Danfoss Thailand increasingly profitable

Danfoss has increased its profitability in Thailand every year since Mr. Prasansak Suwanpotipra five years ago was handpicked for the job as General Manager of the prominent Danish company in Thailand.
     “When you look at the figures, you may at first glance notice that our gross profit has been going down in terms of percent of the turnover,” Mr. Prasansak says.
     “But what is more important is, that as the sales have tripled, our sales and administrative costs have come down from the level of more than 30 percent of the turnover to today’s level of below 14 percent,” he explains.
     While the turnover has shot up 300 percent, he has managed to keep the growth in overhead costs down tremendously. The persons who handle orders, quotations, service requests, inquiries, deliveries have only increased from four to five people through constantly increased efficiency in this department.
     Mr. Prasansak actually expects this gross profit margin to gradually drop slightly further over the coming years of further expansion-and is quite happy with this prospect.
     “It simply reflects that an increasing share of our sales go through a network of dealers and representatives. The incentives we offer them will naturally show a drop in our gross profit margin. But because we are able to keep our costs at such a low level it will still translate into a larger profit of the total operation.” he explains.
     Some key customers are, however, still being served directly by Danfoss’ own people. Nine out of ten of the new staff, Danfoss has employed over the past five years, are sales engineers. Their product and application knowledge is one of the major assets of the company.
     “With this background they can recommend customers the best solution and generate benefit for the customer. Ultimately, we don’t sell the product. We sell what it can do for the customer,” Mr. Prasansak says.
     Change in attitude in the management of most Thai companies works in favour of this line of thinking. In the old days, the owner of most Thai companies would in his own wisdom define what he needed to improve production and operational profit. Today, most companies let the staff and our engineers help analyze which solution would maximize the benefit for the company.
     Big modern supermarkets are good example of how Danfoss is able to help their clients achieve substantial savings and other benefits if they work together. For these large retailers, controlling the temperature of their warehouses and throughout the chain of logistics is a lot about money. Not just because energy may be saved in this way but also because it maintain the value of their stock, especially of the meat.
     “If you have 100 tons of meat in a refrigerated store, and you freeze it down too much, you may loose 10 percent of the water in the meat. If your retail price of that meat is 60 baht per kilo, your stock just lost 600,000 Baht of its value-money which literally escaped into the air,” Mr. Prasansak explains.
     Another example is a huge warehouse in upcountry, which is today supervised by sensors in online connection with a computer in Bangkok with remote access function. Before, staff would have to be employed to keep a constant eye on the meters. Today, one man on duty will get a phone call from Bangkok, if the alarm triggered by the remote sensors indicates that something needs to be adjusted.
Danfoss’ variable speed drives are also very successful in Thailand. They control electrical motors by adjusting the frequency of the current which also translates into energy saving. In general if the sensor indicate, that the speed of a motor which run a pump can be reduced 20 percent, the energy saving is equal to 50 percent. Today, these variable speed drives have become almost standard equipment for most industries.
     The food industry, including dairies and the large breweries build in the past few years by among others Danbrew, also use Danfoss equipment to control the flow of the fluids.
     The efficiency of Danfoss is reflected also in its own warehouse management. The value of the inventory is at the level of less than one month worth of sales. When it comes to electronic products there is, however, need only a very small stock, Mr. Prasansak explains. With the efficiency back in Denmark, where most of these products are assembled, Danfoss in Thailand is guaranteed delivered of these goods within ten days from the time the Thai customer signs the purchase order.
     Mr. Prasansak Suwanpotipra was managing Director for EAC’s Technical Marketing when back in 1998 he was hand picked for the job to lead Danfoss (Thailand) Co., Ltd. He succeeding at that time Mr. Brian Griffin who had moved on to a position with Danfoss in South Africa.
     The consultant, who recommended Mr. Prasansak, was looking for a Danish oriented person for the position and he could find no better man to fit his ideal candidate. Mr. Prasansak had even successfully proven that he could replace a Dane in a Danish company without causing any organizational friction.
     “The benefit is selecting a local person for the top position lies mostly in his understanding of his staff, I believe. The risk is, however, always how this person will fit into the corporate culture and structure of the mother company,” Mr. Prasansak says.
     Mr. Prasansak – today 48 – initially graduated as a bachelor in Mechanical Engineering from Kasetsart University in 1978. The next three years he spent in US where in 1982 he took his master degree in System Engineering. Back in Bangkok in 1984 he continued studying and in 1986 he graduated with master degree in marking from Thammasart University.
     Before joining, EAC, he had worked with five different companies, including the Sales and Marketing department of the Swedish company SKF, which at the time had a Danish Manager, Mr. Leo Alexandersen.
     “They have all done well, since I left,” he says contentedly adding his belief that “if a company goes down in performance when we leave it, we have done a bad job.”
     Apparently, a company can also do well without having good people leaving the company. The tripling of Danfoss turnover since 1998 has mostly been achieved with people who have been working with the company for several years. Four of the current staff have been with the company since the start 10 years ago and another five have worked with Danfoss for more than five years.
     It was therefore a sad day, when four Danfoss staff in August had to leave the company. This was however in line with a corporate deal which had been struck between Danfoss and Siemens to transfer one product line to Siemens world wide. Consequently, anywhere in the world where Danfoss had people working with this product, they likewise had to be transferred with the product to work with Siemens.
     “We ensured that they were all transferred on contracts which honoured the number of years they had been working with Danfoss,” Mr. Prasansak says.
“But I don’t think we should mention the name of the product. Siemens is not Danish,” he adds.

About Gregers Møller

Editor-in-Chief • ScandAsia Publishing Co., Ltd. • Bangkok, Thailand

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