Theuns Kuhn, Director of Technical Systems

The South African government has repeatedly stated its wish to see more companies using the country’s raw materials to manufacture their own goods, thereby adding value to domestic raw materials before they are exported.

While the explosive growth in China over the last few years and its thirst for raw materials has seen it turn into a mass exporter of goods, there are still some companies that reverse that trend and are exporting to the Chinese market.

One such company is feed distribution manufacturer Technical Systems, based in Bellville in the Western Cape, which has now based its own warehouse facility in China to meet increasing demand from the country.

Technical Systems was started fifteen years ago with one premonitory goal in mind, to use South Africa’s raw materials to manufacture a product to export, a goal it has successfully met with 96% of its production being exported and only 4% remaining in South Africa.

Theuns Kühn, founder and director of Technical Systems, started the company in 1993 with three other employees. “The main aim for Technical Systems was to export and add value to local materials. That was the concept,” says Kühn.

The survival of the company was based on the concept of exporting from day one. “The local South African market is too small to warrant a plant or production facility, in our interests at least. So you have to export, similar to the electronics industry in South Africa, its too small to manufacture for local markets,’ says Kühn.

“We had two engineers working on various products to see where we could add value. Obviously you need some large capital to go into hi-tech products and the idea was not to make anything simple that anyone could make and then have to compete with other local industries,” says Kühn.

Though Technical Systems originally explored manufacturing in the computer and printing industries, the idea for the feeding chain was sparked by a group of farmers in Johannesburg, who explained to Kühn that importing a particular component was proving expensive.

Four years later the company had chosen and developed its flat feeder chain, to be used in machines that distribute feed to poultry and farming companies.

Though Technical Systems can now claim to export to all seven continents, Europe remains its largest market, with Germany, Holland, France and Spain all major customers.

“We’re not supplying to the end-user, we’re supplying to the companies that build the full installation from manure removal systems, egg removal systems, temperature, lighting, everything,” says Kühn, noting that automatic feeding systems are used most frequently in first world countries given their high cost of labour.

Once the product was chosen, Technical Systems started attending trade fairs and visiting potential customers, though Kühn says the reception wasn’t always positive. “Some doors were opened and some doors were closed, saying you’ll never make it; it’s too complicated, we’ve got a supplier already.”

“We started to exhibit in 1993, actually before we manufactured the product,” notes Kühn. “We were in Germany at the international fair and the first order was received by a company in Thailand, which is still our customer to date.”

"Quality is the number one challenge facing any exporter. Your product must be excellent quality, no doubt about it" - Theuns Kühn

So for other South African companies wanting to move into the export market, what are the main challenges they are likely to face? Kühn says ‘quality’ is the number one challenge facing any exporter.

“Your product must be excellent quality, no doubt about it. Secondly, your service must be 100%: on time, correct service, correct product, and correct specifications,” he says, noting that companies in developed countries expect first-class service.

Helping to achieve this level of service, Technical Systems has established a presence in various countries around the world, in order to meet the demands of its customers with a presence in the US, Brazil, Malaysia, Holland, and finally its recently opened facility in China.

Garry Colenbrander, marketing manager for Technical Systems, says the idea of a warehouse facility in China was mooted after the company began to see a large number of its customers there expanding.

Though experiencing rapid growth, China is still a developing market, and a highly segmented one at that, with hundreds of small players. Colenbrander notes that in developing countries customers cannot always take a full 20ft container load at a time, while the cost of a smaller load usually outweighs the benefit.

The cost of a 20ft container to China is $1,700, while a little one pallet container costs as much as $500, so shipping goods together at the same time and selling directly from the warehouse has proven to be a cost-effective method.
Technical System's Augur Wire

“We thought ‘lets open a warehouse in China and see what this market is really about. Are there a lot of small players that want to buy directly from us through the warehouse?’ The answer is yes there are,” says Colenbrander.

Thus the idea of the facility in China was borne. Since opening the warehouse in 2006, the strategy has paid off with the customer base in the region having doubled from 10 consistent customers to 20.

One would imagine that opening a warehouse facility in China would pose a number of problems for a South African company, language being just one; however Colenbrander notes that the process was, in fact, very easy.

“We work through a number of regular freight forwarders in South Africa, so we just took our regular one at that particular time, and said we’re considering setting up a warehouse in China, what have you got to offer?”

“Instead of us starting a Chinese company, we’re making use of our freight forwarders warehousing. They have warehousing in Shanghai, in Xingdau, and Tanxian, so they provided a cost structure for us to house our stock, a monthly fee to manage the stock and then other various fees for clearing the goods,” Colenbrander adds.

While that aspect of the business has proven to be relatively easy to manage, Kühn says that any exporter must constantly be improving their business. “The competition is fierce out there. You can’t just start manufacturing a component and then enter the export market. It’s also the way you position yourself in the market by focusing on a particular product.”

That is what singles out a company from the rest, says Kühn, the constant improvement of your product. “We own a product that we manufacture and we focus on that. You have to be focused and keep specializing and improve all the time."