All Change

Very few companies survive to celebrate a 50th anniversary, let alone the 86 years so far achieved by Warren and Brown Technologies (W&BT). Business is like evolution: companies that can't keep adapting to changed operating environments quickly fade into history. So how does this Melbourne-based octogenarian continue to thrive and expand like a youngster?

Warren and Brown first opened its doors for business in 1921. It was then a manufacturer of precision tools for the hot, new, next-generation industry of car making. But the dismantling of Australia's tariff walls in the 1980s gave manufacturers such as Warren and Brown a stark choice: change or die.

Old command-and-control management hierarchies, bloated cost structures and competition from producers in low-cost countries necessitated a profound rethinking of the business. It needed a makeover in its product range, workforce structure, costs and orientation to world markets. In 1986, W&BT's then general manager (and now managing director), Neil Domelow, lead a management buyout.

Since then, W&BT has adroitly sidestepped into a new field: fibre-optic communications technology. It has also adopted new workforce structures and begun expanding its manufacturing operations in South-East Asia.

The Challenge

How to turn an old-style metal products manufacturer into a lean, cost-efficient maker of niche telecommunications products.

The Solution

In the late 1980s, W&BT leveraged its metal fabrication expertise to help win contracts from Telecom Australia (now Telstra) for cable ducting and other components. That work enabled W&BT to expand into splicing and patching modules, optical distribution frames, ducting and other systems for managing fibre optic communications.

W&BT also took advantage of a Telstra downsizing program. Telstra's loss was W&BT's gain as it snapped up some high-quality telecommunications technicians. Domelow says. "I'm a mechanical engineer and we had to learn about telecommunications. Those technicians gave us a lead back into Telstra."

Telstra has now been a W&BT client for more than 20 years. But the Telstra contracts are never taken for granted. Domelow says: "Telstra expects productivity gains - translated into lower costs - every year. The only items that can go up are selected raw materials charges."

For W&BT that has meant a continuous process of pruning and shaving costs. Domelow says: "Everyone from the floor sweeper up knows that their ideas are welcome here." For example, the legacy metal fabrication business has been outsourced to its staff. W&BT owns the plant and equipment but a former W&BT senior manager takes responsibility for fulfilling contracts and quality control. The error rate has dropped from 3% to 0% and employee remuneration has risen substantially.

The company has also implemented a Japanese business practice of deploying staff to assemble components on a piece-work basis. Staff work in their own time at their own pace. Costs have been cut while quality has been maintained.

W&BT has commenced manufacturing in the Philippines and Thailand (with offices in India and Vietnam) and is in the process of duplicating its manufacturing operation in South-East Asia. Domelow emphasises that this not about closing down the Australian operation. Instead, it gives the company greater flexibility in bidding and winning contracts. He says that W&BT's Filipino workforce are willing to work intensive shifts to meet big orders in return for workplace flexibility at other times. "They have families to feed, school and care for."

Domelow has a "triple source" policy for most components that W&BT buys in. Three suppliers are asked to bid and the one with the best price-quality mix wins. Domelow says the competition between suppliers gives W&BT buying leverage: "We usually ask them to cut 10% off each contract and end up getting 5%."

The Results

In the past five years, turnover has risen from $6 million to $25 million. Domelow says the $30 million budget for the current year will turn out to be more like $45 million.

The staff turnover rate is negligible. Domelow says: "They love our flexibility. I can't remember the last time someone left apart from retirement or illness."

A partnership with the Dutch Mulder Hardenburg Group is going from strength to strength. The group has installed fibre optic networks in Rotterdam, Deventer and Almere, as well as the initial CITYnet rollout in Amsterdam. CITYnet will connect 400,000 homes in the next 10 years.

Author Credits