabled us to keep many overseas customers for over two decades."

Strong Supply Chain

Chang says that his company works with many subcontractors, forming a reliable supply chain that effectively realizes quality control. Also Shun Den dose not compromise on outsourced product quality, insisting on pre-agreed quality-control procedures. "We ask subcontractors to hand in quality test reports on tolerance and specification. Also, we send QC engineers to spot-check unfinished products," Chang says. Sometimes, Chang does spot-checking personally to minimize the chance of error and stay updated with current production, allowing him to immediately discuss with operators to make needed modifications.

Being backed by a full supply chain, Shun Den can readily offer excellent production efficiency. For instance, the firm guarantees a lead-time of less than 35 days.

Shun Den also optimally makes use of subcontractor teamwork that fills orders with even ultra-fine specifications. "In short, Shun Den has a simple objective-delivering high-caliber quality and service," says Chang.

Worried more than other factors by the continually rising cost of steel, Chang says: "Our profits have been compromised by increasing steel prices over the past several months, but we are doing everything possible to cut production costs by streamlining production. Fortunately, steady material prices over the past one and half months are helping us to see brighter prospects."

The company currently exports mainly to the U.S., Canada, and industrialized Europe, with concrete plans in the work to expand sales into Southeast Asia, Latin America and Africa in the foreseeable future.

Specializing in Bicycle and Optical Parts

One OEM metalworker is Lien Chin Industrial Co., Ltd., founded in 1994 in central Taichung, which has built a solid name among customers.

Lien Chin, backed by in-house precision production line, specializes in zinc, aluminum alloy die-casting, copper, aluminum alloy forging, aluminum alloy heat-treating and parts machining, turning out high-end precision bicycle and optical parts, which are made on computer numerically controlled (CNC) lathes, milling machines and machining centers.

Strongly committed to quality, Lien Chin not only adopts testing instruments, but also regularly calibrates them to make sure optimal precision. "To survive in this line, a supplier in Taiwan has to continually upgrade equipment and technologies," says Z.T. Lai, company president.

To sharpen competitiveness by meeting world standards, Lien Chin has made efforts to be QS-9000 certified, and deal with customer complaints according to TS16940 standards," Lai says. Such strategy also helps the firm to stay ahead of rivals from mainland China.

Upon receiving orders for precision parts, Lien Chin prepares needed toolings, gauges and clamping rigs, as well as sets up optimal production processes and allows for exact tolerances, enabling the company to supply highly customized products faster than most counterparts.

Highly Flexible Production

"We are also very efficient, able to adjust production processes and change molds even three times a day to turn out specialized parts. In short, we are willing to go the extra yard to fill an order, making Lien Chin highly sought-after among customers," Lai indicates.

Prudently adopting tried-and-true production means has helped Lien Chin effectively offset price hikes in metals over the past few years. The firm fine-tunes production processes to meet customers' requirements, but also streamlines production to cut costs. In times of inflation, customers willingly accept inevitable quotation increases asked by Lien Chin to take advantage of hassle-free business.

Also a green supplier, Lien Chin uses lead-free parts supplied by subcontractors who are required to submit material analytical reports meeting international standards certified by SGS.

Small but Very Efficient

Tan Yang Precision Metal Co., Ltd., established seven years ago, is a specialized OEM/ODM of precision automotive, motorcycle and bicycle parts, which are made on CNC machine tools to maximize precision.

Wielding a highly-desirable advantage of being efficiently small, Tan Yang can readily fill rush orders. "We can quickly retool production lines to meet special requirements since we are not bound by red tape," Tan Yang president W.L. Yen says. "Our high flexibility in production has enabled us to build customer loyalty, with many having done business with us for over a decade and are satisfied with our OEM/ODM service."

Besides having gained more than 15 years of design and manufacturing experiences in making precision industrial parts before setting up the company, Yen also has keen sensitivity towards worldwide demands.

The company mainly turns out automotive parts, bathroom parts, cable joints, and bicycle parts as an OEM/ODM basis. Over the past two years, the company has invested over NT$30 million (US$909,000) in state-of-the-art production and inspection equipment, including projectors and coordinate-measuring instrument, as well as owning five CNC lathes made by Takamatsu of Japan.

Unique Inspection System

To ensure the highest product quality, Tan Yang adheres to a "unique" pre-delivery inspection system that checks products in every manufacturing process, Yen says. The firm is able to handle manufacturing with No. 303 and 304 stainless steel, aluminum alloy, steel alloy, copper and iron.

The global financial crisis, Yen says, has compromised his orders since the beginning of September, adding: "At present, industrial production worldwide is on the wane, leading to plummeting orders. But I believe the financial crisis will get over its roughest in a few months as governments worldwide are going all-out to avoid worsening economic recession; while we are also adopting a more conservative operating strategy, hoping to weather the dire situation."

Declining orders have given Tan Yang the opportunity to use downtime to offer on-the-job skill upgrading to its workers. "Our advantage of having less overhead costs than bigger operators allows us extra protection against operating risks amid the financial upheaval," says Yen.

Furniture Leg Specialist

One maker of metallic legs and plastic guides for furniture in Taiwan is Cheng Hsin Iron Works Factory Co. Established in 1968, the maker did not start up in the current line. Over the past few years it has, by tapping its expertise in hydraulic machinery, diversified from its roots in producing automotive parts, turnkey hydraulic machine tools, and design-and-fabrication of molds and dies, to add metal-pipe furniture parts and accessories to its lines.

"We are capable of exporting turnkey hydraulic tools," says Y.C. Hsieh, president of Cheng Hsin. "We have built ample experience in drawn iron and stainless steel parts for the furniture, bathroom and sanitary lines."

Also an innovator, the company has patented its foldable metal-furniture legs in Taiwan and China, with such items ideally suited for occasional tables, sofas, cabinets, and Japanese-style tables.

Half Output Exported

The company exports half of its output mainly to the United States and Western Europe, with most of the products finished in electroplating and baked enamel.

"Being engaged in mold-making since the start, we have plenty of expertise in designing molds for furniture," Hsieh says. "Over the past several years, many foreign customers have contracted us to design molds."

Hsieh notes his company is fully ready to develop cost-effective, made-to-order products, with one example being its recent development of the lightweight suckers for glass-topped tables. Besides being an OEM of furniture parts mostly, the firm is backed by an in-house R&D team that creates innovative items.

Despite the economic slowdown worldwide, Cheng Hsin has seen a 25% to 40% annual growth in sales over the past three years. "Our dedicated product innovation program has enabled us to land an influx of orders from new customers overseas," says Hsieh, adding: "I believe our innovation will attract more global customers."