Textile Machines - Europe Does Not Know, How To Sell.

Europeans were once the Best Machine Makers in the world. However Textile Machine Makers, now are struggling to keep afloat.

Textile Machines in Europe have been facing a challenge for the last 30 years , competing against Asian Machines. Many of them collapsed and went bankrupt, as they could not compete against the Asian Tigers. Example : Then, Scholl, ICBT, RPR,and then Oerlikon managed to save many a bankrupt companies and is now itself struggling to survive its Textile Machine Division. ( First error, it should have called it Textile Technology Division )

One big reason for the collapse of Textile Machine Industry in Europe is that they don't know How To Sell Textile Machines into Asia. Which by far is the largest consumer for their product lines.

Textiles is something, where the technology of the process is loaded onto the machine. Say, yarn has to be drafted to make it finer, then Drafting machines will have the set of speeding rollers.

Since, the Process Technology is itself so rudimentary that making such machines is very simple. How then a European Maker ever compete with Asian cost. . If you are a good engineer, then you can design a machine in your workshop, buy all accessories from standard suppliers and start your own textile mill , specially the spinning machines, ( other then auto coners) . If you buy a Chinese Ring Frame, then actually other then the main skeleton, they would offer you all the other parts made in Germany or from any of your favorite supplier . Which means, if you can ask the local workshop to make a ring frame skeleton, then everything else is available off the shelf. So, why the hell pay Euro 150 per spindle for a ring frame. Make one for yourself at a price of Euro 50 per spindle or still better take from China @ Euro 40 per spindle.

I am giving this example to understand that when Textile Machines made in Europe have to compete against such machine makers, then one has to map the competition and the customers carefully. European Textile Machine Industry has failed miserably in retaining this business and most of it has migrated to Asia. Failure is not account of low cost manufacturing in Asia, but poor management skills of these machine makers.

While everything under the sun has the same issue, where Branded products are about double the price of self crafted or local crafted products, but when it comes to large investments, the selection is based on availability of funds, competitiveness of the company, customers it is serving, capability of the asset, incremental benefits of using a superior asset.
At the end one is running a business and not making a lifestyle statement. So the assets have to yield profits. And profit equation is an extremely complex equation.

If only the variables of a high investment machine directly linked to the profits are taken, then the first major cost comes is the cost of money, second the operational cost and the third is ,if such asset will make any significant improvement in the product quality, which will then fetch higher sales price or even if not higher sales price, at least his products will be the dominant player in the market.

If these 3 numbers are significant, then automatically the higher asset price is justified. And most of the time, none of the European Machine Maker is able to explain any of these three variables.

Secondly, the area of Technical Superiority of the Asset: Basic Technology of textiles itself is so rudimentary, that technical superiority is generally explained with very elementary features like providing some roller or giving a guide or some tensioner etc and this is so much cosmetic that it hardly is factored by the user as a significant technology input.

Third, the reliability of the machine : This is one area, where European machines are the best and this again no single European Sales Man ever projects STRONGLY to the user. Lately I had to reinforce a German Company to write in Block Capital, 120+ years of Technology, Made In Germany.

Fourth : Asian Culture : A continent, which is largely impoverished and is only now showing improvement. The attitudes of people is of Buying Low Priced products and later consolidating. Even the trained Textile Engineer carries his attitude that if he could save money by running a low priced asset, then he would be considered a Good Engineer. I have an expert dyer friend, who is now 66 and is a leading consultant to many a dyeing and finishing companies in Major textile zone in India .He repeatedly counsels the clients that , when it comes to Stenter, he would make run the Ahmadabad make and hence no need to spent Euro 400,000 for a German Machine. Though I will not agree one bit with him, but then that is the extension of the culture. Unless Machine Makers reinforce the market that this perception of High Cost is wrong , the attitude will be barrier for sale of European Machines. These Gate Keepers will not permit the machines to move further into the large middle segment of Textiles.

Fifth : No machine maker ever segments the market. Big company to small company to Industry wise segmentation, say Home Furnishings, Automotive weavers, Industrial Yarns, Commodity yarns, Specialized yarns, Medical Yarns, Sports Yarns, Dyed Yarns, knitting yarns, etc etc. Whatever products range they have, they would try and fit to all segments. No one thinks, ok, let me make a special brochure for Home Furnishing customers and design a machine, which has features suitable for coarse yarns,that are most used in Home Furnishing. Any case the machine is the same, but now it has some other additional features and has been Branded as Home Funrnishing Horse and is getting the attention it deserves from the customer. Eg: Yarns of size 8s count with 4 ply is a very specialized yarn and is mostly used by home burnishers. But there is no such machine exclusively that can be offered to the yarn spinner. If only Volkmann, could have called its Large Pot Dia machines as Home Furnishing Twisters and made a separate catalog and would have added some funny features to it, then it opens a new segment of market for itself. But what it does is to have one catalog, where all its models are listed and the pot diameter and the twist range and then it is upto to the customer to consider, that this is the best choice for his application. This is not marketing anyday.

