In 2007, with the world economy booming, lead by the construction sector as much as any other, there was one question ahead of all for most Western European crane buyers. Not, ‘What can it lift?’, nor ‘How much does it cost?’, but ‘When can I have it?’
By 2010, those production backlogs and yearlong delivery times had evaporated, but some crane builders and buyers were allowing themselves a degree of cautious optimism. And then, days before Bauma opened, fate dealt even that limited hubris a devastating blow, as Eyjafjallajökull erupted, spewing a plume of ash across Europe and leaving show visitors grounded at home or worse, halfway to Munich.
Since then, much of the world’s economy has enjoyed a slow and faltering recovery. But even that hesitant growth has passed much of Western Europe by.
Christoph Kleiner, managing director of Liebherr’s Ehingen mobile cranes division, says: "Demand used to be biggest in Western Europe. But last year, which might not change dramatically in 2013, the single biggest market was Germany, with stable growth year, and a record market share for us of 59%. In Europe, we only had one more country in the top ten, France.
"Coming from more than two thirds of turnover seven or eight years ago generated in Europe, we are now at 38%. Turnover there is now stable, with development mainly overseas.
"Our most important export market was Russia, followed by the USA and Brazil. Our fourth largest was Australia. Then we have the Netherlands, but not driven by Netherlands itself, but by the international crane companies based there. Growing markets for mobiles are Japan, the Middle East and Saudi Arabia, and Canada."
Halfway around the world, Japanese cranebuilder Kobelco has seen the same change. President and CEO Akihiko Tsukamoto, and general manager, corporate planning, Takemichi Hirakawa, say, "In Europe, the market is a little bit quiet. It’s fairly static, and keeps at a low level."
Philippe Cohet, EVP Cranes EMEA, Manitowoc, emphasises that while Western Europe may still be slow, some individual countries show promise: "The market is not as bad as it first looks in Europe. We still have countries where after several years, there’s no sign of recovery, such as Spain and Italy.
"But it’s a very contrasted picture. The Western European market is traditionally very large. In the UK, Germany, and Scandinavia, it is changing very quickly.
"Germany is an OK market for us, we’ve had very good results for mobiles, self erectors, and tower cranes. It’s still holding up quite well. Sometimes it will slow down, but it then picks up. Fleet owners there and in surrounding countries like Switzerland and Poland are still OK.
"France was OK until recently. It’s slowed down in the last few months. People are nervous about the new government, and what its plans are for construction.
"The UK, the Benelux countries and Scandinavia are down a little bit. They’re not great, but not catastrophic."
For the Chinese companies that have spent the past decade building their international businesses, Western Europe struggles to be the focus of their attention. Yanming Xiong, VP, mobile crane branch, and general manager, Zoomlion, explains: "All Chinese construction equipment manufacturers attach great importance to overseas markets, and especially for cranes, where 70% is from overseas business.
"We have a very small market share in the global market: including tower cranes, mobile cranes, crawler cranes, and rough terrains. We are developing our overseas markets, but the main markets are, of course, not in Europe, they are in emerging markets."
A hard time at home
Even for those companies whose products are primarily aimed at the sort of Western European customers who demand the highest technology and features packages, the region is a challenge. Peter Schiefer, CEO of Wolffkran, says, "Overall, the market in Western Europe was difficult after the 2008 peak. It has been creeping up slowly, particularly over the last two years.
"We are quite pleased with Germany, Austria, Switzerland, and the Benelux countries. In these markets, we’re probably running to some record high figures. While the market is still not in good shape, that speaks for itself. We’ve got to generate these sales somewhere. The overall market condition hasn’t recovered to a peak, but for us, we’re getting sales in these countries."
"Another interesting market is the UK, which is coming back. We’re seeing some very healthy development there and getting good utilisation rates."
"Southern Europe is not our market anyway, but our perception is that sales are very, very, slow"
Schiefer is, like many of his customers, subtle in his analysis of the market and careful to consider all possibilities in his forecasts: "The concern is how long the real estate boom in Germany is going to last. One could argue against that concern, but public projects are still on hold, and public spending is slim. The industrial side has not invested into real estate over the last two or three years: they’re happy to fill existing plants, but we haven’t seen aggressive new build. Taking a more aggressive view though, one could argue these sectors could catch up once the economy as a whole makes a solid return, even if residential slows down."
