RACO Group: Mansour Alharbi Discusses Servicing Oil Refineries and the Petrochemicals Industry in Saudi Arabia

Interview with Mansour Alharbi, Chairman at RACO Group

What is your assessment of the sector in the region? How do you stand out from the competition and what do you offer?

We have two sectors we are working in through the consulting office which is Remah and Alasamer Technical. At Alasamer Technical we are very much focused on partners with whom we can add value to the industry. We are very selective and conservative in our selections. We try to have the high quality and the standard quality based on the Saudi standard, European standard, and American standard. We try to avoid working with those lower standards which cannot have a long lifetime in the industry because the output of that equipment or machines does not match the real standard of the Saudi Arabian industry. I come from a background of working in the oil and gas industry for 28 years. I used to work in SABIC and I was the General Manager for Strategic Purchasing. I left SABIC in 2009 and decided to start my own business because I could make more value to the country by being a businessman who can do something in the industry rather than being an employee. We are very selective with the valve manufacturers who we are working with. We are supplying to SABIC, Sadara, Sipchem, and in Kuwait to KOC, KNPC, etc., as well as Al Khafji Joint Operation Company. Most of our oil and gas work is in the petrochemicals and in the oil refineries, not in the oil upstream which is in the crude oil. We are also doing pipe fittings with a partner that is a French company located in Italy called Fives ITAS where we work with all types of flare systems. We are also working with mechanical expansion joints with the Fives Group located in France. We are also working with Fives Nordon for the cold boxes, heat exchangers, and more. We are working also with the burners, reactors, the reformers. This type of material is where we supply the burners and we do the testing for the burners and the flare system. We are not only working in expansion joints, but we are making a complete pipe solution. In industries where they have any problem with cracks in their pipes or their expansion joints, we make a complete root cause analysis, not just for fixing the crack, but we are seeing where the problem comes from. We make a complete piping solution from the vibration, from the flow, from the temperature, from the pressure, from everything in that unit in order to find what happened exactly and then we fix it. We also have the packaging system. We do the container liners, the jumbo bags, FIBC, FFBC. We are involved with many products on the packaging side with great manufacturers from India. We have several plants in India who are cooperating with us. We look at their standard and their quality, make a sample test for them, test it to make sure it meets the standard on the requirements of our partners and our end users, then we qualify them to bring their material to Saudi Arabia. We are not only in trading, but we are linking where we can find some added value material to the industry. For example, in Saudi Arabia with Chevron Phillips, we have had a contract with them for almost six years supplying the same material and they are not willing to change us. We are not taking advantage of that. We are not opportunistic at all. We are strategists. Everybody can sell, but the issue is whether you are going to be there for a longer time or you will disappear within one week. For example, when Sadara Plant started, which was a joint venture between Aramco and Dow, we have supplied them with more than $42 million with our partners from the United States called Sunbelt Supply. Other people supplied more than us in terms of value, but later on when the plant started up, everybody disappeared except us. With the start up, there was some strange behavior with the valves so we went to Sadara for about three or four months free of charge from our team. Our engineers were going over there meeting the Sadara team every day at 7:30 in the morning, attending the morning meeting between the maintenance and the operations of Sadara. In the end, they compensated us, but it was not a prerequisite to send our engineers. This is what makes us different from others. We are there whenever they need us. We are a very ethical company. We are 100% committed to business ethics. We respect the others’ patents, the competition, and our partners requirements that will not be shared with anyone else. Of course, everybody works for money at the end of the day, but money is not the goal by itself. It will come by nature if you do good business. If you put the money in front of your eyes, you will not do anything. But if you put the values there, you might lose in the first six months or the first year but you have to be patient until the people really trust you. Once you have been trusted, that has a huge value.

What products and services do you offer?

We have two expansion plans in mind. The first plan is a packaging manufacturing facility within Saudi Arabia. The second plan is a complete valve overhauling and repair shop which can accommodate from 120 inch to one-inch valves.

In addition to products, we also do consultation for our partners such as warehouse management studies and inventory studies. In the supply chain in general, people do not look at the inventory until they have a problem. At the beginning when they start, they just keep buying and buying until a time when the finance department starts bringing a bill to them concerning the amount of frozen money. We are studying the inventory, we will identify duplicate items, we are looking for the specifications of the item, the standardization and how you describe your material. The computer is very smart and very stupid sometimes. If you change any letter, it cannot catch it. If you look at a light, some people describe it as a lamp, other people call it a light, other people call it a fluorescent. If you have an inventory and somebody describes the same material under three different names, he will buy it three different times and he will buy three different materials and you will start seeing the same material with different names. We are working with partners so we can standardize. Now there is a name, a category, a class, and a subclass. For example, Toyota is the main class, a subclass is Camry, then a sub subclass is a 4WD, 2WD, etc. We are doing this for both inventory and spare parts. We make a class and a sub class then attributes and a description of the item. Through this inventory management we are trying to minimize their on-hand inventory because the actual cost of the inventory holding is about 10% to 15% from the item price because it takes employees, warehouses, inventory, stocktaking, etc. If the material is frozen, they will pay the same price of the item while it is frozen in their shelves. We do some material management as well. We help with processing engineering. We also do some business processing engineering for our partners if they need it where we can minimize their internal lead time before they send it to their suppliers and that will also reduce their internal costs of processing the purchases, reducing their inventory, etc. We are also doing some global contracts with companies like SABIC where we will fix the price for them for three years. We are very successful in all of our contracts which we have accomplished. We have never failed in any one of them. We are proud of this as a team and we are always successful in executing that.

