PBA Group featured in The Business Times

28 Oct 09

In the October 7, 2009 The Business Times article entitled "Restructuring That Pays Off", PBA Regional Director Mr. Derrick Yap elaborates on the restructuring that has taken place in PBA to combat the recent economic slowdown.

These restructuring measures include:

  • allocating more resources and putting greater focus to high-value customers as opposed to ad-hoc customers
  • with ball bearing sales in decline, PBA constantly tries to diversify its core competencies and services offerings to include aerospace components trading, spindle repair services, linear motor manufacturing and customized business software development
  • setting up joint ventures overseas to expand its customer base, PBA has a presence in 10 overseas markets, including Malaysia, Thailand, China, India, Indonesia and Vietnam
  • hiring and training staff to market PBA products and create greater brand awareness amongst PBA's machine building customers 

Originally Published October 7, 2009, The Business Times

By CHEN HUIFEN

Restructuring that pays off

Precision bearings and automation company PBA Group reassessed its strategy during the recent downturn and has now emerged stronger to tackle challenges ahead, reports CHEN HUIFEN

DESPITE declining demand, the recent downturn has for the most part been a blessing for precision bearings and automation company PBA Group.

'The business itself had too much fat and we were getting sloppy,' says regional manager Derrick Yap, 31, who is son of founder Tony Yap. 'When there's a downturn, all business flaws tend to be highlighted and every dollar counts. So we used the time to improve.'

One of the 'flaws' spotted during the past year was the inefficient spread of resources. PBA's sales people were spending too much time entertaining enquiries, even those that were not profitable, says Mr Yap.

Staff were always complaining about not having enough time to service all their clients. And even when more staff were added to the team, the rise in sales did not justify the headcount.

'So we restructured, putting a greater focus on the higher-value customers,' says Mr Yap. 'These are the 20 per cent of customers who contribute 80 per cent of our sales.'

That is not to say that PBA is ditching any of its clients, which fall generally into two groups - high potential and ad hoc. The company continues to serve everyone - only with better allocation of resources.

Core competencies

Thanks to a largely prudent strategy, the restructure was minor and did not involve retrenching any of PBA's 150 employees in Singapore and the region. It helped that the group had consistently pursued diversification for the past two decades. 'But even as we diversified, we stayed within our core competencies,' says Mr Yap. 'So when one (business) drops, the others still sustain us.'

Established as a ball bearing trading firm by Mr Yap's father in 1987, PBA now also has interests in linear motors, spindles, IT services and aerospace spare parts. Mr Yap recalls that his father started out as a distributor for a ball bearing and needle roller brand, supplying mainly to industrial engineering firms.

The company then expanded its offerings to include spare parts for aircraft and spindles. With earnings from trading, coupled with a nose that smelled a rising trend for faster automation,PBA ploughed money into research and development to design and make its own brand of linear motors and customise them for use in sub-modules, which are segments of factory automation equipment.

The new business helped boost its trading unit as the parts used to build the motors and sub-modules could be sourced from the existing business. Also, it allowed PBA to be closer to its customers, as each project requires its engineers to understand their needs intimately.

'When people start buying modules from us, the relationship between us and the customers becomes stronger,' says Mr Yap. 'It's unlike trading items, where if you're selling at $1 and next day someone else comes in and sell for 90 cents you'll lose the deal. With this (business), you come in, you have a good rapport, you build the machine together with the customers and they won't switch you off so easily.'

Having developed expertise in linear motors, PBA now uses its own patented technology to manufacture them. Customers include the likes of HP, Samsung, Sony, Rokko and ST Microelectronics.

More recently, the company has ventured into IT services by setting up of PBA Solutions. The unit was set up after disappointing results from sub-contractors that offered off-the-shelf software suites that were not designed with engineering applications in mind.

'We were changing a lot of our workflow to suit those systems, creating more work for us, rather than less work,' says Mr Yap.

So PBA Solutions was set up, led by Mr Yap's older brother Jeremy Yap, a computer engineer by training and general manager of PBA Solutions. The company developed its own software and then offered its expertise to other SMEs, mostly engineering firms with similar needs. Today, PBA Solutions has a 15-person developer team offering solutions such as enterprise resource planning, customer relationship management and infrastructure planning systems, tailored for engineering firms.

It is now one of PBA's fastest-growing businesses in the group, says Mr Yap. 'The growth rate in revenue terms is close to 100 per cent between last year and this year. This is in part due to the fact that the government is giving a lot of grants to companies to adopt IT.'

Transformation

Over the next three to five years, any one of PBA's aerospace, spindles, linear motor or IT units could potentially outdo its trading business, which now accounts for the lion's share of revenue. When that happens, it will mark the transformation of the group from mere hardware distributor to engineering solutions provider, driven by knowledge rather than products.

As it is, PBA has already moved into repair and consultancy for the spindles business, and is in talks with a major US firm to set up a services hub in Singapore to complement its aerospace parts supply unit.

'Same as we did for the spindles business,' says Mr Yap. 'We used to sell the spare parts and customers did the repairing on their own. Now, instead of just selling the spare parts, we want to also do the repairing.'

Including joint venture firms, the group has a presence in 10 overseas markets, including Malaysia, Thailand, China, India, Indonesia and Vietnam.

It generated about $40 million in turnover last year, but foresees a decline of 10-15 per cent in turnover this year due to the economic slowdown.

While the ball bearings trading unit has seen sales fall, other businesses have generally held up.

'But with the restructuring and a more focused sales strategy, we are likely to maintain our profitability and are projecting sharp growth in the next few years,' says Mr Yap.

Looking for more staff

To help achieve that, he is already on the lookout for eight more staff - in IT, project management, engineering specialists and marketing.

'Because we are in niche market, there may be many who do not know what we can offer,' he says. 'Rather than mere trading, we also want to set up a marketing department to approach the market through education. We want to have joint trading seminars with our overseas suppliers or experts to reach out to the engineers and tell them about what we have.'

Mr Yap's father and PBA chief executive Tony Yap says: 'Many machine builders make machines with parts that are expensive and rare because of lack of exposure to products. Often, the parts that different companies use to design machines are similar. Yet machine builders are making their machines with different parts, not knowing what the common parts are.

'PBA can offer engineering advice to machine builders, telling them which parts to use to minimise cost, and also parts that are more readily available. There is no competitive advantage for machine builders to use unique parts, or for manufacturers to produce rare parts for a few customers.

'The increase in expense, resulting in an increase in cost, is solely a problem of lack of collaboration and consolidation. The industry on a whole would benefit if PBA becomes the company that regulates the parts that are being used, of course without discounting the importance of the technical specification of the parts recommended.

'In five years' time, we envision PBA being the consolidation hub for all top engineering companies.'