Just as Western Europe has long had a reputation as the home of some of the most feature rich (and, therefore most costly) cranes, China has been known for volume sales of workhorse machines. But over the last three years, that picture is also changing.
Zoomlion’s Yanming says: "Our main customers are in two categories. The first are state owned enterprises, whose main businesses are railways, oil and petrochemicals. The second are private rental companies: there is a very comprehensive scope of rental business in China, both in residential construction and other projects.
"They will maintain growth, but speed will slow down. There are two reasons. First, the market capacity has been developed to a large extent. The second is the Chinese economy will slow down. We will not enlarge production capacity in China, as the market is at capacity."
While Zoomlion’s focus has historically been on mobiles, compatriot Yongmao has developed the core of its business in tower cranes. Here too, Chinese domestic demand is scarcer than before. General manager and senior engineer Shi Yong says, "In 2011, the Chinese manufacturing industry dropped off. Railway station projects were stopped by the Chinese government. After Fukushima, some Chinese nuclear projects stopped. The Chinese government has slowed down housebuilding. In 2012, the market has dropped, but our sales are up 7% from 2011-2012."
But Shi believes the Chinese construction sector is on track to return to its previous strength. He says, "In 2013, a new Chinese leadership has been appointed. The new government has released new projects, railway building and nuclear building projects have started. China is using international technology, the AP 1000 reactor, in these stations. This will see the Chinese economy grow. For the nuclear power stations, around 70% use Yongmao tower cranes."
XCMG has also had to fight hard to maintain, and develop, sales in China’s tightening market. Vice president and general manager, international, Yansong Wang, says: "In 2012, we witnessed some drop in our domestic market, but not much for us. Our share rose by 3%. For mobiles, we have 56% of Chinese sales. The tower crane business is new, and sales doubled last year. Our crawler cranes saw a big increase.
"Our truck cranes are used for a very wide range of applications. Mainly they go to residential apartment building, refineries, oil sector construction, chemical projects, harbours and ports, as well as wind turbines. With our mobile cranes above 200t, we took 80% of the market in China, a big increase. The decrease mainly hit small machines.
"Because the small cranes have low technology content, we have many competitor manufacturers in China. But for the big cranes, with high technology content, we have fewer competitors."
The view across the Sea of Japan is rosier. Kobelco CEO and president Tsukamoto and general manager Hirakawa say, "General demand in Japan is growing. In 2011, we sold 218 crawler cranes in Japan; in 2012, we sold 278, than a 20% increase. We expect that in 2013 we will sell around 300 crawlers, 10-12% more. The big demand is for rebuilding after the earthquake and tsunami.
"Also, the Japanese government will increase consumer tax from the beginning of 2014, so we expect some of the customers to rush buy this year. On the other hand we foresee market demand for 2014 will slow down as the consumer tax comes in."
Going farther
With so many historically dominant crane markets struggling or only gradually recovering, all of these companies are looking to extend their geographic reach.
Liebherr has a long history as a leader in both international sales and global manufacturing. Its tower crane division has decades of experience of flexible, localised, production. One of its most wellestablished manufacturing outposts is in Pamplona, Spain.
Dominique Tasch, managing director, Lieberr Biberach, says, "In Pamplona, we used local manufacturing to adapt to local demand. In the past, cranes were especially made and developed for the Spanish and Portuguese market. As those markets are down, we evolved the plant for products not just sold in Southern Europe, but in the West and the rest of world."
The model developed at Pamplona and elsewhere is now being adopted for a new generation of rapidly expanding markets. Tasch says, "Our Brazilian factory has been up and running since the end of last year, supplying customers. We’re seeing increased demand out of Brazil, and other South American countries. The crane in Brazil is designed to fit demand across South America. It’s not just Brazil or Chile, one design fits all regional needs. Customers in South America work across countries. Customers in Brazil may have jobs in Chile or Columbia, for example.
