Adding value to leather chemicals29 June 2001
BASF have set themselves the target of being the leather industry's preferred supplier by providing value added solutions to leather manufacturers. Hartwig Michels, worldwide director of BASF's leather division outlined the company's future strategy for the leather sector in an exclusive interview with Leather International. 'The recent strategy has been to close any gaps in our product range to cover the whole leather chemical market', Michels told Leather. 'Historically we have been strong in the field of dyes, high performance pu and acrylic finishes, water repellents and tanning chemicals. I have been keen to improve our product range particularly in the areas of fatliquoring and beamhouse products. We have chosen to improve our business internally and not by acquiring or merging with other companies', he added. Over the past few years BASF have been subject to a number of rumours that included acquisitions, mergers or even pulling out of the leather sector altogether. Michels is keen to dispel any misunderstanding: 'We have chosen not to buy or merge with any other company because we already owned more than 80% of the chemistry in house. I'm not saying that we would never consider buying a competitor but the rationale behind any acquisition would be different. In the recent past we have been linked with Stahl and TFL or even leaving the industry altogether. All are untrue', he told Leather. Instead, they have concentrated on building up an international network of production, marketing and service centres to support customers on a local level. Research and development has also led to product range improvements combined with a new Luganil manufacturing plant at Ludwigshafen. 'The larger tanneries look at BASF to bring the technical innovation into the industry and become involved in their own innovation process on a local level', says Michels. 'We are now very strong in the value added markets such as automotive upholstery which now accounts for around 14% of our BASF Group sales. Our general trend is to offer our customers more value added innovations and not just be a supplier of leather chemicals without any customer service', he added. Verbund - Know How When Friedrich Engelhorn founded BASF (Badische Anilin & Soda Fabrik) in 1865, he had a vision. He wanted to bring dye research and production under one roof. Each production facility would be linked to other plants so that the products and excess materials from one plant could be used as raw materials for the next. The original site in Ludwigshafen is now the world's largest chemical complex. All 350 plants are connected to other plants by at least one product or process stage. This network of integrated plants makes sense economically and environmentally. The network is known as Verbund. Today, Verbund is an integral part of BASF's corporate philosophy and now also relates to the company's dealings with those outside the company such as customers, strategic partners and the community as a whole. In the leather division the Verbund philosophy has been adopted to produce new products and processes from synergies within BASF's production. The leather division employs 17 chemists to carry out research and development only on leather and a further 15 chemists are currently working on additional projects which involve leather. The additional chemists are an example of how they utilise the 'know how' from other elements of the business to development of new leather chemical products and processes. One example of the Verbund technology is BASF's production of acrylic dispersions. The company produces five or six times more acrylic dispersions and as many dyes (for leather, textile and paper) as are used in the entire leather chemicals industry. Worldwide activities 'We want to do our business as regionally as possible. As well as our production and service centres in the four main tanning regions of Europe, Asia, Latin America and North America we also have regional production, marketing and service centres', says Michels (see map of BASF worldwide sites). The company are now in a position to supply all the key markets from local production or service centres. The global centre is still located at BASF's headquarters in Ludwigshafen, Germany. Asia now represents 40% of sales for the leather division and is now the biggest and most important region for the leather division. The regional marketing for Asia is based in Singapore and is run by Doo Soo Kim, director, regional marketing Asia for leather dyes and chemicals. 'The Asian market is particularly strong at the moment and we have avoided problems such as foot and mouth and BSE although the costs of raw materials are very high at moment', comments Kim. BASF have identified a shift in the Asian market towards more valued added products such as upholstery leathers. China, the largest single market in the region, is now served from a new production and regional service centre located in Shanghai. The Shanghai service centre was opened last year. 'During the first two quarters of 2001 we have seen steady growth in Asia. Continued growth in the third quarter is dependent on the costs of raw materials from the US and Europe', says Kim. Additional production facilities are located in Indonesia, Thailand, Taiwan, Bangladesh, India and Pakistan. 'In Shanghai we have all our major product lines as well as trained technical staff. We also have a full line of chemicals in India and for the other major markets we have a range of products which are specifically suited to a particular local market, such as Bangladesh, which suit the local conditions and raw material supply', Kim added. Outside Asia two further technical service centres have completed construction this April in Charlotte, USA, and Leon, Mexico, to cover the North American and Central American / Mexican markets respectively. 'The automotive upholstery sector is still strong in the US although we are seeing a gradual decline in the market. However, the Central and South American markets are more stable. Mexico and Argentina are a little flat at this particular time but the Brazilian market is very buoyant', says Hartwig Michels. BASF's North American operation is controlled from Charlotte. In Central and South America production sites are located in Mexico, Venezuela, Brazil, Argentina and Chile. They also have a regional service centre in Sapucaia do Sul which is ideally located for the tannery cluster in the Southern Brazil. The regional marketing for Latin America is based in São Paulo, Brazil. BASF's European operations are centred on the global centre in Ludwigshafen as well as Barcelona in Spain. A further regional production centre is located in Türkiye and the company have service centres close to the Italian tannery clusters of Arzignano and Santa Croce. Recent problems with the diseases of foot and mouth and BSE have affected the market in Europe by forcing up raw material prices. 'In Germany production has been down as low as 40% and markets in Spain, Italy, UK and Ireland have all been affected. However, there are still a number of high quality leather producers and fashion led tanneries in Europe which are very important to us', says Michels. Internal training Every technician at BASF undergoes training every two years to cover specific topics such as beamhouse technology, making waterproof leathers or automotive upholstery finishing etc. BASF use their own experts to train staff on each specific topic and Michels reckons that in general each BASF technician receives some form of local technical training three times a year on average. In January 2000 they established their own 'Leather Campus' to train staff and each technician attends the campus every two years. The aim of the training programme is to provide an increased level of customer service to their customers by making BASF specialists number one in their field. Some of the company's most important customers, such as Sadesa or Prime Tanning, can receive a 100% support service from BASF as they are so important. Also for the key accounts BASF will also offer training of customer's technicians as part of their technical support. To supplement BASF's commitment to improved customer service they have embarked on increasing the number of technical staff which they employ (see table 1). In Europe their aim is to have 50% more leather technicians within two years. Conclusion For global organisations such as BASF the best way to compete with a large number of small local suppliers and other large international players is to offer a higher service level. The strategy outlined by Hartwig Michels is aiming BASF's Leather Division in the right direction. There is a requirement by the larger tanners for a higher level of technical support and access to new economic, environmental and technically superior products which only companies such as BASF can offer through their vast internal resources and their unique Verbund philosophy. If tanners can obtain an advantage in the market place through research and development and innovation from BASF then the future of both the supplier and the customer appears healthy.