Not realizing that Textile is still a fragmented industry and 99% of the industry is family business and 1% only is MNC or Coroporatized. So, the customer base is strictly family run businesses, where the owner of the plant is the final authority for each capital expenditure. And in such an environment , the general perceptions are more important then the asset itself. Unless your machine is perceived as the exclusive solution to a certain segment of market, it does not get the attention it needs.

Sixth : Technology : None of the machine makers has invested into upgrading the technology. If 18 th century was the Industrial revolution, then 21st century is the Digital revolution. The machines,which are designed in the 19th century are just about the same. Very little has changed. I once spoke to a Technical Adviser to Barmag and told him, why could he not design a machine, which would run at 3000 metres per minute and the usual stupid answer you get from everyone. But the Yarn should Run.

We are there to run the yarn, if you can make the machine run.

Barmag, a man made fibre machine maker who makes machines for FDY, running at 5000 metres per minute and the yarn does not break, is questioning that on texturizing , the yarn could not run at 3000 metres. If early texturizing machines has pin type texturizing, then moving to disc type texturizing was a technology advancement. But since then, no one ever moved further. Still the machines run with Disc and at speeds of 1500 metres maximum. Anycase , still better then 800 metres per minute in the year 1987. However, it needs to be noted, when I say Technology, it is not the speed. It is the process. Like Open End is a Technology by itself, Jet Spinning is a technology by itself, but when it comes to ring spinning, it still stands in time. If only a ring frame maker changed the system of drafting from aprons and cots to a false twister as in DTY machines and rather then cops added a winder , it would have made a new technology.

Today, Murata has taken over from Rieter by designing MVS machines and shrunk, simplex , spinning and winding to one machine. They have stolen the show. This is an example of investing into technology . But with Europe no such investments were made in technology, only in improving the speeds of the machine ITMA after ITMA. That is how they would measure the performance of their product designs. But the markets want better methods , larger variety in its offerings, besides higher productivity and lower cost of production.

Increasing speeds from ITMA to ITMA is incremental thinking. Adding cosmetic measures to show improvement is lazy thinking. And that is the reason, European machine makers fail and Asians make the same product much cheaper.

Seventh : I see Managers as that of Pre Internet Era and Post Internet Era. Pre Internet Era are those, who know how to connect to the internet and will sometime browse a few things and knows , how to make a presentation out of a computer and some basic skills. And then there are Post Internet Era managers, who use the Information Highway to explore the global developments and factor them quickly into their product offerings and exploit the opportunities. Internet is a source of Innovation, Design, Global Reach, Customers, Competitors, and smart positioning. Check the websites of each and every European machine maker and it is so shameful, that other then the catalog and some product description, the site does not travel anywhere. When the world is writing Blogs and directing one and every internet user to his product , even if it is only $100, here is a case, where 100,000$ machine seller has vague presence on the net. Many of them show up on 10 th page on Google Search. In a world, where every single information is searched by a click of button, no one goes to the 10th page to find a product offering. I have not seen one single blog by any sales manager for his product offerings.

The site does not make a lucid reading at all, it is not informal and friendly. A medium which should have been exploited brutally by the sales team on rampant dissemination of information has been left untouched. In times of Youtube, Facebook etc etc, Machine makers do not find any presence.

Eighth : Technical Seminars : Last year I attended a seminar conducted by Swiss Textile Machine Makers and it was such a shame. Swiss with companies like Rieter, Sulzer, SSM, etc etc and when it comes to making a presentation, it is usual stuff of Slide after slide explaining the machine.
For God sake, the whole world already knows that Swiss are the best machine makers in the world and they also know more of your machine, then what you would know.
It is now your opportunity to make a presentation and tell the customers, how you are more competitive in terms of investment, and how your technology can bring value to the customer and how your machines will make something so exclusive, which market has not seen.
Take some yarn samples and give the baby cones to most significant customers, create an euphoria of your brand, present stories of other customers and present anecdotes and jokes, so that the audience is not sleeping at least. One could see 90% of the audience were sleeping after the lunch and before the lunch they were waiting for the lunch break.
Other then one presentation of Rieter for his open end machines, all the others were pathetic.

