Singapore-based Vital Solutions may be based in a traditional industry, but they are no stranger to pushing the envelope. Started in 2000 as an internet company, their plan was to develop an e-commerce model for online trading of paper products.
“We were an early entrant in e-commerce,” says co-founder V Krishnan. “We spent a couple of years trying to develop a B2B model, with a technical team here and India. But then the dot com bust happened and interest in the space was reduced.”
“Our transactions were very sensitive because the value is so big, so there was a need for a certain amount of confidentiality and certainty,” he says. “And while the team was able to deliver on both fronts, customers were wary due to a lack of familiarity with the concept of e-commerce.”
Today, the team has gone back to basics and are a key supply chain partner in the pulp and paper industry.
“It’s been a fairly successful transformation of our business model,” says Mr Krishnan. From nothing in 2002 to where we are today, hitting over US$500 million last year. It’s been an interesting journey, replicating our business model in the various markets across the world. Oftentimes people think we are a trader, which we are not - our orders are made to order for specific customer needs.”
With offices in over 10 countries and clients spanning across 80 markets located across the globe, the company has clearly come a long way.
Establishing an edge
Mr Krishnan credits the company’s good planning, strategic supply chain, youth and ambition for getting them as far as they have.
“Many of the players in the paper industry are very long-established, billion-dollar companies from Sweden, the US, and Western European markets. We are nimble and we are extremely focused on how to deliver more value for our customers.”
In addition to the distribution of paper products, Vital Solutions also has processing capabilities in South Africa, India and Australia. It manufactures cartons in India and are key suppliers to companies like Foxconn, Colgate, Panasonic and other large manufacturers. The company also markets its own brands, which are custom-made by global manufacturers.
Besides this, Vital Solutions has exclusive distribution rights from leading paper manufacturers for a variety of paper grades, with warehousing capabilities across 11 locations in markets like Australia, South Africa, India, UAE and the US.
As such, it generally dominates in terms of market share. In addition, they are able to leverage economies of scale and reap efficiencies across the entire supply chain to get better prices from their suppliers and in turn offer a wider range of products to their customers.
Developing a close relationship with their customers has paid off. About five years ago, the company decided to leverage their relationship with customers who were in the steel trading business to branch into the field.
It may seem like a diversion but Mr Krishnan reasons that they are both manufactured products that are distribution driven. “Once you establish a relationship with the supplier it’s just about seeing what else you can do for them. The key thing is to have a strong relationship either at the customer or the manufacturer end,” he says.
Mr Krishnan also attributes the company’s growth to their partnership with Standard Chartered Bank, with whom they established a relationship in 2001.
“They are a very trade-oriented bank with a wide variety of products. It also helps that they have presence in many of the emerging markets we are interested in. Standard Chartered Bank understands the markets, has a wide range of products, and they are willing to take the time to understand our needs,” he says.
“During the course of our working relationship, the one thing that has struck me about the bank is how they’ve engaged us over the years. The bank is very aggressive about supporting the customer and learning how to do better things for us. There is no doubt they’ve helped us grow to where we are.”
Like many other organisations, the global pandemic has hit Vital Solutions hard. According to Mr Krishnan, the sales volumes have dropped by about 50 per cent this year. “Even if the company hits growth targets of 20 to 25 per cent by next year, it will still be a challenge operationally.", he says.
“COVID-19 has been extremely difficult for us. With many markets shut down, there were some cases in which we were not able to ship goods. There were also situations where we could not collect money from our customers. Every market threw up different challenges - some ports were shut down, and in other places our customers were not able to operate.”
While the company hopes things will “normalise” in fourth quarter, the team has taken steps to reduce unnecessary expenses in a bid to free up cash flow.
Through the trying times, Standard Chartered has stood by their side. In addition to offering the company a variety of working capital loans and repayment extensions, Standard Chartered has also worked with Vital Solutions apply for various schemes made available by Enterprise Singapore.
"We have extended temporary bridging loans and trading schemes to them during this period. We have also worked with Enterprise Singapore which has been extremely supportive and prompt in helping us obtain approvals for this client,” says Standard Chartered’s Chow Wan Thonh, Regional Head of Client Coverage, Corporate, Commercial & Institutional Banking, ASEAN and South Asia.
The bank has also provided hedging and interest rate solutions for Vital Solutions to better manage their forex and interest rate risks.
Services such as Standard Chartered’s receivables financing solutions has helped Vital Solutions to leverage on their accounts receivables to obtain financing flexibility. This has reduced the strain put on their working capital and helped the organisation with their risk management.
Despite the challenges thrown up by COVID-19, Vital Solutions still sees growth opportunities. In the paper side of their business for instance, they are shifting their focus to packaging materials which is still seeing growth due to the boom in online businesses.
”We’ve also been working on an e-commerce plan for the last six months,” he adds. “We think it’s a good time to revisit B2B e-commerce.”
Beyond making their offerings available online, Vital Solutions envisages this platform as providing a community space for buyers and sellers.
According to Mr Krishnan, the paper industry still values face-to-face interaction and remains very labour intensive. “We expect that in time there will be a need for a more efficient way of interacting, which is 24/7 and catering to different time zones,” he says.
“There’s still a lot of information asymmetry in the paper business ecosystem,” says Mr Krishnan. “We want to bring greater transparency across the supply chain and create a platform where requests can be exposed to a wider range of suppliers and customers, ultimately creating a more efficient way of transacting.”
Source: The Business Times © Singapore Press Holdings Limited. Permission required for reproduction