The wraps are being taken off one of the panel industry’s best kept secrets. The directors at Knowsley-based Sonae are the first to admit that after an all-singing, all-dancing launch in 2000 the £100m plant was quick to run into trouble.

And for the past two years a blanket of silence has cloaked the Portuguese-owned Challenger factory.

But not for any longer. A retrenching operation has seen the company build a new team fired with as much energy as the plant they operate.

The mood is positive and the message is clear. Despite industry rumour to the contrary, Sonae is here for the long haul with the full backing of its Portuguese owners.

Deputy managing director Nigel Graham explained: “Sonae always intended to have a manufacturing facility here – the UK was considered a main market by the group which already had a commercial operation based in Liverpool.

“Once the decision was made in 1998, a team was put together to construct the new facility. The construction programme was ambitious in that they thought it could be built within nine months.

“What we probably didn’t fully appreciate at the time was that the group had concentrated on other investments in France, Germany and Canada and a lot of resource was taken up – our management and engineering expertise was stretched considerably.”

Production problems

The first Challenger board was manufactured in January 2000, but although the machinery was state-of-the-art, Mr Graham said there were issues in relation to its stable production.

“We had a fairly simple manufacturing process but it was complicated by a sensitive relationship between different pieces of equipment, especially given the high dependency on IT,” he explained.

Another issue was recruitment. “In the early days we had a 40% turnover in shop floor employees. It was a new industry for the area which had high levels of unemployment,” said Mr Graham. “We didn’t have a residue of base knowledge and that put a strain on operations.”

Sonae took stock. “In February 2002 the group board put in new management to rejuvenate the business plan and identify some key constraints, such as the proposal to have a recycling operation which was just not feasible.”

At the time Mr Graham was general manager of Spanbord and he was invited to Liverpool to help implement a new business plan. “We knew we needed to strengthen our team. In terms of operational management we needed an experienced industrialist – and Tony Hackney, now managing director, came along at just the right time.

“Challenger was the name – and it was a challenge! Some days we thought we were making progress and others we wondered if we had bitten off too much and would never be able to turn it round.

Standing back

“With Tony we had the mix of experience and determination to move forward and the group stood back to let the UK management make day-to-day decisions.

“2003 was a period of consolidation and by 2004 we were making the operation work and we hope to achieve full capacity of 450,000m3 by 2005. We are already at 420,000-430,000m3, so we are not far away.”

Logistics have always been a key factor in Sonae Group‘s strategy. Its product is of low value but transport costs are high – and the company has deliberately placed its plants throughout Europe close to its customers, with Liverpool no exception.

Sonae owns the 30-acre Knowsley site which has good road, rail and port links, and product can be moved easily between its Spanboard plant in Ireland and the Challenger facilities as market demands.

&#8220We have not solved every problem, but we are trying to overcome them and rebuild where necessary. We need to take the positives and recognise the negatives and present ourselves in a way which shows where we are”

Deputy managing director Nigel Graham

The UK represents 8% of Sonae Group’s turnover and Mr Graham said: “Success in the UK is an important part of the group’s global ambitions.”

Competition

In the UK, Sonae has many competitors: “We are in a very busy street with three main players on our doorstep. To compete we have to offer something different,” he added.

“In late 2003 we decided to put prices up to improve the financial performance of the business. We had less share than others but our business was growing and we felt that would continue. It was a significant risk – but it paid off.

“We were told we were cheap sellers, only providing raw board. But most of our customers were adding value and demand for raw board was not being met so we adapted to prevailing market conditions. We knew it was going to take time to grow market share and get people to see us as a viable alternative.

“It was important not to condition ourselves into thinking we were just a chipboard manufacturer – we had the capability to specialise in some other panel products.”

The UK team now meets regularly their European counterparts regularly to swap and develop ideas.

And one-to-one meetings are held with prospective and existing customers to define detail of the logistics, production and commercial aspects of individual companies.

Mr Graham said: “We have changed from being an inward looking company to an outward looking one and are now anything but a traditional manufacturer.

“One of the traps the industry has fallen into is talking about service – but there is a difference between talking about it and doing it.

“To provide a different service you have to get very close to the customers that are important to you and understand what they do and what makes them successful.

“We asked ourselves whether customers are going to get less demanding, and the answer was no. Stock plays a key part. Just in time is ‘I want it today, but I want it three to four times today’. Our strategic advantage is that we are in the middle of the country which means we should be better than our competitors at getting stock to people.”

Polarised response

A questionnaire sent to customers generated a 25% response and the answers were very polarised. Mr Graham said: “We have not solved every problem, but we are trying to overcome them and rebuild where necessary. We need to take the positives and recognise the negatives and present ourselves in a way which shows where we are.

“We don’t want to be a well-kept secret any more – we want to show what we can do. There are enough people out there that don’t want a single supply.”

In its bid to gain new customers, Sonae has embarked on a new marketing and advertising campaign. It is also investing in training to help its personnel move from being commodity driven to strategically partnership driven.

Sonae has also worked hard to develop relationships with merchants. “Many contracts with the nationals were tied up with our competitors, so we have majored on the regionals. We have developed strategic alliances with new customers and the business of one, Sheffield Insulation Group, has grown from 200m3 to 1,000m3 a month in the space of two to three months.

“We use the strength of both organisations to achieve mutual objectives, but this has snowballed and the difficulty is trying to control it.”

And if proof were needed that the hard work is beginning to pay off, Mr Graham said: “We have now got to a point where some of our competitors are beginning to treat us with tacit respect!”