"In Russia, we are getting ready to manufacture tower cranes in the next one and a half years. We’ll start with tower sections, which are a big cost driver in terms of transportation costs: by starting with tower sections we can reduce import costs and taxes. In the second phase, we’ll manufacture the slewing portion in Russia in a size that exactly targets the market and adapt the design of the cabin."
Liebherr’s mobile crane divisions take a different approach, focussing more on global sales than multinational production. At Ehingen, with the plant’s focus on high capacity, feature rich, cranes, the policy is to build cranes in Germany and to build distribution networks around the world.
Managing director Christoph Kleiner says, "It’s not a dogma for us to do all of our production in one place, but it’s economical to do so. We have 36 different models, selling over 1400 cranes a year, too little to spread around the world. Apart from that we are using high quality steel, so we have issues with logistics, the learning curves of skilled labour, and international salary levels.
"Our latest sales organisation, founded this earlier, is in Mexico. It’s a distributor for Ehingen, for the Middle American market. For southern Latin America, we have Liebherr Brazil, Chile, and Argentina. Out of Chile, we also serve the remaining countries of the region.
"We started developing the Mexico sales organisation by appointing a mobile crane division head; we will appoint additional sales and service engineers, to serve local market. Along with the sales organisation, there will be spare parts stock, and then usually at later stage, we will develop service facilities.
"We’ve just opened a new sales and service set up in Sydney, Australia, and we have an additional six depots distributed across the country, with sales and service facilities. A lot of logistics efforts need to be taken: working Australia always involves long distances, and long travelling times.
"We still feel a solid demand out of Australia. There may be some signs out of mining that demand could slow a little, but in the long run we expect stable and solid development in the country. And, the population of cranes we have established, requires this investment."
For Zoomlion’s Yanming Xiong, knowledge of local markets is vital. One way his company has been achieving that knowledge is by acquisitions, such as the purchase of Italian concrete pump manufacturer CIFA in 2008.
Yanming says, "There is difference in our strategic orientation in each country. Our biggest market is South East Asia. We sell through our dealers: we have dozens across South East Asia. We are building an aftersales system. We are sending employees to stay at dealers to support them and to train their own service force.
"In Europe, firstly we need to solve local production, to make them suitable for local user habits. A crane is under production, at the Cifa plant in Milan, Italy. We will build our two new mobile cranes, on show at Bauma, in Milan. The crane is designed according to the needs of the European market, and will be suitable for this market."
Investment in new production is never risk-free. For Liebherr, the slump in Southern European residential construction meant that part of the original reasoning behind the opening of the Pamplona plant no longer applied.
Kobelco took a similar risk with its India plant, opened in part to allow it to maintain its position as a dominant supplier of mid-range crawlers.
Last year, the Japanese crawler manufacturer had its nerves tested as a major political scandal threatened the flow of public investment, vital to India’s construction sector. Tsukamoto says, "The Indian market now is at the bottom. Last year it was almost halved from 2011. We expect the Indian market to pick up from the middle of this year, probably at the end of this year. We expect it to grow in 2013 and 2014. We won’t change our strategy in that market. We will make our production plant stronger. We will transfer some old facilities from our Japanese factories into the Indian factory, in preparation for 2014."
The company is also working to develop local production in China. In India, the company built its range of locally built cranes up gradually, lauching the biggest yet at bC India in February 2013. In China, with a huge number of local competitors, particularly in lower capacity classes, it is for now producing just one model.
Tsukamoto says, "Now, in China, we are making only 260t cranes. In India, we make 100t, 135t, and 260t. We started production in China in March of 2012. At the moment, it’s the same model we make in Japan, with no big modifications. Of course, we change some parts that we can procure in China.
"In China, we have not yet sold so many units. We will consider product support there. We have sold around 50 units from Japan. We have an office in Shanghai, supporting products in China now. Support will be increased as the volume of machines sold increases. At the moment, the market is very small, about one per month, but our capacity could be two or three units a month.
"For China, we offer quality and reliability. We’ve sold around 50 units in 15 years. Customers know the product, and the resale value of these products.
