Magazine article Industrial Management

Tips on Working in a Developing Country and an Asian Culture

Magazine article Industrial Management

Tips on Working in a Developing Country and an Asian Culture

Article excerpt

With many U.S. companies owning production plants in foreign countries, and others planning to do so in a now-global economy, what does it take to run a metal fabricating plant overseas, especially in a developing country and an Asian culture?

An excellent example is a boiler components plant located on Indonesia's main island of Java and run in a joint venture by ABB Combustion Engineering Systems (ABB/CE), a leading supplier of fossil-fueled utility steam generation equipment. A subsidiary of Asea Brown Boveri, of Switzerland, ABB/CE Inc. is headquartered in Stamford, Conn.

Indonesia, at the heart of Southeast Asia, is the world's fifth most populous nation (180 million people), and consists of almost 14,000 islands that extend from the tip of the Asian mainland to Australia. Electrification 15 one of its highest-priority objectives. Power stations that use steam to turn turbines require large utility boilers and other components, the impetus for the ABB/CE plant. The intent of PLN, Indonesia's state electricity company, was to gain a dependable local supply source, increase the country's technology base, and avoid cash outflow for some of the costs of power generation.

One of the prime success factors of geographical diversification is the proper choice of location. Given Indonesia's strong electrification growth rate, we targeted it as a strategic market for steam generating equipment parts. Besides Java, Indonesia has five other fast-industrializing islands that give it huge potential--Sumatra, Bali, Kalimantan, Sulawesi and Irian Jaya. And nearby are Singapore, Malaysia, Thailand, Bangladesh and the Philippines.

Indonesia was also chose as its Southeast Asian manufacturing base for other criteria such as a well-managed economy, a growing financial sector, fast rate of deregulation and low labor costs.

The boiler components plant, located in East Java, commenced operating in 1989 in the port city of Surabaya. It is a joint venture of ABB/CE who has 60 percent ownership; P.T. Barata, a metal fabricating firm with 20 percent; and P.T. Pal, a shipyard with the other 20 percent. (P.T. is the Indonesian equivalent of "Incorporated," and the plant is actually located in the shipyard.)

Called P.T. Energy System Indonesia (P.T. ESI), the joint venture has a management and sales office in Jakarta, the capital city, for ABB/CE believes it important to have some organization near the government center.

According to William L Grupp, the company's senior consulting engineer for manufacturing services, P.T. ESI works under a "Partnering" concept with its joint venture partners. This arrangement results in utilization of the best of facilities, equipment and personnel from each organization. It allows P.T. ESI to benefit from a $100 million (US) capital investment made by its partners in modern manufacturing equipment. In this arrangement, P.T. ESI is chartered to fabricate the key tubular pressure part components for boilers and has supplied equipment for this purpose. With its partners, P.T. ESI has a total area available for boiler work of 30,245 square meters. While substantially more manufacturing space is available if required, only a small fraction of the designed boiler space is being utilized for this work.

In total, P.T. ESI and its partners employ almost 10,000 people at the Surabaya manufacturing locations. Under partnering arrangement, P.T. ESI employes a core pressure parts manufacturing work force, which is augmented by its partners to accommodate increases in workload.

The key labor skill required in boiler fabrication is in the welding area. P.T. ESI and its partners have a total pool of 2,854 welders to draw from, of which 10 percent are already involved in pressure type welding. All pressure welding is done in strict accordance with the ASME code.


What has ABB/CE learned form its plant-operating experience in Indonesia? First and foremost is the crucial need for training, and it chose to emphasize on-the-job training of a core of managers/supervisors to add to their existing skills and indoctrinate them in quality control and productivity. …

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