Please Machine Maker Association, next time you hold a seminar, get the Top Business School professor to lecture on how to evaluate Capital Goods and how European Machines are cheaper then Asian machines. Because none of the sales managers of European Machine Maker knows, how to explain this simple fact.

Ninth : Skill Set: Since European Textile Industry collapsed 25 years ago, the skill of the sales manager who present the machines to the customers is highly skeptical. Most of these managers themselves are not either Textile Graduate, or they would have never worked in a textile plant or they are from another industry altogather and do not not understand the requirements of the customer. And even if there is a textile graduate, then the selling skills and above all management skills are highly questionable.
Not one single Sales Manager from Europe and I repeat here again that not one single sales manager has ever presented the case of DCF to the customer .Because he himself does not know, what is DCF.

Further, I am still not sure, if the Sales Manager understand the significance of Depreciation as a Tool of marketing. Depreciation is not just an accounting entry to avoid tax. It is the actual source of funds for the company, which it has build over the lifespan of the asset. So, it acts as a source of funds for the purchase of an asset and also acts as a source of tax deduction. Both these elements are never factored by the sales manager in his presentation. A profitable company paying taxes will rather buy an expensive equipment as long as it is tax neutral for him, besides the revenue stream generated out of the asset.

With such nice Business Schools in Europe, the least the machine makers should do is that before commissioning an engineer to field to sell a product worth 100,000$ . He should be sent to Business School for a short program on learning marketing of capital goods. ( Business School opportunity, to design a program for Industrial Product marketing )
Simple basic accounting models to evaluate a capital expenditure for comparison of machines like DCF is one prime tool .

European machine maker does not understand that the competition is not the machine and its quality, it is the low price. And low price cannot be competed all the time by talking only on High Features of Machine and quality of machines. It needs accounting numbers and accounting numbers clearly reflect that operational cost of using a higher investment asset is lower, then the higher investment is automatically justified. ( And in case the asset cannot show this number, then better such machine maker actually packs up, because there is no hope for him, competition knows no boundaries, it will travel right to the doorstep of such a maker ).
Hence, even if you are a high cost machine, it does not make any difference. Because the asset is paying for itself. Money is coming from borrowing . Market is paying the price and owner has the pride of using a European Machine. Higher price also means higher depreciation, which also means, for higher profit company, it is a tax guy who is paying for his machine and not him. This also means, until and unless a sales manager continuously monitors the Financial statement of each of the listed companies, and tracks the profitable ones, then he knows that these companies will for sure invest on accounts of available reserves .But these small fundamentals, only a management guy understands. Not a technical person.

I told once SSM marketing manager, actually your machines are much cheaper then Indian maker and he laughed at me, how can a machine of CHF 4000 Per spl be cheaper then a machine of USD 1300 per spl. But that is where is the BIG DIFFERENCE in sales comes (I will write this in another blog , when I compare SSM to Asian Winding Machine maker ) lately something similar happened. Volkmann lost order of around USD 1 Million to an Indian supplier. Peass Oerlikon asked me to help them out( as they are working togather with Volkmann China for the doubler winder ) and I spoke to the sales manager and he repeated the usual thing, our machines are 20% more expensive then the Indian machine and customer is not willing to give a higher price. Well, I told him, if he gives the contract to me, I will change the order in his favor with a simple arithmetic that his machine is actually cheaper then Indian. He pointed out that he was selling for 20 years and he knew his job. The guy never got back to me and USD1 Million sales gone to the Asian Company. This happens on daily basis.
( Hmmmmm, I am an Indian, so why support the European, let them live in blissful ignorance)

So, unless and until European Machine makers sent their front line sales man and back end Marketing guys to Business schools or hire management graduates, there is no hope for these companies, no matter what they keep doing. Because Asian machines are becoming better with each passing day and they would anyway be always cheaper. Transferring the manufacturing to China or India is not the best solution. As machine making does not need much of manpower.
Most of the machine is outsourced and outsourcing from Eastern Europe will still get you Certificate of Origin of Europe. So, why loose the strategic advantage of Made In Europe.
Further any company in Textile Machine business does not need more then a few designers, outsourced technologist, material manager, and some assembly technicians. Rest is all about making drawings and outsourcing the full machine. So, why should there be a high price to fight the low cost competition. Company should have more and more sales man, because each of this guy is at least getting business and is not a cost centre. All the others are cost centres.

