Ashut Engineers: Furniture, Drums and Warehouse Solutions in Kenya, an Interview with Mehul Shah

Interview with Mehul Shah, Director at Ashut Engineers Ltd

What is your vision of the raw materials in the world and how have you adapted yourself? What has been the impact for your industry in terms of these rising costs?

Globally, everything has gone up in raw material from steel to aluminum and wood. Due to the COVID impact, there is a shortage of containers and supplies have been erratic. Our suppliers have also faced the same challenges. They are not able to ship. They are not able to produce. Steel prices have also gone up by 35%. Month to month, they keep telling us that there is a discount structure. But now, they will not give us the discount structure because they are not sure where the global prices are going. So, we are facing a lot of challenges. We are not able to book enough material. There is a supply and demand issue, as well. Along with that, our prices internally have also gone up because the power has gone up. Labor cost we have been trying to control. Local demand has been another effect on us. The shilling has depreciated quite a bit over the last one or two years. Currently, it keeps on rising by a shilling almost every week. We are at 111 to the dollar and the Kenyan shilling is normally back with the dollar. When there is a problem outside, it really affects Kenya, as well. We have started booking in advance. When COVID happened, we tried booking for six months in advance. We have local suppliers and we have supplies coming from Egypt and South Africa. We anticipated that what happens in Europe and America will normally hit Kenya about three to four months later. It was the same with vaccinations. People in Europe and America have been vaccinated fully and once those are exhausted is when Kenya starts getting the vaccines. Currently, the vaccine drives are happening and hopefully we should, by the end of the year, be at around 50% population vaccinated. Because the trend is there, we normally look at what is happening outside and then we add up to that. We have some buffer stocks. We anticipated that this was going to happen. Our inventory has slightly gone up because of surplus buying during COVID and we are utilizing that in this case. If prices go up, they have to come down. We are not certain when these prices will actually come down. It is a game of what comes first. Will the prices go down immediately? When they drop, they will drop suddenly and then we will have a big inventory at a higher price and are not able to consume. We have to be careful because cash flows have gone up.

What are the different channels that you have in the company? What have been the reasons for this reorganization? Is it due to COVID or external? What is the organization of the company now?

Ashut has a long history. We have been in business for the last 40 years. Initially, we had a small shop. Once we went into industry, we have not looked back and just kept on growing and growing.

Currently, Ashut Engineers Ltd makes a lot of products locally. Our tagline is “designed for the way you work or the way you live”. Any customer can get anything made from us in steel or wood or aluminum. If you have a warehouse, we design based on your warehouse. Based on that, we had a lot of products and we divided according to the channels and the categories. Education becomes one sector, manufacturing is a sector, banking is a sector. Each channel has its channel lead and the category would be a wheelbarrow, the drum section, office furniture, home furniture, school furniture. We separated and made it more focus oriented. Every channel lead has a target and they are supposed to go out, look for business, and try and make sure that they achieve their target. With that, we have not been dependent only on people walking in or calls asking us to send our technicians. Our team is now going out and knocking on doors and finding out where the opportunity is and trying to get hold of that. When COVID happened, initially, we were not sure what COVID was going to do to the employees. Our senior staff, the management team, took three days working from home and two days working from the office. There was a rotation. In case somebody caught COVID, which so far nobody has in the company, they would not give it to somebody else. That way, there was more opportunity for them to work from home, as opposed to five days at the office. COVID protocols came in suddenly, such as putting sanitizing machines all over the production areas, including the showroom. We had handwashing, social distancing, and the normal protocols which we were supposed to follow during COVID. Every employee was given face masks. The enforcement of all that happened. These sudden changes were immediate and they had to be done. Some were long term. But that has helped us in the current situation. In Ashut, we have not had a severe drop in sales. We have somehow managed to keep the numbers up. We are at 80% of what we were expecting. We have a broader management team than before and more dedicated and everybody knows what they are supposed to do. It has worked out well for us, in that sense.

What has been the impact for your exports in the region?