"Our main customers are in construction for power stations, and we have customers working in highway and bridge infrastructure."
For sale and for rent
Chinese tower crane builder Yongmao has developed an impressive global sales record, backed up by investment in its home production facilities.
General manager Shi Yong says, "Right now Yongmao export to over 70 countries, including European countries, like the UK, Germany, France, Belgium, and America, Australia, all of Asia, and South America. We also export to about 20 countries in Africa.
"Our best sales are in Africa, and in Singapore and Malaysia. There is a project building a mosque in Algeria, using Yongmao tower cranes at 300m height.
"We’ve made a lot of changes in production. In [Yongmao’s home city] Fushan, we have built a new factory for tower cranes. Right now, we are building a new production and painting line, using automated technology. This plant can build around 1,000 units a year.
"Yongmao has a joint venture company in Singapore, listed on the stock market, a rental company with Tat Hong. They have registered a company in China, that now controls three of the biggest rental companies in China, using only Yongmao cranes."
This combination of a rental business, running alongside a tower crane manufacturing business, is by no means unique to Yongmao. It’s a model that Wolffkran has followed with a great deal of success around the world. As well as being an additonal revenue stream, it offers the German-based manufacturer a crane owner’s view of its products, and the ability to offer tailormade combinaitons of sale and rental.
CEO Peter Schiefer says, "The customer knows that when they buy from Wolff, any special components or add-ons, they will be able to rent from Wolff. The customer has full flexibility to do interexchange, to fit their needs. The other thing is, customers know that we know by heart if there are issues with the crane, because we use them every day. We erect them, we use them, we dismantle them, we maintain them. We have the same view as customers, we’re using the same products, that keeps us improving the product all the time. That helps the overall offering. When you do sales and rental, you can always find a solution for the customer. We have a mix of customer relationships, some starting with sales, some starting with rental, and find a tailormade solution for each.
"We’re at virtually 100% utilisation rate of the entire rental fleet. Maybe 97%: you have some special cranes in the fleet, and cranes have to be dismantled, so you’re at the theoretical maximum. The rental rates are OK, but one of the biggest obstacles right now, is that they are still too cheap compared with the equipment price. We’re not buying utilisation through the price, but the overall market price is still too low.
"The market regulates itself. We have to calculate our crane and rental offers, the same as our customers do. The customers we sell to, and the end user companies, appreciate being able to pick and choose from rental or purchase according to their own financial options. The rental companies we sell to, we make sure we’re not competing. The market is broad enough we don’t have an issue.
"All the rental companies face the same financing conditions and offerings. The equipment price plus the financing options, dictate a healthy rental rate. To accomplish that is difficult sometimes, because there are people on the market with old, written off, equipment. As long as this equipment is not utilised, you’ll always find someone who will offer the crane at a lower rate. With higher utilisation rates, that happens less. It’s a natural movement in any market, there’s always someone who wants to offer the cheapest rates. The market needs to improve more to bring up rates. In the long run, we need better, more healthy rental rates, so customers can afford the kind of equipment we are providing."
Long term innovation
Key to the long term growth of the industry is technical innovation. Liebherr’s LR 1250 crawler offered one indication of the likely future of the industry: the development of carbon fibre reinforced plastics (CFRP) in structural components, in this case in pendant links and jib backstops. The company first used CFRP in construction crane pendants on the LR 1300, shown at Bauma 2007.
Gerhard Frainer, managing director of Liebherr’s Ehingen lower capacity crawler and duty cycle machine division, says, "We use new materials, like CFRP, more and more in the LR range. It’s been used first in the 250- tonner at Bauma, which has pieces installed already. It’s also used on the HS duty cycle cranes on the pendants, and on the HS 8300 HD.
"We don’t produce the raw material in house, but work in close cooperation with suppliers, performing a lot of technical verifications. Our specialists in house work with suppliers to develop products. In our design department, we have specialists. We have a clear commitment and the capacity for our design department to make themselves familiar with new materials. They have to keep their eyes and ears open, and look at whatever could be used for the cranes.
