Good Partners Are Worth Seeking Further Afield
Machine workshop company Siimet decided to choose a different route than its competitors and got itself a subcontractor in Vietnam, with Finnpartnership’s support. The company has had no cause to regret that decision.
A few years ago, Siimet Oy, which manufactures oversize transport equipment, found itself facing a choice. The company would continue making its custom-made oversize truck trailers in Mikkeli, but the new serial production of trailers would have to be outsourced to retain the company’s competitive strength. Siimet’s toughest competitors in Central Europe had transferred some of their production to Eastern Europe. The Finnish company didn’t want to go the same route so it started instead to look into the possibility of a subcontractor in China.
“We had several discussions about it with an expert from Finpro, who told us that it wouldn’t be wise for a small or medium-sized company like us to look for a partner in a country as vast as China. Instead, he recommended Vietnam,” says Markku Häkkinen, Siimet Oy’s Chairman of the Board.
Business Partnership Support is vitally important
Siimet started looking for subcontractors in Vietnam with Finpro’s help. It received Finnpartnership’s Business Partnership Support for identifying potential partners. “I have an extremely positive view of Finnpartnership and Finpro’s operations. Without support of this kind, a small or medium-sized company like Siimet would have no opportunity of going to Vietnam,” says Häkkinen. Siimet’s representatives first visited ten Vietnamese companies that manufacture metal structures or trailers. They invited tenders from five of them and had in-depth discussions with two.
“In the end, we chose a metal company that operates in Ho Chi Minh City as our partner.” Siimet began a pilot project with this partner in 2011. The work has been distributed so that the Vietnamese company is responsible for manufacturing steel frames for trailers according to designs made in Finland. Axles and brake systems and other final equipment are installed in Mikkeli. This is to ensure that the trailers comply with Finnish and EU vehicle construction rules and regulations.
Positive experiences from the pilot project
The first steel frames for trailers have now been made in Vietnam, delivered to Finland and put on the road. “In a country like Vietnam, you have to have time. Things don’t happen quickly.” Nevertheless, Häkkinen says he is extremely happy with the collaboration. “The subcontractor’s price-quality ratio and delivery reliability have been very good. There’s a little room for improvement in the quality of work in Vietnam and the design work in Finland, but that’s what pilot projects are always about.”
In Häkkinen’s opinion, the greatest challenge is the distance. An engineer designing equipment in Mikkeli sits close to the metalworker welding the trailer, but communicating with the Vietnamese subcontractor is not always as straightforward. Häkkinen explains that cost calculations have to take into account the fact that carrying the heavy steel frames to Finland by sea is not free. In addition to fluctuations in sea freight prices, you have to be prepared for changes in exchange rates and wage levels in the target country.
Work quality improves through training
The three-year long pilot project has come to an end. The collaboration is not yet financially profitable, especially in the pilot project, but Häkkinen has faith in the future. “After we have sorted out our operation, we’ll have a good chance of mutual success. Our target is a long-term partnership. Our Vietnamese partner is also eager and very willing to cooperate. Their attitude is exactly as it should be.”
The main focus in deepening the collaboration lies in improving quality and quality control. “We are working hard in Vietnam now to make sure that the welding methods and the finished work correspond to European standards.” An important part of quality improvement is training the Vietnamese company’s staff. For this, Siimet receives Finnpartnership’s support.
Subcontracting is a good fit for Siimet’s system
In Häkkinen’s opinion, the subcontracting done in Vietnam is a good fit for Siimet’s system. He believes that their products, which are even more competitive than before, will allow the Finnish company to put up a good fight against their competitors. “International competition is extremely tough in this field too, and the 2000s saw many new importers arrive in Finland.” The trailers that are partly made in Vietnam diversify Siimet’s product portfolio, but Häkkinen still believes that custom-made oversize transport equipment will continue to act as Siimet’s flagship in the future.
The company’s most important clients are businesses that need heavy-duty equipment for transporting earth moving and forestry machines. In other industries, oversize transport equipment is needed to transport chemical pulp, paper reels and scrap metal. The Finnish Defence Forces, for example, use Siimet’s trailer chassis for transporting their equipment. Founded in 1946, Siimet employs 25–30 metalworkers and a dozen clerical employees in Mikkeli. In the last few years, the company’s net turnover has amounted to approximately MEUR 3.5.