A-Kraft Tools Specializes in Hand Tools for Professional Applications

No one can fault Louis Chen, CEO of A-Kraft Tools Manufacturing Co., Ltd., for being overly dramatic by hanging up in his showroom a poster of Superman, complete with the big, red S across the surreally-muscular chest and catchword Super Tools right on the middle. The specialist socket wrench maker is located in central Taiwan, an area known for quality tool-making. Without a hint of exaggeration, Chen says, "The poster basically symbolizes the indestructibility of our product line, while we also take pride in paying close attention to the fine finish and reliable torque strength of our tools."

As a long-term contract supplier to many leading European toolmakers serving professional users, Chen can hardly keep from being smug about his company's capacity to deliver high quality products. His company now produces over 500 different tools mostly for professional car assemblers and auto mechanics. Today, Europe accounts for 80% of his company's business, leaving the remaining 20% filled by A-Kraft brand-name operators in emerging economies like the Middle East, Russia and South Africa.

Chen is a veteran of marketing in Europe, starting his career over 30 years ago at Taiwan's then-biggest wrench maker Ruey/Chiro, now acquired by U.S. toolmaker Stanley. According to Chen, Ruey/Chiro was the first Taiwanese toolmaker to enter the European market. As many of his peers do in the sector, Chen later set up his own business in 1988 working with a team of colleagues from Ruey/Chiro.

Initially and like most of the island's tool-makers, Chen produced tools for household users in the United States, the world's biggest market for do-it-yourself (DIY) hand tools. "Shortly, we phased out this budget-priced segment and moved upmarket, serving the high-end market by enhancing our quality-inspection capability," he recalls.

To upgrade our capacity, the company has spent over NT$20 million (US$625,000 at US$1:NT$32) on inspection instruments, including the pricy durability analyzer, sodium-spray tester, and chrome-plating thickness gauge. The company has even been approved by the German GSVPA, known for being extremely strict, becoming one of the few toolmakers on the island to be qualified to label their products with the German mark. A-Kraft is also ISO9001:2000 approved.

Qualified by A-Kraft, Qualified by All

A stringent quality system enabled the company to turn out tools that are highly valued by specialized contract makers. "Even today, dedicated manufacturers contracted by us still say 'qualified by A-Kraft, qualified by all'," Chen boasts, adding that his company also adopts the European DIN industrial standard.

The A-Kraft top executive concedes that market transformations posed him with tough challenges, while the highest hurdle has been to fill orders of diversified specifications at low-volume and the reluctance of dedicated contract makers to accept low-volume orders with complicated specifications. "But soon they accepted our orders and found that they are, despite the higher complexity, actually more profitable than other contracts," he recalls.

High outsourcing percentage, Chen stresses, is one of the company's advantages. "Pure manufacturers mind manufacturing while we mind quality control, a perfect cooperation that reduces our costs whereas boosting quality," he notes. Each item's examination record is kept at the company for at least three years for the sake of convenient tracks by GSVPA specialists and reference to the company's perspective customers.

All of the company's contract manufacturers are ISO qualified and make professional tools. They build A-Kraft's tools according to the company's designs and standards. A-Kraft regularly sends its quality specialist to inspect manufacturing at contract manufacturers. "Our R&D specialist assessed them when we were selecting contract manufacturers so that we could fully understand their strength," Chen notes.

Innovation is the company's other advantage. According to Chen, the company spends around NT$10 million (US$312,500) on product research and development each year, representing around 4-5% of its revenue. So far, the company has won 20 patents on its innovative designs. One of the patents is for a 94-piece tool kit and one is for a waterproof tool-kit case completed in blow mold.

Chen says his company introduced the industry's first 94-piece tool kit 15 years ago and the product remains popular today. "The kit is a very handy tool collection containing the mostly used 94 tools," he says. Chen notes the kit is a symbol of his company's design point stressing functionality, convenience, novelty, and light weight.

