Taiho Plastics Industries Private Limited In 1976, Mr. Wong Ling Kah one of the co-owners of the family-owned Taiho Plastics Industries took over the management of the company and later became the managing director. Between 1978 and 1982, as the industry was trying to counter the effects of recession, Mr. Wong moved to invest for an approximate amount of $5. 2 Million to replace their outdated hong kong extruder, sealer, and cutter with more efficient Japanese machinery. These were financed through loans from financial institutions.
Such a decision was considered unwise by people within the business community. Mr. Wong however, personally believed that the investment was justifiable taking into consideration the lower unit cost and the company’s plan to be competitive in the international market. The manufacturing of plastic bags consist of three basic processes: extrusion, printing and cutting, and sealing. The maximum working capacity of the machines is 350 tons per month. Cost of production has fallen from $3,914,831. 00 in 1980 to 3,846,254. 00 in 1981.
To meet production date lines and high volume of orders, the company may increase the number of shifts per day. There may be from 1 to 3 shifts depending on the work load. Production is stopped once every two weeks to allow both man and machine to rest. Plastic resins are the main raw materials which form 65% of total cost in comparison to direct costing and overheads which account for 25% and 10%, respectively. These raw materials are imported through trading companies or subsidiaries of resin manufacturers. Shipments of these raw materials usually take two to three months and sometimes four months.
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Taiho is in good terms with its suppliers and so far has only experienced minimal problems, even during times of tight supply. The company however, does not practice any formal system of stock control. It restocks every 15 days, and if the company should require more, it will result to spot buying. For finished goods, the stocks are also low as the company can work up a stock equivalent to the volume of a shipping container within 15 days. Plastic bags used in Singapore include vest bags, carrier bags, garbage bags, food wrapping bags, industrial packaging bags, and market bags.
On the local scene, Taiho is concentrating on these two segments: supermarket and emporiums where there is a demand for bags of a higher quality and print. Sales operate on a contractual basis and orders have been regular. Taiho enjoys a core of regular customers. It is not heavily dependent on any one of them in particular and believes in having at least two clients in every country it exports to. Mr. Wong supplies not more than 50% of each client’s requirements and this help to reduce dependence and risks.
At present, Australia accounts for 80% of sales, Holland and the U. S. 10% and another 10% from domestic demand. Local sales, however, which previously accounted for 25% of total sales, have now dropped to only 10%. Mr. Wong believes that the key to expansion is to look west and is currently trying to establish contacts in the U. S. The introduction of a double tax reduction on 80% of advertising cost has encouraged mr. Wong to advertise in a few trade journals. The plastic bags industry in Singapore is characterized by large number of small competitors.
On the other hand there are many small volume users and large volume users making it a highly fragmented market which results to a high company failure rate in this type of industry. In 1983 alone, sixteen companies went out of business and during this period, most if not all manufacturers were operating below capacities. Over 90% of these manufacturers have plastic bags as their sole product while a few have diverted to related activities such as the trading of plastic resins. In Singapore, there are two companies that stand out in terms of the size of operations and finances are Lamipak and Maya Plastics.
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Both of these companies invest in research and development to improve their production and with the recent development of automated machines that can be operated at lower unit cost. Traditionally, production of plastic bags has been labor-intensive. But due to technological advancement and innovation, one can produce bags economically by having a lesser number of employees to work for the over-all production process. Since 1979, the number of employees at Taiho has fallen from 150 to 65 due to lesser human labor requirement and with major changes in the industry.
As a step in training, mr. Wong has sent three senior supervisors and six shift supervisors to courses at NPB. The production manager is also attending a two-year course in production management. Taiho has no immediate objective to compete head-on with Lamipak and Maya Plastics whose approaches are different from those of other local firms. Learning from example, Taiho is now paying more attention to the development of innovative bags. Mr. Wong’s future plans were to expand the company’s base in the U. S. market once he would come up with a strong financing.
