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S C: Not taking things for granted
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• During the past 12 months, CM has visited quite a few UK major-league trailer makers. And whenever we've asked "Who's your biggest rival?" it's funny how often the name SDC crops up.
What's also noticeable is that after complimenting SDC on its impressive performance, they invariably mutter darkly about so-called "advantages" enjoyed through Northern Irish grants.
Managing director Don Campbell is having none of it. "I accept the argument about the grants—but it's historic and you can't fault Seamus McClory [South Derry Coachworks' founder] for taking them."
And as Campbell points out, "the grants were available to anyone," a point SDC's detractors (not least those with sites in Northern Ireland) might do well to reflect upon.
Sour grapes
So is it sour grapes? What's not in dispute is that during the troubles in the late seventies and eighties, the Province's Industrial Development Board was keen to support local businesses and employment through grants.
And no-one is denying that SDC, like many other local companies, accepted anything that was going, including grants to help offset the cost of buildings and equipment or employment and training.
However, Campbell insists: "The actual amount was minimal. And anyway, the economy is much more buoyant and employment levels are pretty much similar to the UK—so there's not the same requirement for grant support to engineering. The focus is now on generating IT companies.'
Today, Campbell says the chances of SDC getting any further grant aid is pretty remote: "If I was to go to Invest Northern Ireland [the successor to IDP] and say 'I run a successful company employing 370 people—how about some money?' they'd probably say 'Well, good luck to your His parting shot on the subject is equally unequivocal. "If you tell me that we wouldn't have got to where we are without grants, then I can tell you it's not the grants at all—in fact, there's no grant aid anywhere, those days are gone!"
So what exactly is behind SDC's impressive rise? According to Campbell, don't want to sound arrogant, but I don't think our rivals have the kind of management control we have at SDC. One area that we work closely on is looking at the margins of competitors based on their reported accounts. One is never happy, but in relation to the industry our margins are as good as anyone's—although that's not saying much!"
For Campbell, however, a's not just about looking at profit-and-loss figures. 'Whenever I look at rival competitors' accounts, I look at their return per employee—it's critical to know what each employee is contributing."
At SDC, each direct employee is currently creating in excess of 10 trailers per annum. "I find typically with the competition that their contribution is around 4-5 trailers per employee," notes Campbell.
It comes as no surprise to learn that the pay scheme for SDC's assembly line workers includes a significant bonus element. "Our workforce is highly motivated," reckons Campbell. "We pay a basic rate per hour with a further 3040% made up by productivity bonuses based on completed chassis and quality control levels."
Estimated market
Whatever the process, I certainly seems to be working—for the 12 months to the end of December 2002, SDC built 3,267 trailers of all types within an estimated total market of 16,500, including fridges.
However, in 2003 Campbell believes the market is more likely to hit 15,000, with SDC building around 3,600 trailers, enough to give it a 24% share of the market and overall leadership. "I can't see anybody bigger," says Campbell frankly.
So where has it all come from "I think a lot of our market share has come at the expense of General Trailers Fruehauf and Montracon," says Campbell.
Whether SDC can continue to gain at the latter's expense is open to debate, as Montracon recently announced plans to further improve its production cost base through greater standardisation. Not that there isn't room for further improvement at SDC, as Campbell admits. 'We're always looking at ways of increasing efficiency of throughput through more standardisation—we have a £3m capital spend set aside looking at handling at Antrim [SDC's chassis plant] and other bottlenecks. Space is our problem: we're bursting at the seams."
Work is already under way on a new site for parts and trailer refurbishment, as well as for storing second-hand chassis. One option could be to simply combine SDC's currently separate NI chassis and assembly plants into one facility and save the constant traffic between the two. "It's something we'll look at for the future," says Campbell, "but it's not for the short term."
Cutting overheads
SDC could also boost revenue by cutting overheads, but Campbell insists: 'We don't want to lose employees; we want to do more with the same. As it is, finding welders is very, very difficult, and we have to do a lot of in-house transfers. The key to survival is getting the cost base as tight as you can and remaining flexible."
In a recent interview Campbell confirmed that, like many other manufacturers, SDC had looked at the possibility of setting up some kind of production facility in Eastern Europe. However, he says that: "Where we sit at the moment we can't identify any cost saving."
It's worth noting that Campbell is prepared to consider different approaches in order to keep SDC ahead of the pack. "Where I differ from them is that I'm not born and bred in trailers, so I'm happy to look outside the box. It's absolutely critical that we've been pro-active in giving value to customers, so we're trying to minimise the production cost process without having a negative influence on the product."
Talk to SDC's rivals and they also tend to mention its "competitive" pricing— although right now CM would be delighted to meet any trailer maker achieving 'list' price for its products.
"I'd love to live in a world where you'd get £18,500 for a curtainsider!" admits Campbell.
SDC's market share will clearly take some feeding if it's to retain its claimed number-one spot, and rental companies will undoubtedly help provide a large throughput. They already make up between 30-35% of SDC's UK customer base: Hill Hire recently placed an order for 750 trailers, the largest single order ever taken by SDC.
"The rental guys provide business that's more production-friendly, but less margin-acceptable!" confirms Campbell. "If the rental guys do more and more, we've got to follow the market."
But will SDC make any money out of the Hill Hire order? "I wouldn't do it if I didn't think that," he says.
For the moment there are no major new products on the horizon, says Campbell, adding: "There are certain products we walk away from: we're not a niche-market builder." But he does not rule out the chance of moving into specialist markets through acquisition.
As SDC is the one rival most commonly named by its competitors, who does Campbell rate as a potential threat? Interestingly, the answer is Schmitz. However, he warns: "if Schmitz want to really have a go, then we'll give them a good run for their money!"
Order book
SDC could probably stand it too. For the year ended 2002/3 turnover was in excess of 2,60m. And in 2003/4, Campbell reckons that's likely to grow by 10-15%, "in light of our current order book."
Of course, turnover can flatter to deceive; what counts in trailer-making is profit. While Campbell says SDC is a profitable company, he also adds that "profits are abstract".
Not a bad quote, and one that will no doubt give SDC's rivals something else to talk about.