Currently, we have some export still going on. But we could not go and reach out to our customers who are in Uganda and Tanzania because borders were closed. Things have mainly happened on Zoom or over the phone. It was the same situation with our suppliers. We could not reach out to them and ask what is new in the market and what we can develop in the long term. The customers who have been buying from us from outside have been continuing to do the same and the support they gave us during this time was greatly appreciated. We still reached out to them with the new products we have developed. We send an email or WhatsApp and they confirm and it moves from there. We have been working from the office and working from home based on this COVID scenario. Once everything starts opening up, we can start going out and doing much more.

What has been your investment in the plants themselves and for the company in restructuring or not restructuring?

Currently, the solar plant at Ashut Engineers is being installed. It has been delayed because of issues in China. They had serious demand from other avenues for solar and there was a shortage in supply. We were supposed to launch in April this year. The current plan is for the installation to happen in October. Now, the roof has solar panels. We were supposed to have finished it by today and commissioned it but certain equipment is not available. We hope to finish it by mid-November. That will serve almost 80%. We are commissioning about 500 kilowatts of power. By the middle of November, it should be running up to standard. We ordered CNC machines last year from Malaysia. Malaysia had a severe COVID outbreak and their borders were closed, the people were not working, companies had shut down. We are hoping that by the end of this year, we will receive those machines. In terms of new product development and new machines coming in, that is one of the areas where it has been delayed but it was underway quite a long time ago. We have also started a Six Sigma process for the staff and for the entire company. We have completed the Five S (5S) which is a Kaizen principle of making sure everything is clean and you only have good products in the line in the production areas and clear up all the waste. While we were doing that, we got quite a large amount of inventory, which we are now able to use as raw material to make other products. Now, we are converting that waste into good product. There is a lot of clean up happening. We have managed to earn about 20% of space from that process and now we are fine tuning using Six Sigma. That will now take us to much higher competitive levels in terms of pricing and market and giving better quality at a good price.

What is your plan for the company in the medium term, three years’ time?

With COVID hitting us two years ago, the economy has really suffered in Kenya. Everything has shot up in terms of prices of steel, power, wood, aluminum, and people cannot afford it. There is not much money in the market. The dollar is also not helping us. Inflation has hit us hard. We have the election next year. Every election year, people get worried about whether we should keep stocks or whether we have enough inventory. It is a catch 22 situation. We are not able to plan ahead. Whatever plans we created last year, we will continue with the same in terms of their targets and what we have achieved. Next year is going to be similar to 2021 and we just have to ride that wave. Once we know exactly who is coming in and how stable the country is, we can plan the next five years ahead. But currently, it is a bit of an up and down situation.

What major challenges are you facing in order to develop your business?

Currently, challenges include the prices being high. A lot of importation is coming in. The only good thing is that because of the higher container prices, importation has become more expensive. For a container which was at $3,000 for a 40 foot, now, there is no availability. Or if it is available, it is at $10,000 or $12,000. In that way, it is a good thing. But the economy is a challenge. There is no money in the market. That situation becomes very difficult. The other challenge is low quality goods coming in and put in the market at throwaway prices. Because people do not have enough money to spend now, they buy what is available at the lower cost. With the new technology, which hopefully we get by January, we are trying to redesign our products, really look at what is not necessary, remove that, and make it more competitive. Obviously, we will do this keeping the quality in mind because we are known for our quality and our quality is very good. The only thing we have to work on is the pricing. We will become more efficient and then we will be more competitive in the market.

What are the sectors that you feel have the most potential growth?