Tenth : Channels of Marketing : Each and Every European machine maker under the sun, has agents and the sales in that particular country depends upon the performance of the agent. Profile these agents and you will find none of them knows the front of the machine to the back of the machine and is basically an escort service. If this is the quality of channel, then what results can one expect from this market.
This agent channel system itself is highly questionable.
It makes far more sense to have your sales rep in each country. Take a local sales guy and ask him to operate from his home. All Travel at actuals and all other expenses at actual. Expenses of hiring a person in Asia is much much lower then the frequent visit of the sales manager from the home country . Further a dedicated sales man is concentrating day and night and knows, if the joker does not get enough orders, he would not have his job. ( Of course this depends upon the volume of business in that country. Say for NZ, one would not keep a sales rep)

In a world, where information is first searched on the net, not one machine maker provides for "Get Customer, Be Rewarded " or similar scheme and for all you know, the damn competitor agent is sending information to you. Why not give Pay Pal vouchers for small denominations for each valuable opportunity and if the opportunity actually materializes, give the joker Euro 100 voucher, so that he looks for more such opportunities and also forwards your brand further. You would have created an automated channel, this way.
Provide for " Sent your Inquiry and get a T shirt" and you find the over enthusiastic plant manager sends the inquiry to you. Ask your sales rep to give him the T shirt, which you would buy in Indonesia for less then 1 $each.


Promotion : Most of the time, the local agent himself does not know, what opportunities are there, he has 10 agencies and his job is to submit the offers to the customers and follow up with a response.More then that , he does not know. Now for all English speaking customers, who are large corporate houses, and communicate directly with the company, the least the machine makers should do is to have a nice lady writing emails and sending newsletters and asking about any service or spares or any other help they need.
If small companies can have a call center doing this little job, why not pay some money to a call center in Philippines or India and ask them to contact the customers regularly. Ask your back office to design a quiz and forward to all the customers connected online and ask them, for the first 10 quick and correct answers, they would get a T Shirt with winner of MANTEX ( winks) or whatever your company name and in such a way, you are creating a brand value.
Intellectual challenges is very motivating for all technical people and they then get a chance to boost amongst the friends and colleagues that they won a prize from a European Machine Maker.
Regularly have Essay competition on What new would you like to have one your spinning or winding or dyeing machine and give one of them a Certificate that he provided a great input. Advertise the competition globally on the net , . All this cost very very little, but is much much better then spending millions of dollars on wasteful exhibitions.


Eleventh : When I first stared working for machine makers, I asked the chief engineer one day, why is that all machines are made in Green color. Well he did have a good answer, but after a few years, machines were in all the colors except Green. The next stage has come now. Machines needs beautiful pictures and department should look like a lively place of work, with whatever screen saver the customer wants ( In India, they will go for Pictures of their favorite Gods, huh ). Lately I asked Thies, why dont they make a rain forest picture on the vessels, so that if you step into the dyeing department, then you feel ,as if stepped in a rain forest.


Twelfth : It is a world of Knowledge economy. World has changed so much that young men now make millions of dollars before they are 30. In an age, where technology is changing so rampantly where in you buy a TV and it is out dated in 3 years, you buy a hand phone and it is outdated in 6 months, cars are changed within 3 years. And any other business accessory which can bring in efficiency and revenue is grabbed by the over hungry consumer.
Wealth positioning has changed. More money is now available with the the Asians, the next generation from the family owned businesses are far better educated and most of them are from top business schools. Textile is flourishing, consumption per GDP in each country across the world has gone up. Old Assets have to be changed in most countries across the world And even now, if Europe will not be able to sell, then there will never come a time again like this.

European machine makers have to realize that they have to educate the customer, that no more the machines are for 10 years or 20 years, it is maximum for 5 years. Because within 5 years, they would offer them a machine , which is twice the productivity of the current machine and hence the operational cost will be half and therefore they are tied up with a Technology supplier who would lead them into the future. They have to educate them that the residual value of a machine after 5 years of usage is still 50% against any Asian machine, which will not be even 25%. So, while working out a DCF, European machines are any day cheaper then any global machine maker. ( Why do I have to educate the Europeans for free)

Unlucky Number Thirteen : Pricing : Unless Europe chooses to keep Sensible pricing, the game is lost even before the match starts. Because already a high price perception exist and 90% of the middle segment, which is rather the large textile manufacturer never even floats an inquiry to the European Machine Maker.
If the whole world has seen that Low Cost Airlines sent State Carriers to bankruptcy, then the lesson to learn was that Atleast start filling your seats, ( Capacity of the plant with whatever price and then move to high priced seats, as the capacity fills ) Why not Put on the website, Price Starts at Euro xxx, which is anyway 10% cheaper then the Asian prices. The damn thing makes the person STARTED, he will least sent an inquiry and explore , what is this offer.
And after that it is your ingenuity to move him up the value chain or just close the deal and fill the capacity. ( Using Marginal Costing contribution as model of pricing formula, rather then keeping a price list and giving obscene discounts, the price list system has failed )

Fourteen :Historical Sales Analysis : I have never seen one single letter from the sales manager to the company, where they sold the machines 10 years back.

