Moving up the value chain opens Eurozone market for Keltech
Determining high value opportunities
Until recently, Waterford-based Keltech would have been classified as a sheet steel fabricator with an ‘If it’s metal, we’ll make it’ philosophy.” admits business development manager Seamus Lawlor.
“We basically pitched at every opportunity that came our way, from a bracket at 5c to high-value components. It was a fiercely competitive market. We had lots of competitors in the UK and were winning business based on price. A margin analysis showed it was simply not sustainable.”
“I was coming to the end of the International Selling Programme, and we made the decision that things needed to change, based on the recognition that not every opportunity could be for us.” That evaluation took the company to the point where it has slimmed down its offering to just four areas: acoustic enclosures with fuel integrated bases for OEM manufacturers; integrated fuel and hydraulic tanks; overhead guards and integrated cabins; and telecommunication enclosures.
Customer value through lean
At the same time, the company has implemented lean strategies throughout the operation, with four manufacturing cells now mirroring the product offering. The move might seem radical, but the risks were calculated, Lawlor says.
“We weren’t new in any of these areas.” Moreover, the strategy came largely from the customer base. “Spending increasing time on the road, doing pain diagnosis with existing customers, we found they all shared some commonality. They were all looking to increase output and to reduce stock levels.”
Reconfiguring the product offer
In response, Keltech has sought to produce more of the supply chain fully integrated as ‘plug and play’ packages for its clients. For power generation customers, for example, Keltech supplies an integrated product that reduces build time for the customer from between 8 and 10 hours to just 1.5 hours in cases.
“The customer had to procure 50 line items; now it’s a one-line item, and Keltech manages all of the supply chain and the cash,” he explains. “This has gained a huge amount of traction. Our orders have grown from 150 tanks per week to a projected 550 tanks per week at the end of Q1, 2017.”
As things stand, Lawlor admits to being a little apprehensive about Brexit. But he adds:
“We would be dead in the water without this strategy. It’s enabled us to turn a corner. Our pipeline is radically reduced, but the value is far greater. In fact, even in the present uncertain climate, UK customer acquisition numbers have been stronger in the six months since the Brexit vote than the previous six months.”
“When we were shipping 5c brackets, there was no value-add, and transport costs were 30 to 40 percent of the item. Shipping €1,000 to €5,000 items has reduced the contribution of logistics costs and opened up a huge range of geographic markets. In the last two and a half years we have added 10 new customers in the UK, moved into Europe and won business in Germany against two German companies and two European mainland competitors.”
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