With a spanking-new three-story factory providing a total of 2,574 square meters of floor space, Huang Kou-shu, chairman of Yong Yen Metal Co., is more confident about the company's ability to fill big orders for its garden-sprinkling hoses.

"In this industry," he explains, "a big capacity gives you a better chance to win orders from big buyers." He estimates that the new plant has space for at least double the number of machines in the original one, which contains 30 computerized numerically controlled (CNC) lathes for making metal parts and five extruding machines for plastic hoses.

"Except for the fitting accessories, which we contract out to dedicated manufacturers, we make every part of our sprinkling-hose systems in-house," Huang claims, estimating Yong Yen's self-content ratio at 90%.

The company has spent at least NT$50 million (US$1.5 million at NT$35:US$1) on equipment over the past two decades, and the recent expansion is a continuation of that business approach. The added capacity is needed, Huang explains, because more and more large European garden-tool retailers are forming joint procurement alliances so that they can place big orders and keep costs down. This, he comments, requires suppliers with large capacities, because only such manufacturers possess the economies of scale they need to negotiate prices.

At the company's inception, Yong Yen was a provider of secondary processing services focused on metal parts for sprinkling hoses. About six years ago it expanded into the making of garden-use sprinkling hoses in order to achieve the higher added value offered with complete products. Since that time, Huang says, his firm's revenues have increased by an average of 20% annually.


More Profit, More Pressure

The production of final products has given the company fatter profit margins, but it has also brought more pressures. "We didn't have design and marketing pressures when we were just doing processing work," Huang comments. "Now we have to tap markets and develop products on our own." To date the company has developed over 20 patented products, which are introduced at major trade shows around the world.

One of those patented models (in Taiwan and the United States) is a sprinkling-hose system that comes with a palm-sized round box that allows the choice of eight sprinkling patterns: jet, sunflower, flat, vertical, cone, shower, dual jet, and mist. The hose rolling system includes a 50-foot polyester hose that can resist up to 300 pounds per square inch of water pressure, along with an acrylonitrile butadiene styrene (ABS) case.

"This system, like our other patented products, was developed from scratch in our own facility-including the building of the molds," Huang says.

A more recent product is a patented sprinkling system equipped with a multi-pattern sprinkling head and a separate showerhead, giving one additional sprinkling pattern.

These "smart" sprinkling systems are part of Yong Yen's strategy of developing unique products instead of moving production to mainland China, where many of Taiwan's hardware makers have set up factories and where local producers have emerged to challenge Taiwanese suppliers.

"Only those manufacturers who depend heavily on manual labor need to go to the mainland," Huang explains. "My company has no urgent need to do that, since we believe that our proper strategy is to differentiate ourselves from the manufacturers who depend on cheap labor to turn out their lower-price, lower-quality products."


Spending on Development

In each of the past few years, the chairman reports, he has spent NT$2 million (US$57,000) to NT$3 million (US$86,000) on product development.

The company now ships around four 40-foot containers of products a week, according to Huang, with 60% going to the United States and the rest to Europe and Southeast Asia. The products are sold, bearing customers' brand names, at hypermarkets and specialized stores.

Huang claims that his company has the advantage over its competitors, even if they too started out as secondary processors, because he possessed more complete processing capabilities. This fact, he believes, gives him a better control of quality. One result of this quality assurance was the company's being granted ISO-9001 certification, version 2000.

Its well-equipped production lines enable Yong Yen to turn out sprinkling products in at least 100 different specifications, with diameters of 3mm to 60mm. Automated machinery assures top precision. The company produces parts as well as complete sprinkling systems, including plastic trigger nozzles, metal trigger nozzles, hexagonal brass couplings, brass connectors, brass clincher couplings, brass nozzles and nozzle connector sets, plastic connectors, and hoses.

Despite Yong Yen's new ability to accept big orders, it will continue taking small orders as well in an attempt to keep capacity filled at all times.

The chairman says that after falling off for a while, orders have returned in a rush since early this year. The robust inflow of orders has forced the company to work overtime; Huang remains cautious about future prospects, however, and is nervous about the possibility of business falling off suddenly.

To keep the orders coming, Huang plans to absorb recent price hikes for copper instead of passing the increased cost along to his customers. And, he insists, Taiwan can now offer products with quality equal to that of Japanese manufacturers.