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05/11/2018

Growth through optimisation

The Erber Group’s turnover has doubled every five years since it was founded 35 years ago. This is only likely to be more difficult given that turnover currently stands at 300 M euros. Then again, maybe not.

He was into organics long before the word was in fashion, but then Erich Erber, founder of Erber AG, has always been ahead of his time. In the early 1980s, he came across what he refers to as “a highly academic issue”: mycotoxins. These are a form of toxic moulds that may for instance occur in damp grain. If fed to animals, not only can these impair their digestion and growth, they can in turn harm people. Erber came across a remedy that binds and neutralises the toxins  and which is relatively easy to produce naturally. Soon he was distributing it across the world under the name Biomin, leading him to achieve global leader status in this segment.

But it was never Erich Erber’s style to rest on his laurels. He pressed ahead with global expansion, opening production sites across the world, expanding his portfolio to include anything he deemed suitable. And, vice, versa, any business ideas that did not work within the business as a whole were promptly dispensed with.

As well as Biomin, three other brands remained: Romer Labs with its feed safety diagnostic solutions, veterinary disease prevention specialist brand Sanphar and EFB - the hub for Biotech innovations. Together they generate a profit of 300 million euros, no mean feat by Erber’s accounts. “In the beginning it was very frustrating”, he recounts. There he was, a young entrepreneur at a trade fair for animal products in the Netherlands, no place for an Austrian - an outsider to the well-established industry there: “The Germans and the Dutch have a lead industry for everything, and then along I come to try and tell them how the world works.”

But that is something the entrepreneur is very good at. In 2004 he set his mind on launching a world nutrition forum, a gathering of the top minds in the sector: “I only ever spoke to technicians, never the boss, I wanted to meet the bosses.” He wanted to discuss the future of the sector with them. In 2004 there was controversy about the EU ban on feeding antibiotics to animals: “The Americans said it was a no-no; the Swedes had been doing it for a long time already – before we knew it we were in the middle of a huge debate.”

380 guests came to Salzburg for the first World Nutrition Forum. That number rose to 580 in Vienna two years later. Erber remembers how a key decision-maker from Thailand had sent just one representative in the first year. The next time, she came in person. That number had risen to 900 in Vancouver in 2016. The World Nutrition Forum is the biggest event in the sector today, something Erich Erber takes immense pride in.

PASSION, PEOPLE, PROFIT
The key to his success lies in the enthusiasm he can generate. This comes down to the three Ps of economic philosopher Charles Handy, says Erber. First and foremost? Passion. “You have to be enthusiastic about what you are doing”. Although a graduate of economics, he started his career selling feed additives: “anything that was approved, we sold. When these were no longer effective, others said just double the dose. That wasn’t enough for me.” He was already familiar with the tried and tested and always on the lookout for new discoveries. “That bored me.”

To Erber’s mind, if you can generate enthusiasm, you will find the right staff that are just as enthusiastic about getting to grips with the issue as you. This leads us to Charles Handy’s second P: People. Only when you have Passion and the right People can you contemplate the third P: Profit.
And this has been flowing steadily for 15 years – with sales doubling every five years. Even at times when sales were not particularly buoyant, profits rose steadily: “Rising profits are a sign that you are doing something right”, says Erber. He has been involved with some customers for 35 years, “they could have given us the boot long ago. But they don’t.” As he says to his distributors: “make sure that you remain important to your customers.”

DECLUTTERING PROCESSES
Given the increasing difficulty of doubling profits at a turnover of 300 million euros, two year ago he decided to launch a change project. Erber refers to this as ‘P2’, the two Ps standing for Production and Procurement.

Erber, now Chair of the Supervisory Board, is a man that likes to look at the bigger picture. The details of the P2 project are therefore handled by Gundula Pally, Managing Director of Kerkhoff Consulting, whose advice guided the transformation. The aim? To update processes in Production and Procurement in order to facilitate the planned doubling of sales. No easy feat by any means given that teams often neglect to pull together when things are progressing well anyway. So why change anything? Pally worked with a simulation game. The principle is simple. The factory is reconstructed in its current set-up in a room with ten tables, only the division heads are assigned to positions different to their real-life roles. “In reality, the head of procurement would refrain from making suggestions for improvement to the head of production”, says Pally: “She is likely to tell him to stick to his own affairs.” In the simulation environment on the other hand, removed from day-to-day business, staff can experience familiar processes from another perspective, identify and acknowledge weaknesses and actively work on constructing a better version. An added benefit is that this offers a means of breaking up rigid silos.

THE NEXT STEP: ERP
The procurement part of the project was the simpler part, completed in just half a year. CFO Rudolf Stelzhammer used cost cutting to finance the difficult part: the optimisation of production, logistics and the supply chain. He looked impressed by the closing presentation in the factory: “It was a member of staff that explained the changes in each division, not a head of department. A forklift driver stood in front of a chart and described what he was currently working on. And he sounded enthusiastic about it.”
The next project is the launch of an ERP system. The Erber Group was one of the Austrian pioneers, starting out with SAP S/4HANA: “Most companies work with an early version of SAP and contemplate whether and when they should upgrade”, says Stelzhammer. However, rather than have to replace an old system, Erber has opted to jump right in with the latest version. This means that every single one of the 1400 members of staff worldwide will have to become acquainted with the new system: “That will be tricky but, not to worry, we won’t forget what got us here ... our entrepreneurial spirit!”

Author: Mara Leicht

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