Quality is also seen in the company's product finish and material improvements. The company's six-specialist R&D team began in 2004 introducing a special electroplating technique called Ultra-Tech, which boasts good merits in fighting rust and friction. In the same year, the team unveiled titanium wrenches and screwdrivers. Chrome-vanadium alloy steel has long been the material for the company's tools.

With years of diligent improvement, the company's quality, Chen says, is now only 40% short of top European standard. "But our pricing is only one tenth of that for top European tools. Besides, we have GSVPA certification, our company is a big one in Taiwan and we have high recommendations from customers," Chen says, explaining why leading European toolmakers have chosen his company as a contract supplier. "Most of all," he adds, "we do not supply own brands in Europe."

Value-added Warehousing Service

Three years ago, Chen's company introduced a value-added operation, its warehousing service. The service, Chen notes, makes the company a one-stop-shopping center for hand tools in Taiwan. "It is a complicate operation because you have over 10,000 product specifications to deal with and you can not go wrong in any case," Chen stresses.

The service, Chen explains, is closely associated with buyers' needs for other products than A-Kraft's. "Since there is a huge number of product items in hand-tool industry, no single one manufacturer can make all of these items by itself. Many big-name suppliers usually depend on several contract suppliers to make their product lines complete. Actually, in many cases they prefer to deal with one supplier for all needed items to individual suppliers for each item. So, when a contract supplier has the ability to satisfy buyers' one-stop-shopping needs, it more likely wins contracts than those who do not have the ability," Chen says.

But Chen stresses that although trading companies can do outsourcing for contract buyers, they do not have the ability to sort out items into categories and package them. "Neither do they have quality control and manufacturing capabilities," he notes. His company conducts quality control at contract suppliers and when their products arrive at its warehouse. "Most importantly, we make customers feel the warehouse like theirs," Chen stresses. Currently, warehousing service accounts for around 20% of the company's revenue.

For warehousing operation, the company has built a 12,000-square-meter warehouse on its factory campus, allowing several shipment-container trucks to park en masse, and highly computerized warehousing management. "Computerization is the key to the success of the operation because you don't want mix up orders, item specifications and even packages," Chen notes.

The company launched management computerization in 1992, laying solid foundation for its warehousing operation today. "Now, over two thirds of our 110 staff members are linked to computers," Chen boasts. He reports his company's warehousing service promises deliveries to reach European buyers' stores in two months.

To secure precise operation of its warehousing service, many effective programs have been added to the company's computers. For instance, a self-developed website offers contract buyers real-time insights of imports and exports in the warehouse. In addition, an electronic-mail system automatically notifies the company's contract suppliers of delivering supplies as soon as they are overdue to make the deliveries.

Chen notes that five of its major customers in Europe have joined its warehousing-service program. "They are pretty much satisfied with our service and I expect our service to lure more customers to join," he touts.

Chen knows very well that only machines can hardly keep its operation running properly. "We have quality talents in management," he says. To maintain the quality, his company has regularly sent its personnel to take training programs outside the office and hold trainings in-house. "Each year, our training expenditure accounts for around 2% of revenue," he claims.

A-Kraft projects its revenue for 2008 to increase 15% from 2007, during which its revenue grew 13% from a year earlier. Chen attributes the remarkable rise to mostly expansion of warehousing service, increasing orders from existing customers and newly found customers.

Chen is somewhat optimistic towards the future, believing orders from the West for Taiwan-made professional-grade tools will increase sharply. "The underselling trend in the hand-tool industry fueled by those in emerging markets tend to force established manufacturers to enhance quality, as the upstarts generally resort to copycatting, massive production that saturate bottom-end segments. For instance, Taiwan is doing so under pressure from mainland China. Competition from Taiwan is also forcing Japan to move upmarket, with Japan pushing the top European makers to switch manufacturing to Taiwanese counterparts. Ultimately, cost dictates the direction of competition," he says. (January 2008)