The road that set Stamford Tyres on its journey
The road that set Stamford Tyres on its journey
BT 20120716 MANOSTAM16 1322949
Mr Wee: Today, Stamford Tyres is one of the largest independent tyre and wheel distributors in South-east Asia - FILE PHOTO
application/pdf iconStamford Tyres Corporation
INTRODUCTION
THE Singapore investing community has, for many years, been focused on large local or foreign companies listed on the SGX. Small and medium-sized local listed companies, or SMEs, have been largely neglected, resulting in under-served low valuations.
This series by BT hopes to increase interest in below-the-radar companies that actually have a good track record and are set to succeed further. Presented by Mano Sabnani, who has tracked many of these companies for decades as a business journalist/editor and analyst/investor, each feature traces how the company has built itself up against many odds over the years to what it is today: a successful SGX-listed SME.
In this first part, we feature the Stamford Tyres group, which is essentially a distribution/supply chain company. It has its own brands of tyres such as Sumo Firenza and Sumo Tire. But manufacturing for these is outsourced to factories in China. Because these tyres are made in China and mostly sold there, they do not command premium prices. On the other hand, as a distributor for Sumitomo (Falken) and Toyo, Stamford's margins are limited.
Strategically, what are the options for Stamford to improve its margins? Manufacture its own tyres and sell to China? But manufacturing carries its own risks and is not a core group competency. Distribution is a people business. Besides retaining and growing its own people, the group has to continue to grow relationships with suppliers and customers in different geographical locations. What more can it do to strengthen its liaison with different stakeholders and consolidate its business position?
CEO Wee Kok Wah and CFO Conson Sia talk to Mano on the group's success story so far and how it plans to continue to grow while grappling with various issues arising.
Mano: Tell us about the origins of your group and how it got to its current business scope and overall size.
Wee Kok Wah: Stamford Tyres was founded in the 1930s by my father, Wee Boon Kwee, starting out as a tyre shop and petrol service station along Singapore's Stamford Road (hence our name).
In the 1940s, Stamford's founder noticed the high rates of tyre wear suffered by both commercial vehicles and those operated by the British forces in Singapore. In response, he established Singapore's first tyre-retreading plant and Stamford Tyres kept these vehicles running while Singapore was being rebuilt after the second world war.
In the 1970s, I took over as CEO/president and expanded the business of the company both locally and in South-east Asia and China, mainly through starting Stamford Tyres' distribution business. We moved to our present premises in Jurong with a state-of-the-art, 18,000m2 warehouse and a 3,000m2 tyre and accessories sales and service centre.
In 1991, Stamford Tyres made its initial public offering and was listed on the Second Board of the Singapore Stock Exchange (called Sesdaq). Shareholder support for our company grew steadily and, in 2003, we were moved up to the Main Board of the SES.
After listing, the team worked on strengthening and extending our footage to South-east Asia, South Africa, Australia, Hong Kong and China. I focused on building up our distribution network by enlarging dealer networks, and identifying brand representatives in Malaysia, Indonesia, Thailand and China, etc.
In 2004, Stamford Tyres started the wheel plant in Thailand to (1) enjoy Afta (Asean Free Trade Area) duty-free benefits and take advantage of vehicle parts growth in South-east Asia; and (2) complement the sales of high-performance tyres and wheels.
Today, Stamford Tyres is one of the largest independent tyre and wheel distributors in South-east Asia; it is working with more than 4,000 dealers in South-east Asia, South Africa, Australia, Hong Kong and China. Stamford Tyres has also developed a strong range of proprietary brands - SSW light alloy wheels and our tyres, Sumo Firenza, Sumo Cougar and Sumo Tire.
With the technical expertise gained over many years of operations, Stamford Tyres also supports fleet operators with tyre management and maintenance services to help them optimise tyre mileage and save operating costs.
Stamford Tyres offers two ranges of products - major brands and proprietary brands
Our major brands are:
Falken, manufactured by Sumitomo Rubber Industries, a leading Japanese manufacturer of tyres;
Continental, a range of top-quality tyres designed and manufactured by the company of the same name headquartered in Hanover, Germany;
Toyo, a major Japanese brand offering a full range of off-the-road tyres for mining and construction equipment and specialising in quality off-the-road radials for the mining industry.
