The Sustainability Champions of Segamat

Segamat Panel Boards (SPB) is a household name among engineered wood panel manufacturers in Malaysia.

Known for medium-density fibreboard (MDF), the company also actively embraces environmentally friendly technologies.

SPB now believes that the material of the future for Malaysia will be oil palm trunks (OPT) hence the newly-developed technology and investment.

In recent years, the company has developed new lines of products that cater to a wide variety of customer needs. SPB had acquired UC Gravure Sdn Bhd (UCG), and now produces high quality decorative printed paper.

SPB has also invested in semi-finished and value-added products as their new Prime Coating Line and High Gloss UV Lacquering Line commenced operations last year.

That same year, they developed the capacity to manufacture prime coated and melamine faced door skins.

Through its achievements, SPB clinched the first prize in the AmBank BizRACE 2018 challenge, beating close to 1,000 small- and medium-sized enterprises (SMEs) and startups in a competitive elimination process.

SPB’S Evolution

This manufacturer of MDF has been around since 2002, with Shigetoyo Takeuchi taking over the business after his father’s illness.

When it secured an 18-acre greenfield site in Segamat, Johor, the company needed someone with extensive industry experience to lead its operations.

Peter Fitch was chosen to fill the role of managing director, and 16 years later, he still holds that position.

A veteran in the industry, Fitch was the project director for a company in China before joining SPB. It was a time when China was transforming and industrialising at a very rapid rate.

Prior to working in China, he had been in Malaysia twice; first for the London International Group which produces dipped latex products and later for Takeuchi MDF. The call to return was good news to him.

To be honest, my heart was still in Malaysia, so when the opportunity arose to return, it was an easy decision to make.

During the initial stages, the company faced many challenges from installation and operations, to sales and regulatory requirements.

Fitch credits the hard work and determination of his team as the reasons for the company’s ability to overcome these challenges — completing the factory within eight months and a limited budget.

Continual Change — The Only Constant

It is continued evolution that led the company through many challenges in the industry.

Managing Director, Peter Fitch

As Fitch puts it: “Continual change is the only constant.”

Their initial business model was to produce quality thin panel MDF. At the time, these were more difficult to make and sold at a premium price. Although this pioneering move turned out to be profitable at first, they were soon forced to change.

“Like everything, when competitors see you doing well in a niche market they also want part of the action. Now 15 years later, this material has become commoditised and no longer commands any premium.”

Adding to the dilemma, their raw material – rubberwood – is increasingly in short supply and local manufacturers are finding it very difficult to compete on cost with those in Thailand and Indonesia.

The 2008 financial crisis became another challenge. Demand collapsed in the traditional markets, leading to cost cuts and a scramble for new markets, ultimately forcing them to be “lean and flexible”.

Things became troubling. Business cycles were getting shorter and they realised a few years ago that their business model was maturing. More crucially, it was in decline.

To overcome these challenges in the short term, SPB embarked on investing in alternatives, namely semi-finished and value-added products — in other words, higher grade products manufactured from rough material. These tended to yield higher profit margins.

However, Fitch and his team knew this was not enough to sustain them in the long term.

“We needed a revolutionary breakthrough which was environmentally sound, sustainable, and something that the furniture and construction industries wanted.”

Finally, they came up with the idea of converting palm trunks into engineered materials which were equivalent to – or better than – the properties of existing timber materials.

This fulfilled their need for an ideal solution; to use sustainable materials to produce a value proposition to the company’s customers.

Focus on the Customers

The key to SPB’s success in the industry, according to Fitch, is the company’s constant devotion to meeting customers’ needs.

“To be honest, the personal relationship between customer and supplier is still the most valuable ingredient to our business strategy.”

He said that this relationship was equally important with both suppliers and customers.

By engaging with business partners in an open, transparent, and ethical way they were able to overcome most of the challenges they had faced – to find a better and more efficient way to develop their business.

A Greener Future

An advocate of environmentally friendly solutions, Fitch said that the company is highly focused on making the best use of OPT as the material of the future for two industries: furniture and construction.

Environmental and sustainability issues have always been at the forefront, but today, these are becoming an absolute necessity.

“Collectively we need to meet the consumption of a growing global population and fulfil lifestyle demands of developing countries in a sustainable and ethical way. In our company, we are always looking at ways to reduce waste, recycle, and turn otherwise waste material into something of value. We consider this our duty to society,” Fitch says.

Aside from building a greener future, Fitch also sees how SPB can play a role for Malaysia. As Malaysia needs to compete on the global arena, Fitch expresses the need for the company to facilitate a more highly skilled, educated, and inclusive workforce.

“We see no reason why we cannot create a world class company here in Malaysia.”

This is one of the reasons that when looking at new investments, they want to be ahead, in terms of technology and to embrace automation.

“Our success will have a beneficial multiplier effect for Malaysia starting from the plantation (sector) and progressing all the way through to the construction industry and the manufacturing of furniture and other related products.”

Conclusion

When asked about the future of the company, Fitch had this to say: “We have been fortunate enough to be in business for 15 years and have had many successes. In my opinion our biggest success is still awaiting us in the future.”