What are your expansion plans both in terms of products and services and in terms of the region and internationally?

We have two expansion plans in mind. We started the visibility study two years ago but because of COVID-19, we stopped. It will hopefully resume at the beginning of next year. The first plan is a packaging manufacturing facility within Saudi Arabia. The market still is in shortage. Comparing what is manufactured in Saudi Arabia and what is being consumed, the gap is huge. The second plan is a complete valve overhauling and repair shop which can accommodate from 120 inch to one-inch valves. This is very much needed in the industry today in Saudi Arabia. There is quite a number of workshops, but the majority of them are not certified. We are working today with one manufacturer trying to establish a certified workshop who can do testing for the material, certify it, and put it back in the production line without any problems. That certification needs to be approved by the manufacturers. This is important because one valve might cost close to $500 or $1,000, but it may be close to $5 or $6 million dollars to repair it because you have to stop the plant, take it out, and put in a replacement. That delay time is costing millions of dollars for the plant. So, what we need is to have a trusted workshop where when you put it in the production, you can forget about it for at least two years. We are now trying to evaluate who we should partner with from those major manufacturers.

What challenges are you facing to running your business and what are you doing to overcome those challenges?

In any business, there are challenges. But if you have a good team, with empowerment for your team you authorize them to do things, they do not have to come back to you for every single thing, you delegate them, they know the schedule, they know what they can do, they can make decisions without coming back to you. This is our key success. If there is any problem from the customer, we always believe that the customer is right. I always evaluate my team by the worst customer we have because the best customer knows what to do. For those worst customers, you are obligated to satisfy them. Sometimes, we lose money in that, but it does not matter. This empowerment to our team makes it easy for us. They have empowerment to solve issues. We are very committed to our partners and to our suppliers. We always look for the future and that makes us different.

What is your vision for the medium term, three years’ time?

We are supplying today internationally throughout the Arab world, including Jordan, Kuwait, Emirates, but our main market is in Saudi Arabia. For the manufacturing facility or the valve testing, we are not going to expand outside Saudi Arabia for the time being, not even for the next 10 years. The Saudi Arabian economy is the largest in the Middle East. Secondly, putting a manufacturing facility in the neighboring countries today with the political situation, with the geopolitical atmosphere happening today would not be a good decision. Definitely, we will supply to the neighborhood. We are looking into the Iraq market and waiting to see what happens with the next elections. We have already had some good talks with Iraqi businesspeople there trying to establish business especially since the market there is very promising. For Jordan, we are mainly supplying to the phosphate industry. Some of them may have some relations within Iraq to send the material back to Iraq. Because we are dealing with some sensitive items, we are always asking who the end user is. We need to know the end user before we supply any materials, especially with the valves. Some of those valves can be used in chemical weapons or nuclear reactors, so we are very sensitive about sending any materials to any country without knowing who that end user is. We are working also with our partners where we have the clearance from the customs department in the United States that this material can be sent to the supplier or the end user or not. We are very aligned on that and very committed. We cannot really make some leaks of that or some easy processes.

What is your background in the industry?

I had a scholarship in Germany in the beginning of my life where I studied chemical engineering. I have another degree in business administration. I have programs in Harvard, MIT, Pennsylvania State University, Michigan State University. I have good memories from being in Houston, Texas for quite a long time. My last position was General Manager for SABIC Strategic Purchases. I also worked with the Gulf Investment Company as the General Manager for Commercial Administration for two years.

What inspires you? What drives you to do what you do?

There are five needs for the person, basic things of life, safety, home, getting married, and so forth, until the time where at the top of that you want to see yourself. I have been in an executive position since I was 38 and I am now 59. Next is only retirement. I decided that I had to do something because I saw what I can do and I thought I should utilize that to do something better for me and for my kids in the future. That is what I wanted to be. If the days come back, I will not be an employee at all. So, I decided when I was at the age of 48 that I had reached what I wanted to reach. This is the beauty of doing your own business. Whatever effort you are doing is your own money rather than being an employee. This is basically what encouraged me to leave. If you go to the hierarchy of the country, the president of the country or the king of the country is serving these people. At the end of the day, the freedom I have is more than if I am an employee. My income is equal to my effort. As a business owner, when you start your own business, in the beginning, I did not make anything. The first year, I hardly covered my expenses. I was the tea boy and I was the receptionist and I was the engineer. A few years later, the business started growing until I freed myself to what I wanted to be. You see yourself in business and you see your real success, but it takes a lot of patience. You have to be patient. Any business will not make a profit in the first two years. The people that often fail see the losses the first year and decide to stop and start another business again with another loss. You have to look at the future, you have to be sure of yourself, and you have to be confident in God.

For more information, please visit: https://raco.com.sa.

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