Proprietary Brands:
Stamford Sports Wheels (SSW): Our proprietary brand of alloy wheels, which are designed, manufactured and tested in-house;
Sumo Firenza: Our premium budget range of performance tyres, SUV, light truck and truck/bus radials; and
Sumo Tire: Our line of nylon-bias tyres for light truck, truck, and agriculture and off-the-road applications.
Mano: What has been your business model and strategy and what competitive advantages have you used to get to where you are now?
Wee Kok Wah: Stamford's services of tyre and wheel distribution, retail operations and management services are fully integrated. It has developed a real-time supply-chain system to maintain stock levels to meet customers' needs on time. This system links its main centre in Singapore to satellite warehouses located across South-east Asia, South Africa and China.
Our strategy has been to:
Secure higher allocation of tyres by maintaining a solid relationship with Sumitomo Rubber, Stamford's largest supplier;
Value-add to tyre business of major brands by improving warehousing and distribution capabilities;
Systematic expansion of our product range; and
Respond quickly to market change and optimising gross margins by keeping focused on distribution network in South-east Asia, Hong Kong/China, South Africa; building new distribution outlets in Vietnam; further expansion of our retail network in Malaysia and Singapore; value add to entire business model by adding complementary product range and services to our retail offerings such as car care, maintenance and accessories.
Our competitive advantages are:
We are one of the largest independent tyre and wheel distributors in South-east Asia; working with more than 4,000 dealers worldwide;
Stamford has sales and operations in more than 90 countries - in South-east Asia, China, Hong Kong, Africa, India, Europe, the US and Latin America.
Sole distributor for major international brands, including Falken, Continental, Dunlop and Toyo;
Model set since 1990s not changed; remains focused as it takes a long time to build relationship and trust between dealers and principals;
Consistent policies and customer service is most important because of the large active dealer network;
Good principals such as Sumitomo Rubber, Continental, Toyo and reliable factories in China like Shentaida, Doublestar; and
Good team, which has been with Stamford Tyres long enough to understand the tyre business and provide best service and prudent direction for business growth.
Mano: What were your success factors in earlier years? Was it people; technologies, finance; access to markets; products/services; business environment or other factors?
Wee Koh Wah: In the early years, Stamford Tyres was only an SME with less than $15 million turnover a year.
We were opportunistic in business development but remained focused on cash-flow management. Breakthroughs came in 1975 when Sumitomo Rubber appointed us as Falken distributor. Toyo appointed us as Toyo OTR tyres distributor in 1976 and Continental appointed us as Continental distributor the same year, thanks to our focus on branding and long-term relationships.
Mano: You are progressing well as a group now. What are the important success factors that keep your group growing? .
Wee Kok Wah: I would highlight the following factors:
Good support from banks because of good quality of accounts receivable;
Well supported by good partners in South-east Asia, Europe and US;
Our international outlook; constant search for new markets and products;
Ability to find or build expertise within own company to promote products to customers;
Stable portfolio, expanding distribution footprint and improved penetration (South-east Asia, Hong Kong/China, South Africa, Australia, and new markets like India);
Learning to cope with international forex volatility and slow global economic growth. These are challenges that we face and learn to cope with. It means the group works harder to meet our growth targets.
Mano: What are your strategies for continued success in your activities (new or old) and how are you implementing these strategies?
Wee Kok Wah: We need to stay focused on our fundamental strategies and growth targets.
We began with the wholesale tyre business and we continue to build the business and the value chain - retail network, truck centre, steel wheels, lubricants and other services that increase gross margin but not costs or overheads. We are also expanding our product line so we can continue to grow.
Stamford is a traditional business adopting modern methods like MIS (Management Information System) to allow for better marketing and service. MIS helps us to manage our imports and distribution while facilitating production at lower cost, which is all vital in a competitive open market system.
Mano: What could go wrong with the group, given the many risk factors in your business overall?
Wee Kok Wah: The group is subjected to all kinds of risks. For example the floods in Thailand last year. Then there are currency swings, which can be unpredictable. These and other problems can cause us to be distracted and to lose focus on our core businesses, our cash flow and our customers and suppliers as well as our own staff and their needs
But we can continue to do well if we work hard, stay focused on our priorities and be honest. Each employee has to do his or her best and to work as if it is his/her own business. Our focused strategies and dedicated staff should allow us to overcome obstacles and continue to succeed.