Paramount: Innovate or dissipate

Stretching almost as far as the eye can see, Paramount’s new state-of-the-art manufacturing facility nearby Johannesburg’s bustling CBD is a sign that even in the most volatile business environment, savvy management and intrepid investment eventually pay off.

“Paramount’s birth was difficult,” says Managing Director, Warren Marques, whose father Fernando founded the family business some 17 years ago. “My dad comes from a humble background and built everything up himself with the help from financial institutions; so he has come a long way. The company struggled for almost four years before it could stand on its own feet.”

According to Warren Marques, the business was born “out of necessity” when Fernando moved away from competing South African trailer builder, Zelner, but soon turned into a passion project. “He worked long hours, often late into the night, and I believe that only through his tenaciousness was the company able to start turning a profit. It was six months before he sold his first trailer.” 

Inspired by Fernando’s work ethic, Warren, a Chartered Accountant by trade, joined the family company in 2004. “I am not an auditor, nor did I want to become one, so I joined the production department. But because I was the boss’s son I had to work twice as hard as everyone else to prove myself. I still do,” says Marques. “Now this has become my passion. I love engineering, design and running production.”

And how times have changed with the new factory now up and running. Paulo Ribeiro, Financial Director, can still remember how back in the day, all Paramount needed were a few guys on the ground to run the business. “There was a lot more boiler making back then, today it is all mechanised; now there are plasma cutters, laser cutters and guillotines.”

According to Ribeiro, the move into the new facility was crucial as the company had outgrown its old space. Starting out with one warehouse and over time adding seven nearby buildings on the same street was not efficient, manageable or professional.

“Two years ago we got to a point where we head to ask ourselves, do we buy more where we are or do we take our money and buy something that will enable us to become more streamlined, more professional and make a statement in the industry,” Warren Marques adds. “It was a calculated risk, but a decision was made and we knew that it would be a successful one. We have only been in this new building for two months and our order books have quadrupled. Things are going well.”

The new space is a little over 75,000 square feet (7,000m2), with 29,000 (2,700m2) of them being under cover – a vast difference compared to Paramount’s previous facilities, which measured 16,000 square feet (1,500m2) in total.

However, Marques says he wants to grow into the building step by step. “I am not here to become bigger than what I am. I can build 150 trailers per month here but I only want to produce half of that. I don’t want to put excess strain on my resources, I want to build properly and I don’t want to push too hard.”

Given South Africa’s unstable economy, that commitment to sustained organic growth is already paying off. While strikes continue to torment the country’s economy, Paramount has had little problems with unrest in the workforce.

One reason is the comfortable work environment Paramount created in Johannesburg, but both Marques and Ribeiro point out that maintaining personal relationships between staff and management is the key to keeping production humming along. Management want to know about all the issues affecting the work force, because they believe that even the smallest problems will eventually filter to the top.

According to Marques, the distressing result of the strike wave is that companies now generally have a ‘the less staff on the ground the better’ attitude. “We have just come through a metal workers strike and it really hurt us, it really hurt the industry and the economy and we simply cannot carry on like this. I have spent roughly R12 million (€886,000) on new machinery to make production more efficient, and it is not like I moved into this premises with nothing.”

Given that a crippling three-week strike in South Africa’s motor sector cost manufacturers 50,000 cars in lost production in September alone, management’s open door policy has proven the right strategy for Paramount. It is hardly surprising Marques applies it to areas like customer service as well.

Despite the rapid growth that Paramount has recently gone through, Marques insists he will only allow the business to grow to the extent where management has an element of control. “I always want to have my finger on the pulse of the business. Our ethos is customer satisfaction and I don’t want to grow to a point where I don’t know who my customers are and if they have any issues or concerns. My door must always be open.”

Next to successful people management, the driving force behind Paramount’s stellar performance over the past few years is the company’s ability to adapt and diversify its product range. 

“I would say part of our success has been our ability to expand our product range quite significantly,” says Ribeiro. “Our market perception up until the last few years was that we were the people you came to see if you wanted a really good quality, strong flat deck trailer. It was our bread and butter,” says Ribeiro.

The decision to diversify was demand driven, he adds. “Customers would come in and ask for a flat deck, a tipper and a drop deck; and not being able to offer two of the three vehicles meant customers were taking their business to other manufacturers.”

Now Paramount produces almost everything except fuel tankers – and according to Managing Director Marques, the newly won flexibility is already making an impact. “It got to a point where sales for flat decks were quiet but demand for another type of trailer was high. We were taking knocks when flat decks were quiet and that was also a reason for our decision to diversify and innovate. Luckily for us, everything is busy right now.”

At the moment, Paramount is producing between 70 and 80 vehicles a month, the flat deck still being the most popular model. It is what Marques labels a “fast mover” and quick to build. The next best seller is the drop deck model; followed by heavily customised side tippers, rear tippers, moving floors and bulk feeders.

“We decided to get into building bulk feed trailers because we wanted to prove to the market that we weren’t just a flat deck builder,” says Marques. “It is a very intricate vehicle, it is a difficult build, and there are more man hours and engineering involved. After we started producing the feeders, sales of all our other vehicles went up because customers were confident that if we could build bulk feed tankers, we could handle anything.”

While some countries are slowly moving away from using rear tippers, demand in South Africa’s mining-focused market is still high. According to Marques, there is always a need for short wheel based vehicles for confined spaces, and the rear tipper fits this description perfectly. He says as long as there is a demand, he will continue to build them, but also offer a side tipper alternative which is planned to launch in early 2014.

“I also see the benefits of the moving floor concept. It is an impressive piece of machinery, however, it just hasn’t caught on here. It is expensive, has many moving parts and is very mechanised and this scares some operators. For what it can do it really should be a better seller,” says Marques. “I see it as a way forward to replace rear tippers, for instance. It does the same thing, it is stable and will never fall over, but price and knowledge are key points here. If a customer is not familiar with the product and not sure how he is going to maintain it, he is obviously going to go for the rear tipper. For the price of one moving floor vehicle you can get three rear tippers here.”

Speaking of innovation, Marques says Paramount has not only grown in diversification, but also in vertical integration. Three years ago the company developed its very own mechanical suspension, and it since garnered a positive reputation in the industry. “Why import when we can produce ourselves?” asks Marques. “We build to customer specification, so if they want a Hendred Fruehauf suspension, we are happy to comply; but at the end of the day, they are my competition.”

As a result, Marques is now in talks with a European suspension company to start importing his own suspension. “Why must I pay margins to a supplier when I can bring in the product myself?”

With regards to components and running gear that is not built in-house, Paramount favours Haldex braking kits, Hendred suspension and axles and Jost fifth wheels. “It is all about costs and reliability,” says Ribeiro. “Get the best quality you can for the least amount of money.”

So, what’s next? According to Ribeiro and Marques, Paramount has a few projects in the works, but they will not make or break the business. “Our next move is to settle down in these new premises; establish ourselves; develop our products and develop our production line so it runs smoothly and efficiently; find stability and then hopefully reap the rewards of our hard work. I am incredibly proud of what we have achieved, of this new beautiful place, but mostly I am proud of my staff – we are now the masters of our own destinies.”

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