"When we look at LR lift cranes, it’s the weight on the main booms and fly-jibs, that’s one driving factor behind this technology. The boom sections themselves, I expect, will be made out of steel for a long time. Price-wise, we made some progress as well, we can nowadays compare certain components to steel, because we gain experience, and the new components made out of CFRP are getting clever design, saving on material costs. The CFRP industry as a whole, is getting bigger and bigger, and our suppliers are able to manufacture more cheaply."
As many crane manufacturers look to tighten their focus on core competences, partnerships with other specialists become increasingly important. One such relationship is between Manitowoc and suppliers of sophisticated electronic system. At Bauma, the company launched new anti-collision and telematics systems.
Cohet says, "Anti-collision systems and telematics are now very sophisticated, and are being deployed in multiple applications in our market. Even if historically, Grove or Potain developed their own solutions, it seems more and more we need strong partnerships rather than developing these systems ourselves.
"Our requirements are quite special: cranes move very quickly, the accuracy you are looking for is very high. And you’re dealing with a safety system. We’ve developed a strong partnership with system providers.
"At Bauma, we showed some new directions we’re developing. We have a new diagnostic system for tower cranes. In France, we’re working with Ascorel for anti-collision systems.
"It’s a complete part of our product offering. We don’t want to leave customers to go and pick something themselves. We can’t do everything ourselves, we have to work with partners."
For Terex, new innovations have been born not just out of external collaborations, but through internal reorganisation.
When Tim Ford moved over from the aerial work platforms part of the business, Terex’s utilities segment was added to cranes. He says, "The core of the utilities business is digger derricks, augers to dig holes, and fibre glass insulated boom lifts.
"Historically these have been sold to utilities companies, electrical contractors, and telecoms. That’s mostly a North American market today. In Europe, the practice is to divert to an alternative source. In the US, it’s common to work on live lines. But, as developing markets evolve, many are adopting live line work practices. China is evolving to adopt live line, Brazil is, India is unclear, but looks like it will. We’re also seeing live line working in Russia and the Middle East. So we think it can be fast-growing business in the next decade.
"Most of the utilities contractors have cranes in their fleet. That will allow for cross selling, where our sales managers for a customer, can bring in their counterpart."
Made as good as new
As customers in many parts of the world continue to be conservative about new crane purchases, demand increases for aftersales service and refurbishment. Both are areas that Manitowoc has focused on.
Cohet says, "Across Europe, it’s still very difficult to organise finance. Banks are extremely anxious. The possibilities do exist, but customers are being asked to do a lot to secure finance, and we’re being asked to offer extended warranties. In Italy and Spain, it’s desperate. Customers are trying to manage with the fleet they have.
"In the current market, more and more customers want to get a few more years out of their investment, so they want refurbishment, repainting, and a full check up.
"We can do parts of that with our normal Crane Care [service] business, but also expand on that with our EnCore [refurbishment] business. Crane Care is doing well today: as people keep cranes running longer, they look more for spare parts, service and inspections.
"We’ve been realigning our Crane Care resources in France. We adapted other things that weren’t fitting because of Potain and Grove’s history in France. We’re aligning to have a much better used crane business, closing some customer service facilities, and opening a new one in Paris. We continue to push the Crane Care approach. One thing we want is to combine the Crane Care approach with the used crane, EnCore, part of the business.
"More and more customers want to get a few more years out of their investment, so they want refurbishment, repainting, and a full check up. We can do parts of that with our normal crane care business, but also expand on that with our EnCore business. Crane Care is doing well today: as people keep cranes running longer, they look more for spare parts, service and inspections.
"EnCore has been going relatively well in North America with dealers. In Europe we sell more cranes direct. We think it will be a driver in our markets, as people spend money to refurbish their cranes. It’s also important for our new crane business. We have had several deals for new cranes that combine with trading of used cranes, so we need to take back used cranes before we sell them back here or in emerging markets. Europe is now more keen. In some markets, where we don’t have dealers, we will invest ourselves in EnCore services.
