Rexon Industrial Sets Ambitious Operation Goals

The president of Taiwan's Rexon Industrial Corp., K.F. Wang, recently announced that his company, the world's largest supplier of bench-top woodworking machines, is projecting revenues of over NT$5.5 billion (US$160 million at US$1:NT$35) this year, a 20% gain over 2002, and NT$7 billion (US$200 million) next year.

Key to this anticipated success are direct dealings with retailers, enhanced own-brand sales--primarily by signing up more distributors, computerization of its management system, and enhanced e-connections with customers.

Established in 1973, the company undertook a major reorientation in its marketing strategy in 1995. Prior to that the company had depended on importers for orders; since then it has parted ways with all of its contracted importers save for Bosch, and now ships directly to retailers. "Importers usually shop around for the lowest prices and ignore quality, making them unreliable customers. In dealing with them you never feel safe," Wang says.

Today, Rexon has deals with a wide range of respected retailers, including OBI and BAUHAUS in Germany, Canadian Tire and Sears in Canada, Sears, Lowe's, and Home Depot in the U.S., and Castorama and Leroy Merlin in France.

Sears (U.S.) has pledged tool orders of US$80 million by the end of this year, an increase from last year's US$60 million. Orders secured from British retailers including B&Q, SCREWFIX, and FOCUS are estimated at six million pounds (US$9 million at US$1.5:1 pound), compared with last year's 2.9 million pounds and 1.25 million pounds in 2001.

Earlier this year, Sears U.S. again awarded Rexon its "Partner in Progress" title, for the third consecutive year, in recognition of the Taiwanese equipment supplier's excellent performance in creating innovative products, satisfying customers' demands, and offering value-added models that Sears can sell at a premium. "Sears executives have told us that because of our models their 609 department is their best money-making unit," reports Rexon's vice president, Y.L. Lin.

Rexon seeks to become "the best partner of the world's top 10 hardware retailers." This means that it must impress its customers with ultra-efficient services. Last year it spent around NT$70 million (US$2 million) equipping itself with enterprise resource planning (ERP) resources developed by German's SAP AG, as well as product lifecycle management (PLM) software developed by PTC of the U.S..

"Every Taiwanese enterprise must now equip itself with advanced computerized systems or they will have difficulty surviving," Wang comments, adding that costs and innovations now decide an enterprise's competitiveness. "In terms of costs, domestic enterprises have already lost their advantage to mainland Chinese manufacturers. We must now offer customers differentiated services, and key to this is innovation. In turn, the key to innovation is computerization," he states.

The company differentiates its service on the marketing side, not manufacturing side. "When we begin doing business with a foreign customer, we will first gather information on demand trends and product competition. Then, based on the information, we come up with our design, pricing and product functions. We can even decide order volume for the customer and analyze how much money this order can make for it," Wang says.

In the past, Rexon's design engineers had to personally visit their overseas counterparts to discuss design layouts. Wang estimates they had to fly overseas at least three times and spend at least two months at a customer's location to finalize a design. "Such travel costs had to be absorbed by ourselves, for we could not endure any delay in the rollout of new products," he states.

Now, PTC's PLM program allows Rexon to post design layouts of its products online. When its customers see the layouts, they can directly make design changes when required. Wang claims the system slashes the time spent on completing a design to only a week.

Its computerized management system has also smoothed the firm's manufacturing process. K.L. Ke, another Rexon vice president, says he cannot imagine how the manufacturing of 60,000 different parts and 300 types of complete machines could be handled without the system.

The computerized management systems allows the firm to precisely follow customer inventory, facilitating just-in-time delivery. Rexon has also set up warehouses in Germany, France, Britain, and the United States to shorten delivery times.

These advantages have been in particular evidence since Taiwan has been struggling with deadly pneumonia-like severe acute respiratory syndrome (SARS), because Rexon's foreign customers do not have to personally meet its specialists to discuss product-related matters.

Its stable of retailers carry most Rexon machines under their own brand names. These account for around 80% of the company's total output. The remaining 20% bear the company's own brands, "Rexon" or "Tradesman". During the days when it still counted on importers for orders, all of Rexon's machines went to market carrying its own brand names. Not having forgotten the importance of establishing a recognizable presence by having its own name known among end-consumers, the company continues to seek own-brand sales through retailers. According to Wang, sales for the company's own-brand models jumped 10% in both Britain and Germany last year, and jumped 25% in France.