Moulding his own plastics empire

By Sherilyn Goh

What Seah Kian Hoe inherited from the family business is not only the Heng Hiap trademark but also the responsibility to uphold the reputation of the family business in the industry. With the values instilled from his childhood and a passion for recycling, the 42-year-old entrepreneur went on to mould his own plastics empire.

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When he started Heng Hiap Industries at the age of 29, Seah Kian Hoe had his eyes set on bigger things. Not only did he see an opportunity to revamp the fragmented recycling landscape, he aspired to build a sustainable business model over the long run, emulating the merits of both his Eastern upbringing and Western values instilled from his education abroad.

Just as he refused to accept that being in the recycling industry is something that one should be embarrassed of, Seah equally declined to conform to the inherent weakness confronting the recycling industry, which he thought it would not bring the company far. He wanted to be in the recycling business, but he also wanted to see it transform for the better.

However, in order to integrate the entire production chain, which includes different processes, he needed the right machine with the capacity to do so. He had hit a similar bottleneck very early on in his business while attempting to find the right technology to would help turn his vision into a reality.

“Getting the right technology was very difficult, because everyone basically got used to what was being offered in the market. And then when we were trying to look for a new machine, we couldn’t find what we wanted in the market,” said Seah.

Worse, he added, was that many times he found himself being kicked out of the door by equipment manufacturers for what was deemed a ridiculous request.

“For example, say, mixing. In the market at that time, for a batch, everyone mixes either 300kg or 500kg per lot. When we export in a container, one container is 25 tonnes, or 25,000kg. That means in one container, I have at least 50 lots. Meaning that when my client receives that, they need to check my materials 50 different times.”

Putting himself in his customer’s shoes, Seah imagined that the process would result in complication and inefficiencies, and as a customer, he would have wanted for the quality of all his products to be consistent.

“So when we went to a machine supplier and said that ‘I want to buy a mixing machine. I don’t want to buy a machine with a 500kg capacity, I want to buy a  machine with a production capacity of 30 tonnes. Is it possible?’

“They would say, ‘no it’s crazy. Nobody’s doing that. It cannot be done and you obviously do not know your industry’.”

Having turned down by equipment manufacturers multiple times, Seah, with the same resolve he had when he was a 12-year-old vowing to prove his critics wrong, decided to customise his own machine with their own in-house capabilities.

“And because of that, which turned out to be a blessing in disguise, we started to make our own machine, with our own technology. And that was how we started our innovative journey,” he recounted.

Today, Heng Hiap Industries manufactures and customises superior plastic resins for use in a variety of finished products. The company then sell these “smart plastics” to some of the world’s largest agricultural, automotive and electronic equipment manufacturers, including LG and Toshiba.

The fragmented recycling landscape

According to Seah, the biggest problem he found with the recycling landscape is the fact that it’s fragmented, which he called an inherited industry weakness.

“You have six different companies: company A does collection, company B does sorting, company C does crushing, company D does washing, company E does mixing or colour matching, and finally, company F does extrusion – the process of melting down plastics until they come out in the shape of spaghetti strips.

“The six different processes presented the industry with three big problems,” he told KINIBIZ in an exclusive interview.

“Firstly, they are labour intensive, there is too much uncoordinated labour. Secondly, there are too many non-value-adding logistics in the production chain, it could go from Johor Bahru to Kuantan, to Ipoh then to KL, and finally end up in Malacca.

“Thirdly, they are not talking to each other. When you have all these situations, as the material flows from A to F, the cost goes up, the quality goes down, and therefore results in a bad reputation for the industry.

“What we do here at Heng Hiap Industries is, we combine them all under one roof, from process A to process F,” he explained.

Combining all the fragmented processes and bringing the whole production chain under one roof, he said, would effectively reduce labour costs, non-value adding logistics and enable the business to customise materials by having control over their quality.

“Rather than a small mixer that mixes 500kg per lot, we now have a mixing silo that is three-storey high, measuring 17m in height, which we actually built ourselves.

“It produces much better results, at much lower costs and better consistency,” he said with a proud gleam in his eyes.

Exports unlock new frontier

Heng Hiap Industries made slim profits in the early days of the business, reporting single-digit growth between 2002 and 2006, but Seah clearly wasn’t content. After five years when he started exporting, he started seeing a paradigm shift.

In 2007, the first market that he exported to was India. Soon after Seah brought the business to Europe, starting with Germany, Netherlands, Belgium and the UK. These, he said, are the countries with high production costs, and the customised solutions that the business is able to offer its clients gave it an edge.

When asked about the lessons that he have learnt from their first export market, he said: “Number one, it’s your product, whether your product has a niche, and if you are able to differentiate your product. Secondly, pricing is also something that is very important. And more importantly, we discovered, is to find a good storyteller to market your products.”

Unfortunately though, 2008 was also the year when the US subprime crisis hit, with spillover effects to the economy in Europe. With the subsequent devaluation of the euro, the business got affected and that forced Seah to look for customers in other regions, and that was when the focus shifted back to Asia.

“During that time I couldn’t depend on Europe alone. I was so used to servicing the European market that when it came to servicing the Asian market, I realised that I needed a bigger product portfolio.

“But we were not able to manufacture our products in a lot of different colours or with different specifications. Our customisation capabilities were relatively small back then. So it became a big challenge when we can’t export to Europe anymore, and yet we are not able to capture the Asian market. I was stuck,” he admitted.

That, he said, was a very challenging time for the business, which saw its production slashed by half for a good six months.

“We initially had four machines in the production line, and during that difficult time, we had to shut down until only two were left running,” he recalled.

During the same period the business was also faced with another technological impasse, which the now-42-year-old entrepreneur admitted had rendered him directionless at that time.

When asked where did the staying power come from, he said: “I think I have responsibilities. When I look at my staff, I don’t just look at them, I also look at their family. I expect that whatever I do, I will be able to alleviate their living standards. From the first time some of them came to work cycling, then they bought a motorbike, a car, they got married, they have kids, they bought their own house…

“I enjoyed seeing that progression, and I think I have the responsibility for that. So that got me thinking: if I were to just let go like that, it will be very irresponsible for my team’s families. So I decided to push forward, and it was a good thing because there were so many things we had yet to try. We needed to work this out and get it right,” said Seah.

Yesterday: Bringing pride to the family business

Tomorrow: Conquering the global market