EXPORTING TO AUSTRALIA – OUR EXPERIENCE
At Synapco, we began exporting on our own account in the early 1990s.
As a custom moulder, we don’t actually own the products we make for our clients, so in effect we are moulding contractors, vying for the right to mould their products for their exclusive use.
So, how did we manage to persuade Australian based companies to use a New Zealand based custom moulder as their supplier? The following key elements are, I believe, the main reasons we succeeded in our first foray as an exporter.
Fortunately for us, we already knew most of the people we were dealing with in Australia – they are mostly ex-Kiwis. We had had business dealings with them previously so they knew about Synapco’s capabilities and expertise.
However, the Australian business psyche is different, and it was a challenge to re-establish our contacts and rapport. Satisfying them that we could deliver quality products on time and at the right price took energy and persistence. Numerous visits and follow-up telephone calls over several years ensued before we were given the opportunity to quote.
Sounds a stupid thing to say, but many people don’t understand what product quality actually is. We didn’t – but we sure do now. Here is an example.
Our first direct export opportunity came some 20 years ago at a time when Synapco was experimenting with thermoplastic rubbers to compliment our vulcanised rubber capability. We had acquired tooling from a failed venture, so the moulds were ours in this case. We purchased a suitable second-hand plastic injection moulder so we could establish the processing parameters using this new material. As luck would have it, the injection moulder broke down soon after we fired it up and we didn’t have another option. Given the tight delivery schedule for the initial trial shipment, we had no alternative but to utilise another custom moulder in our town. Regular progress checks ensured we met our delivery schedule – just. We waited for some feedback from our Aussie client – nothing. Meanwhile, we recovered the moulds following the trial run, repaired the injection moulder, and started producing. The quality appeared Ok, but more process tweaking and mould modification was necessary to get a high quality product. After nearly a fortnight we finally plucked up the courage to ring Australia. A very cool reception, and a blunt response – if this was the best we could do, then let’s forget it! Further probing revealed 40% of the trial shipment was rejected because of splitting at the weld lines. However, they really liked the product concept.
Luckily for us, we had done a lot of development work for these guys when they were based in NZ. We explained our machine failure, but emphasised we now had everything under control. Could we please have another chance?
Suffice to say, we are still exporting this range of products to Australia and are regarded as A1 suppliers.
Lesson learnt – ‘Never assume quality simply by looking at the product’. Immediately after our second chance life-line, we agreed on a comprehensive testing regime with input from our client. To the best of our knowledge, there has never been a quality issue since that first run, and the numbers supplied now run into millions.
ON-TIME DELIVERY – LOGISTICS OF EXPORTING
One of the demands from our Australian based clients is that we deliver on time – in some cases ‘just in time’. Our experience over the last 20 years of exporting has confirmed that to be accepted as a NZ supplier in Australia, we have to be able to supply as though we are ‘locals’. This means the mode of transport is critical – it must be reliable and cost effective. In our case, we have opted for airfreight on all our trans-Tasman consignments, and we pay the freight as part of the product cost. The support from our NZ freight forwarders has always been excellent – the few delays we’ve had have always been on arrival/transit in Australia. Yes, we probably give away some margin, but the benefits for us and our clients far outweigh the small cost penalty. To ensure we meet our shipping deadlines, we have instituted a range of in-house measures including ‘Kanban’ for the control of stock levels and production, robust production planning, material scheduling, and open communication between all the parties involved.
PRICING AND MARGINS
As mentioned above, we pay the export freight cost as part of the unit product cost. Furthermore, we price in Australian dollars. Why? Because we want to make it easy for our Australian customers to see us as their ‘local’ supplier, and give them price stability in their currency. There are risks for us as we take the forex gains/losses, but we have managed by pricing to our own established benchmarks. The feedback from our Australian customers has always been very positive. We accept that the Australian market is very competitive, and our pricing/margins reflect this, but the upside for us is generally larger volumes than we could expect from our New Zealand based customers.
TERMS OF TRADE AND AGREED PAYMENT TERMS
It’s normal practice for many Australian companies (particularly corporate) to take 60 days payment terms (or more) as a matter of course. By establishing our expectation for payment terms at the very beginning of our contracts, we have found we mostly get paid on due dates. As a small company, the detrimental effect on our cash flow is huge if a large customer doesn’t pay on time. We therefore take credit control very seriously for all our customers, no matter where they are based.
The majority of products produced by Synapco are exported directly or indirectly around the world either as parts in sub-assemblies or as stand-alone products. Exporting requires a ‘can-do’ attitude to overcome the many obstacles and hurdles encountered along the way. Successfully participating as an exporter for the last 20 years has been both fulfilling for our company and staff, and financially rewarding for both ourselves and our customers.