"In markets where we use dealers we will invest in dealers. UN Mobilkranar in Denmark invested in a very good workshop, so we gave them our EnCore mark. Similarly in South Africa, we have awarded our Grove and Manitowoc dealer, Crane Load Tech, EnCore status. We’re also doing that in the Middle East and other parts of Africa. In the Middle East, they’ve always been active in this area. In Germany and Portugal we’re offering EnCore services directly."
Terex is also developing its service business in a new way, as a result of its recent acquisition of Demag Cranes AG. The company will now be offering outsourced servicing to customers, not just for the industrial crane sector, but for construction cranes and aerial work platforms.
Ford says, "Demag Cranes and Components [the industrial crane divison of Demag Cranes AG] acquired Crane America Services, ten years ago. Crane America serviced third-party equipment, including Kone, Columbus McKinnon, and others: 80% of the equipment they worked on was non- Demag cranes. Crane America Services was embedded in Demag Cranes and Components North America.
"We’ve taken the refurbishment business from Genie, and our utilities equipment service business, and put them together into one business, with $200m in revenue, 51 locations, and 900 team members.
"The idea is that where the opportunity presents itself, we can provide service to customers. We’ll even be going to large aerial customers, and askming, ‘Why don’t you outsource service to us?’ We’ll do the same with cranes, where our distributor isn’t doing servicing. We don’t want to compete with customers: where you have a partnership, your partners have to be profitable.
"The work our service engineers have been doing is mostly electrical. Their skills are currently more transferrable to tower cranes. But we’ll be working to build skills and abilities. We’re creating a common entity they can work around."
What does the future hold?
In many ways, Bauma offered a corrective to many assumptions about the global crane industry.
At the last two Bauma shows, with the European construction sector booming (or going through its first, abortive, recovery from the global financial crisis), the development of international competition seemed to consist of Chinese companies trying to enter Western Europe and North America, and Western companies trying to enter China.
As indicated by the interviewees here though, these three leading regional markets are not the limits of the crane industry. Instead, the battle for customers has become far wider in its global reach, with new markets in Latin America, Asia, and even parts of Africa increasingly important.
With increased competition in these new markets, crane manufacturers will need to refine their product offerings to a broader range of customer demands, both in terms of price and in terms of features. Some, like Brazil, will demand local manufacturing as a condition of being allowed to enter the market. For others, a local presence, whether it is a production facility or a well developed sales and distribtion network, will be necessary to reach customers and meet their needs.
With many customers cautious about investment in new cranes, service and refurbishment will be less and less just about ensuring loyalty and future sales, but a significant source of revenue alongside new crane sales.
A clear path to customers, and a neater supply chain
Tim Ford moved over from the top spot at Terex’s aerial work platform become president of its crane segment at the start of 2013. One of his first acts has been to reorganise the segment, creating a single path to the market for the segment as a whole, rather having each production site represented independently. At the same time, the company is refining the links between its production facilities and looking to simplify its use of components.
Ford says, "I’ve met with customers, distributors, and team members. The universal issues were, firstly, service, and secondly, that we’re hard to do business with.
T"he view was, the way we’ve evolved, every factory had its own resources, and would go to market itself. That would create confusion in the marketplace. We’d have distributors from different factories in the same area. It had become a bigger issue over the last four or five years. It was evident we needed to orient around marketplace.
"That move required our senior leaders to be selfless in their decision making. Marco Gentilini and Francois Truffier accepted the elimination of their jobs, seeing it was good for the business.
"Marco Gentilini will take a business integration role. It’s as if Terex had just done all these deals. Marco led the ERP implementation of Terex Business System. Gentilini will integrate all of these business. So, from the customer perspective, Terex will be more seamless and transactionally simple."
"Francois Truffier will now be responsible for product and commercial strategy. Our product complexity is tremendous. Truffier will be responsible for how we simplify our product line, how we reduce complexity. "Lean manufacturing is a journey, never-ending. It’s a perpetual life challenge to stay thin: lean is like that. We have lean activity in a number of cranes facilities, but compared even to other operations in Terex, we’ve a long way to go. We have a lot of customisation, and that’s where the opportunity is.