In terms of the current growth within the channels we have now, we have seen a good opportunity in the drum section. These drums are made for the petroleum industry. There is a huge scope there because everything is made locally. We have one other competitor in the market so we are doing well there. On the lube side, we work with a lot of shops and convenience stores that are very prominent in the lube industry. There are a lot of small shops within the petrol stations. People are now tending to use more of the convenience store way of shopping. If you want milk and bread, just go to the convenience store instead of going to supermarkets, waiting in lines, paying for parking, etc. The trend is moving again to the small shops, which was the case in the 1980s before the big supermarket boom came in. A lot of shop fittings are moving in that direction and we saw a lot of opportunity in that sector. We also introduced our home furniture range which is four years old now. With a bit of marketing and word of mouth and making sure that quality and pricing is good, we are making headway in that sector. On the education side, we were known for making desks and chairs. There are a lot of private schools in the market and they did not know that we make furniture. Now, we are getting those leads. We have taken part in exhibitions for education, as well. People are now learning what we are actually doing in that sector. In the banking sector, we were not focusing much. With this new direction, we are making quite a bit of headway. We are trying to lock in businesses and customers and they are also seeing what we are doing. Our quality is better than the imported furniture that is coming in. Also, you can get your own brand colors, your own designs, and we maximize your space. So, it is a good opportunity with good potential. We just have to maintain the pricing side. Our service level is also very good. If we tell you that in two weeks you will get your goods, that means you will get them. You do not have to wait for something to come from overseas and two months later there is a delay or issues of clearing, etc. It is a one stop shop in Kenya.

What CSR activities have you been active in?

Earlier this year, we had an opportunity with Fruity Schools. Mr. Kennedy is in charge of Fruity Schools Africa. He was doing a spelling bee competition. He mainly works with kids. When the kids went to South Africa, as a meal there was some fruit with avocado on the side. The kids told him they are not allowed to eat this because when they were in their hometown the avocados were mainly for export. That gave him an idea that if kids cannot eat avocados and they are only for export, why not just grow fruit trees in schools? These kids who walk for almost 5 to 10 kilometers every day come to school hungry. They can just grab a fruit and that will last them for a whole day as well. That was his idea and he approached quite a number of people, but we jumped on the opportunity and said we would participate with him and with all the schools in Nairobi and then that becomes our CSR. While we use wood in our furniture, we got this opportunity. All the work, all the planting, everything was done by Fruity Schools. There was also a partnership with Standard Media Group, so there was a lot of good broadcasting as well. We planted at 337 primary schools. Every school had about 37 fruit trees. There was avocado, guava, and mangoes. The fruit trees were planted based on the climate they are good in. We initiated the project and now they have already done another two counties and there is another partner who wants to plant 5,000 trees every two months in the CBD, in the institutions, in the police stations, and on the streets. This fruit is free. The good thing is that because they give food, they will not be cut like how the other trees are cut for wood to make furniture. It will be a long-lasting thing. With respect to conservation and for the environment, this is a very good idea which is why we partnered immediately. We saw this idea and we signed up in the next week and in two months, all these trees were planted. The kids also learned how to plant trees, which was a big initiative. Now, this is an opportunity where they are responsible for making sure that the fruit trees are given water, taken care of, and when the fruit is ripe that becomes their meal for the day.

What is your inspiration? What drives you to do what you do?

Ashut has a long history. We have been in business for the last 40 years. I am the third generation in the business after my grandfather and then my father who was born here. I was also born in Kenya. Initially, we had a small shop. Once we went into industry, we have not looked back and just kept on growing and growing. Because it is a forty-year-old company, we have a lot of contacts, a lot of companies, a lot of customers, a good number of suppliers. We have built a name in this market. If somebody knows Ashut, they know that we are going to give the right quality, the right product, and a good price. We have a lot of integrity, as well. We want to continue living a legacy. We want to create a legacy. We employ more than 500 people now and we want to carry on doing the same over the next few years. With the new structure, it will give us more time to think about what to do. We will venture into Uganda, Tanzania, the East Africa region, and expand regionally, as well. That is what drives us because we feel happy and motivated that things are moving in the right direction. There is a lot of opportunity. We are still not at the first world stage, but with our vast product range, we keep on innovating new ideas and have new products coming in. It is a good learning opportunity, also, for us as a family and myself. That motivates us and we feel happier at the end of the day. We have built something and we are known. So, it is a good space to be in.

ABOUT ASHUT ENGINEERS: Ashut Engineers Ltd was incorporated in 1980, and has become a leading manufacturer of a wide range of products made from plastic, steel, wood and aluminium. From its origins in a small workshop in Kirinyaga Road in Nairobi, Ashut has grown into a corporate entity with an office space of 250,000 square feet, across 10 acres of land.

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