FEED Business Worldwide - June 2012
Zhengchang: Conquering challenges with innovation and responsibility
by Geraldine Ee
China's feed industry has a breakthrough this year, with the installation of four production lines with a total capacity of 160 tonnes/hour of feed. Undertaken by Zhengchang, one of the largest feed machinery manufacturers in the world, the project was commissioned by Anhui HeWei Agricultural Development Company, one of the country's largest processed feed producers.
"The client gave us a lot of challenges," admits Hao Yun, Board Chairman of Zhengchang. She explains that, "HeWei wanted to build the largest feed mill in China with a capacity of 200 tonnes per hour. There may be feed machines in the world capable of reaching this capacity, but in China, no feed mill was capable of producing at such a speed." But they did have confidence in Zengchange because, "They have worked with us before, and chose us to work on this project."
Anhui HeWei's ambitious project came along with various demands, which in turn, became Zhengchang's challenges, motivating the company to provide innovative solutions. Their answer to HeWei's challenge was Zhengchang's SZLH1068 feed pellet mill, which holds the Chinese feed industry's productivity record, as it can process 45 to 55 tonnes per hour.
"Besides our inherent drive for innovation, our customers' specific demands are also drivers for us to innovate, helping us to continually grow," says Hao. According to him, everyone in the company, from the technician to the salesperson, production personnel to installation personnel, were challenged, and enriched in the process.
When it first entered business, Zhengchang provided feed mills with output capacities of 5 to 10 tonnes per hour, just like its industry rivals. Today, after their equipping of Anhui HeWei's plant with the facilities to produce 160 tonnes per hour, Hao emphasised that innovation is what drives Zhengchang's growth.
"Currently, I think our greatest challenge is to continually innovate and reinvent our technology and skills," says Hao. "We invest heavily on technical innovation, and are very focussed on research. The capacity efficiency of the machinery we develop is very high, at least 15% to 20% above industry norms" she adds.
In its approach towards research and development, Zhengchang focuses on the standardisation of projects and required machinery. The company also strives to enhance safety, increase production capacity and increase the level of automation. This is especially important given the trend towards rising labour costs, both within China itself and in other developing countries with rapidly expanding feed industries.
In China, with, competition between feed machinery manufacturers is heating up as well. Zhengchang needs to keep its costs low, yet maintain quality, and even keep up with increasing demands for ever higher feed production rates. To meet customer demand, both feed mill throughput and the energy efficiency of machine components were enhanced.
Alongside a quest to provide quality products, Hao says that another important corporate value that ensures Zhengchang's success is that of "responsibility". "Responsibility will ensure excellence in whatever you do, be it technical innovation or customer service," Hao says.
Responsibility towards its customer is inculcated in its employees at every stage, from design, production to sales. At Zhengchang, customer-orientation is taken a step further and begins with "internal customers" within the organisation - the design team is responsible to the production team, while the production team is responsible to the sales team.
"At the end of the day, a design or manufacturing flaw of a machine will directly impact the sales team and the performance of the companyâ€¦ so we instil a strong sense of responsibility in all our employees," Hao adds.
The company recognises that selling machinery is unlike selling consumer goods. As the customer can only determine the quality of the product after using it, word of mouth from existing customers is extremely important. It is committed to providing good product and service quality, and satisfied customers, in turn, will recommend its machinery to other customers.
Without mincing her words, Hao says that Zhengchang prides itself as being a responsible enterprise. Emphasising the importance of this, she points out that the food safety problem in China is the result of pursuing quick money, and a lack of responsibility on the part of food producers and some local governments.
Competition in China, opportunities overseas
However, even with high quality products and services, business does not come easy nowadays. As profits are thin for feed mills in some Asian markets, customers demand high quality machines at affordable prices. Be it in China itself or in overseas markets, the biggest challenge is to exceed customers' technical requirements while keeping costs low.
Hao says, "China's feed industry was in its golden years in the 1990s. However, towards the end of the 1990s, competition stiffened, reducing the profit of feed manufacturers to a few Yuan (RMB) per tonne."
To a certain extent, the government's support to the development of agricultural machinery helps. For instance, SZLH1068 pellet mill is one of the National Key Science and Technology Support Projects of the 11th five-year plan and the key program being promotied by the National Agricultural Ministry of the 12th five-year plan.
Additionally, Zhengchang has plans to help agribusiness owners gain access to the funds they need to develop their businesses. It is currently exploring with established Chinese financial institutions the possibility of making secured loans available to agribusinesses.
"We believe they will welcome this initiative and we hope this will be a means to develop the industry," says Hao.
Last year, Zhengchang attained RMB1.8 billion (US$285 million) in sales, an increase of 38.5% from RMB1.3 billion (US$206 million) in 2010. With domestic competition stiffening, Zhengchang has been paying more attention to overseas markets. "When foreign clients approached us during 2001-2002," Hao says, "we realised that the global market presents great potential for the company's growth."
In recent years, Southeast Asia has become an active market. Zhengchang set up offices in Indonesia, Philippines, Vietnam and Bangladesh, run by staff from the head offices with technical expertise and locals with local contact networks and technical ability.
"Southeast Asia and South Asia has great potential and we need to commit time and money to better develop these markets," explains Hao.
In other regions where Zhengchang did not set up local offices, it works closely with local sales representatives who can provide customers with timely support. It also provides training in some markets and even invites foreign clients and sales representatives to Zhengchang's factory in China for study trips to enhance partnership and knowledge of the company's machines.
And the overseas expansion is showing considerable success. Last year, Zhengchang won two projects in Egypt and Uzbekistan, each worth more than US$4 million. Projects in Iran, Peru, Indonesia and South Africa, among others are also underway.
Yet, with great opportunities come challenges and risks. For instance, Hao quotes, the profitability of feed milling in markets such as Egypt is high, at US$50-70/tonne, and that means creates excellent opportunities for Zhengchang. However, the the Middle East's political instability translates into higher risks for the company's investments. Political woes in Syria and Egypt remain unresolved, the economy is affected and its plans for these regions have to be put on hold.
Explains Zengchang's corporate expansion philosophy, Hao states that, "The international market is huge, and we place strong emphasis on depth, rather than on breadth. We would rather focus on a few markets and serve them well, than to spread ourselves too thin by penetrating too many markets too quickly."
Despite the challenges, Zhengchang will continue to expand its network of offices overseas, actively participate in trade shows, step up promotion overseas and develop important markets. When it exhibited its machines at overseas trade shows in the last two years, it attracted serious buyers and helped it win customers' trust in its machines.
In addition, it is engaged in research and development of facilities for biofuels, a much talked-about source of sustainable energy which could pave the way for the future of energy and perhaps, a new chapter for Zhengchang.
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