"Everything is on the table. We want to find a way to make sure we’re leveraging what we have. How many different seats, steering wheels, tires, cylinders, do we buy? Standardisation doesn’t mean everything’s the same. But we don’t need, for example, 12 different seats. We have five different shapes of boom. We probably don’t need five. We want a common design language, so when you see a Terex crane, it looks like a Terex crane. We’re not cutting models, but there will be more commonality and consistency in look and in design.
"It’s not so much about where the cranes are made, but about leveraging their design. We’re looking at how many of our suppliers supply more than one factory site. If we’re sharing designs, we ought to share suppliers. Now, if I’ve got a hundred suppliers, that’s a hundred purchase orders, and a hundred cheques to cut."
Everything you need to know
Little noticed by many of its customers, Manitowoc is currently engaged in one of its biggest ever investment programmes, Project One, integrating and unifying its office, supply chain and production IT systems. The payoff for customers will be far more detailed information on their crane orders. Here, Philippe Cohet, executive vice president, Manitowoc Cranes EMEA, explains the benefits of the changes.
"The first big benefit of Project One is to customers, in terms of the information we’re now able to give to sales people in France, Portugal and Brazil (and later in Singapore, Italy, and parts of North America). Our French customer sales front office people are able to give much more accurate information regarding manufacturing and all the financial information. We still have to improve the functionality of that: web tools like customer and dealer portals, are vital to a spare part business. It’s a huge project, and there’s been a lot of pain, but surveying our own people, 70% of them already see the benefits. It will be more powerful when we have all factories on line.
"Project One is also a very important investment for us. It’s not only IT plug and play, it’s an opportunity to align all of our properties and organisations around the world. We’re creating a single instance organisation, with all sites operating the same systems around the world, with the same metrics and same data structure. Integrating SAP was already a challenge, but doing so around the world is an additional challenge.
"The result of our combination of a lot of businesses has been a very distributed organisation with multiple sites, factories, and customer care centres around the world. The benefit of this project starts to show with supply chain management: we can align all of our processes, and leverage our position to improve supply chain performance, both where we are the origin supplier and when we buy from outside."
Mastering design, step-by-step
Yansong Wang, XCMG’s general manager, international, believes that Chinese companies can only build long term success overseas by gradually mastering the design of different capacity cranes one careful step after another. It is, he says, an approach the company also takes to building its distributor relationships.
"We have 50 years of history in manufacturing cranes, starting in the 1960s, while some others just started in the last three or five years. So, as you can imagine, there’s a big difference.
"We’ve done our research and development of cranes step-by-step. We developed 5t, 16t, 50t, 200t, cranes, little by little. We’ve been building cranes for decades. Some companies in China have started with 50t crane, and then even when they haven’t mastered that technology, they start to build 500t cranes. It’s too big a step, but then they go from 500t to 1000t.
"There are some companies that have small market shares in China, but are very aggressive in export markets. This is no good, it has a bad influence on the reputation of Chinese products. We follow a strategy of only introducing products we are very confident in, with mature technology and high reliability, that can be successful and gain good credibility.
"When we choose dealers, we only choose excellent dealers to work with. They must be a very strong company, so they are able to increase sales. We provide training for their mechanics and technicians, operations, maintenance, troubleshooting. So we make sure that they provide timely support for the products sold, and are able to look after the products well. We give them support in spare parts, in financing, and in technical support. We follow a policy of long term strategic partnerships with our dealers. That is why we are able to maintain the number one position in China’s crane sector. In China many companies, choose one dealer, then throw them away very quickly.
"We invested $200m in a factory in Brazil. We are planning to set up a factory in India. To set up a factory we have to make sure part supply is sufficient, and also you are able to get access to highly talented engineers. Also, we consider, is the market big enough to support operations of the factory. Our factory in Brazil employs 95% Brazilians, five per cent Chinese.
"Brazilian policy is to localise 60% of components. So 60% will be made in Brazil, around 20% sourced from Europe, like Rexroth hydraulics, and around 10% are from China. So the product will be made in Brazilian. There are some differences to fit the Brazilian market. The factory will cover the whole Latin American market: Chile, Argentina, etc."
