Manufacturers’ Monthly took a tour of Keech’s Bendigo site recently. CEO Herbert Hermens and COO Cameron Watts told Brent Balinski about the investment efforts the steel castings company has made to boost its competitiveness.
Why improvement matters
“We’re spending more than seven and a half per cent of our revenue on R&D; this includes a strong commitment to process improvement,” explained Herbert Hermens, CEO since 2008 at Bendigo’s Keech Australia.
Keech is a third-generation Australian maker of castings. Most of these are wear parts such as ground-engaging tools used in the mining sector, where durability and effectiveness mean big loads of earth and big bucks for the user.
“We know what to do, that improves process, develop new products and leverage our patents. We need to add value for our customers,” said Hermens.
“So the products we produce here have got to be able to be demonstrably value adding. How’s that possible? by making them more efficient, more competitive and simpler.
The company operates two foundries producing heavy metal products designed to burrow into the earth, an exercise with a lot more science and research behind it than the average person might guess.
The last few years have seen Keech outlay millions upgrading its No. 2 Foundry – with advancements it hopes to bring to the main foundry – as well as open a wholly-owned Chilean subsidiary and launch an Innovation and Quality centre. Business Review Weekly last year named Keech regional Australia’s “Most Successful Privately Owned Business”, and described the company as pursuing an “aggressive strategy of innovation, global growth and investment” under Hermens. It exports around 20 per cent of what it makes to markets including Canada, Kazakhstan, Japan, the Middle East and elsewhere.
“Our focus is to build a world-class, world-competitive and sustainable production process here,” Hermens told Manufacturers’ Monthly.
“That’s our absolute commitment to sustain a manufacturing business here in regional Victoria.”
Part of what’s been the result of all these improvements and investment will be available in “the next few months” for those in mining and construction, this has been engineered in response to client-led problems.
From 2 to 1
Hermens described how their foundries have responded to demands. “Our No. 2 foundry is a small foundry and it was designed for specialised products,” Hermens said. “We’re able to invest close to $4 million in that. In that, it started off with much less, but our ambitions were able to grow.”
The company is able to trial processes at the small foundry before bringing them to the larger one, where better processes that have been trialled can really start to pay off.
“Our No. 2 Foundry has moved from a production of 250 kilograms a day to potentially seven tonnes a day, so the multiple is fantastic and we’re talking about the same type of multiple happening but on a higher scale in our number 1 foundry,” said Hermens.
Chief operating officer Cameron Watts also mentioned the importance of upgrades – which have included a complete overhaul of what’s done at No. 2, including cooling, moulding and shakeout systems, and enabling workers to recycle almost all of the sand used in production – to the business’s efficiency.
“It was single-cavity, one casting per mould,” he told Manufacturers’ Monthly of the way things have been done.
“Now in the new development of our main foundry we’re talking multi-cavity, and anywhere from four up to eight castings within the one mould as he pointed out, takes the same amount of time to process, so the return on that investment – you need to have the handling equipment to do that at that scale and obviously there’s a lot more output with the same sort of energy.”
Though the effort to improve efficiency and productivity is extensive, there’s one area where the company won’t try and save money. Keech has produced axes used by world-champion woodchoppers, and although these items are sought after for their quality, Keech doesn’t sell many. Their historical significance to the eight-decade old, third-generation family company means they must be retained and plan to keep manufacturing this product ad infinitum.
“It ties right back to the beginning. It ties right back to Keech. It’s important to keep that history going. While this is a family company they want to keep that history. I love that.” said Hermens.
Bendigo hasn’t always been Keech’s headquarters, with the company relocating from Sydney – where it was founded in 1934 – in 1994. It purchased and moved into a site formerly owned by Mason & Cox, and employs over 160.
The regional location can make it a challenge to attract the best engineers.
“Once you get them to Bendigo new comers quickly find it’s an attractive in which area to live,” said Hermens.
“There are certainly some structural issues we need to deal with in Bendigo. But in terms of liveability it’s a great city.”
Getting it right
Though it can sometimes be difficult recruiting the right staff, the science behind Keech’s products and the expertise of their staff are put on a pedestal.
“We have people say manufacturing is not a high-tech industry,” said Hermens.
The technology of what Keech produces is difficult to replicate. The dimensions can be recreated, sure, but the quality of metal and the processes behind this are much harder to copy. There are over 300 or so types of steel, Hermens pointed out. Use one that’s too hard? It’ll be too brittle and break. Too soft? The sacrificial components will degrade too quickly, leading to excessive downtime and lost money for the end user. Then there are considerations like flow, and attachment strategy.
“But how you actually manufacture that casting, what methods go with that to actually produce a sound casting is the secret,” explained Watts.
“People can copy, but there are things that we’ve got expertise in. And that’s not necessarily easy to copy. Although people try.”
For a company that has spent so heavily on making a thoroughly efficient, science-based (and sustainable – it aims to be carbon neutral in the future) operation, there will be no surprise that its CEO has some strong views on how manufacturing can and should be carried out if its to be successful.
Issues facing manufacturing
“For our company the biggest challenge is ensuring that our labour efficiency is maximised,” he said.
“It’s too glib – you always hear the comment being made that our wages are much higher than elsewhere. That’s a fact. So what do you do about it? You protect people’s wages, but you allow them or enable them to be as efficient, relative to other people’s salaries. In other words if another person’s salary is one quarter, our people have to be four times as efficient. That really is the key.”
Of course energy costs are an issue, he added, but being productive is where the major difference is made: enabling a company’s workforce to do its job properly.
“Manufacturing’s biggest issue is labour flexibility. And that doesn’t equate to reducing labour prices. It is the effective price, which is the imperative. But it gets lost in the discussions. You say ‘I want more flexibility’ and the first thing people come back with is ‘you want to cut people’s salaries’. No we don’t. What we want is to be able to use our labour most effectively.
“Which means that we need to train our people, we need to be able to encourage them to be trained because that’s not always a given – not everybody wants to move up.”
But back to enabling a company’s workers to get the job done as well as possible in general, boosting their abilities by investing in training, enabling multi-skilling and ensuring they can perform a number of roles, “so we can encourage them to move from one job to the next,” said Hermens.
“Those sorts of flexibilities are what we’re talking about. The next thing to look at is we need to make this place operational 24/7, 365 plus or minus a day here or there. We need that flexibility to be able to do that without increasing the cost beyond what is acceptable or reasonable. And we need to do that in a harmonious way.”