Writing that " We are pleased that our last machine , model no xxx sold to you in March 1999 is running successfully and on my last visit , I saw the machine was working at speeds of xxxx . While our machines are designed to surpass generations of usage and pridefully some of the grand chilren use our machines from the first generation.
However, in times of competitiveness, we would strongly recommend that you Budget in your upcoming Capital Budget the replacement of the machine with our New Model " Poogle " where the speeds have though not reached the speed of sound, yet are now double of your existing machine. Plus the technology has moved further and prices of our machines are dropping faster then the bombs in Afghanistan. This would be right time to invest , considering the growth patterns and general improvement in economy "

This makes the thinking process start for the company, because there is a document in front of him, which is showing that the Productivity going up by 50% and cost of production going down by 50% and since he has eaten away his depreciation, it is about time, he needs source of deprecation to keep the tax out of the balance sheet. Funds are anyway coming out of the Depreciation ledger, which he maintained sincerely.



Fifteen : Branding : Textile Machine Makers do not know, what is Branding. A company of 120 years and a company of 10 years old, both only talk about machines and equipments. Thies is a Brand and not a machine. Till the date, Thies keeps selling its machines as machines, it will get only commodity prices. The very day, it realizes, that they have a Brand and they follow the Brand principles, they would be on the Top of the world.

For my own brand, Mantex, I offer the customer, Mantex Dyed can be incorporated onto his final product going to the market. But no one single textile machine maker has ingenuity that he can allow the dyer to put on his Cones THIES DYED, European Technology or Monfront Stabilized, European Technology on his fabrics. This is a show me , talk loud world. Branding makes so much difference, that some day, if the customers of dyed yarns find clearly that Thies Dyed cones were better then xxx dyeing machine cones, then automatically the sales is secured for all times to come.
Imagine, Zara collar would read, - Mantex Dyed Technology- Because Mantex will be a brand related to environment, technology, quality, productivity . It will be extension of life style and no more an equipment.

Sixteen :Secondary Market : Browse the web and check out the number of used machines that get sold and it is mind boggling. There is a hidden opportunity there. Why not monitor these opportunities and offer them a used machine picked out of a Trade In new machine with another customer where ever you think, the customer is hooked to your competitor. This would also need continuous research on historical sales.


Last, my favorite machine maker in Europe is SSM, the one company for whom I have deep respect. This is one company which has shown profit year after year, though has the same challenges of fighting competition with half the price winders. Actually, it has lost out a large chunk of its market to an Indian company, which has now been taken over by Schlafhorst. However, still SSM is profitable. (What an irony of fate, I was writing this article on March 23 and SSM was holding its Annual Results conference . Pity that SSM sales dropped from 81.7 million CHF to 38.6 million CHF with losses of CHF 8.2 Milion , remark posted on March 26, 2010 )

The story of success ( No more now ) of SSM is more linked to one single man : Mr Beat Seigrist, INSEAD graduate, an ex McKinsey consultant and CEO for SSM till 2008, he changed the whole company from a simple machine maker to a Top Performing Swiss Company. At one time, I recall the shares of SSM were quoted at CHF 1400 and up at Zurich Exchange. He made the company market driven, changed the way, the business was done and repositioned the product lines, made sensible prices against old pricing system. Made a flexible organization and within no time SSM was a darling company of the stock exchange. The profitability was envy of many a giants in Europe.

The company still has good product lines, but .............., times changed, the product lines of SSM have again only shown incremental advantages and it is getting trapped into the same vicious cycle of other makers. SSM does not realize that winder is not just a winding machine. It is far too much more then soft winder and assembly winders in winding applications. Though air covering was a good product line, yet the extension of the same thought process never went further in the company. Simple again, the company does not have textile graduates , who can see beyond the application of soft, assembly, rewinding and air covering. It is also struggling against Asian maker on its conventional product lines and if it does not quickly bring the wisdom of Mr Beat Siegrist into the business, will see the same results as others. ( Ironical the day I wrote this blog, the same day SSM posted the inevitable.

Though, when it comes to selling, SSM has the same weaknesses as other machine makers. Wish Beat could have given them more time.