Interview with Mr. Adam Kuczynski Transfer Multisort Elektronik (TME)

InterviewSouth-East European INDUSTRIAL Мarket - issue 4/2009

Our goal is to achieve the status of a leading electronic components supplier in Central and Eastern Europe

Mr. Adam Kuczynski,
Transfer Multisort Elektronik (TME)
for South-East European INDUSTRIAL Market magazine

Can you tell us about the development of TME and also about the current status of the company?
The TME history dates back to the 1980s. It was an amazing time when one could sell anything, so altogether with my brother we took up selling electronic components in Lodz, Warsaw and Gdansk. The Transfer Multisort Elektronik company was created in 1990 as a little shop run by the family and dedicated to sales of electronic elements for service and small production purposes. In 1996 TME took up mail-order sale of components, in 2001 we started to export our products and nowadays we are presented in all Central and Eastern Europe countries.

Who are your target customers?
Companies of similar size to TME focus on customers who need small and medium quantities of products. Among our customers there are all kinds of companies and plants from various industries using electronic and electrotechnical components. Obviously, our target customers include manufacturers of electronic equipment, electronic equipment service centres and industrial automation service centres, but also companies from outside the electronics industry, like dairy plants, printing houses, oil rigs, radio and TV stations and many others. Our wide product range and attractive prices let us supply about 30 000 customers annually.

What are the key market segments for TME?
The key market segments for us are small- and medium- sized companies that manufacture, service or repair electronic or mechanical equipment containing control elements. We do not aspire to supply the biggest manufacturers though- this market share has already been taken over by leading global suppliers. We do sell to big manufacturers in Poland and the neighbouring countries but only in servicing or intervention quantities. We also sell electronic elements in bulk. It is very convenient for the customer to be able to order one piece or a million pieces- all in competitive prices.
What is your opinion about the Polish manufacturers of electronic equipment?
Against all appearances, in Poland there are quite a lot of companies with great potential and huge production. We can tell that judging by our deliveries: there are companies that buy hundreds of thousands of elements of one type, which means they manufacture hundreds of thousands of pieces of equipment in a month. We are not always aware of what exactly they produce. Very often it is confidential and in many cases the products are manufactured as commissioned work for bigger companies.

Is EMS sector an important customer for TME?
Here the situation is a little bit more complicated. In Poland a few Electronic Manufacturing Services companies have decided to open their own manufacturing facilities to be able to offer full service- production and also supply of components. Every customer is important for us, also EMS sector is supplied by TME.
TME Managing Board has decided to focus on trade in order to be able to satisfy suitably their customers’ needs.

How about employment at TME these days?
Despite the economic crisis the number of employees is constantly growing. Now we employ over 200 persons in Poland including 20 independent sales representatives in Hungary, Romania, Czech Republic and the Baltic countries.

What is the warehouse area TME has at its disposal?
The area of our warehouse is 4 500 m2. In addition we also rent two warehouses which combined area is 1500m2. We store about 1500 palettes and have more than 40000 goods localizations.

In what way does TME offer stand out above your competitors?
The global market is a bit different from Central and Eastern Europe markets. In the world, our sector for years has been clearly divided into three kinds of companies: distributors, catalogue sales providers and companies that specialize in the sales of products from a specific manufacturer or in the sales of products of the same kind, providing at the same time strong engineering, technical and information support. In Central and Eastern Europe companies combine in their activities all three types of conducting business, which is historically conditioned. Our company provides goods in bulk as a distributor of individual brand names as well as offers catalogue sales. Within TME there are also departments specializing in some fields, like measuring instruments or connectors. Here, we offer engineering support, give advice on the correct use of components, help to match the products with the customers’ individual needs, etc. This is why it is quite difficult to compare TME with other distributors because we offer a wider product/ service range: from catalogue samples selling, through selling in bulk to providing components for large-batch manufacturing.

How does the competition on the European market look like then?
Since 1997 no important market player dealing with electronic accessories has emerged both in Poland and Eastern Europe. The market is limited to a dozen or a few dozen of companies. What’s more, the last 15 years have seen a consolidation process and the number of players on the market is actually decreasing. Since the early 1990s the electronic components industry has been witnessing deflation: in the early 1990s a thousand resistors cost about 4 USD, now it is about 1-1.5 USD. As a result, every year we need to sell more components in order to be able to keep up the same turnover level.

To what extent has the crisis influenced TME customers and the company itself?
From our point of view the crisis is affecting specific industrial branches, like the automotive industry or the domestic appliances industry. We are experiencing a decrease in business on some of the export markets, especially in Eastern Europe where the market actually broke down. Fortunately our company has always tried to act in a way ensuring high level of safety: our biggest end customer generates only 2% of our turnover, and the biggest supplier sells us products worth 4% of our expenditure. This helps us avoid a situation where the insolvency of two, three or even ten of our customers could substantially change our situation.
Nowadays the company is in a very good condition as over the last few years we have managed to collect suitable resources and to plan a stable development. We are building new warehouses, investing in new software solutions and opening next branch offices abroad. At the moment we have our branch offices in the Czech Republic, Hungary and Romania. We are thinking of opening two more branch offices in Slovakia and in one of the Western European countries, which we hope will take place by the end of the next year. During the crisis we and our customers, I hope, are trying to carry out reorganization and implement development activities. Now it is easier to find new employees who leave the industrial branches which were affected the most by the crisis.

Are there any important events planned for the year 2009 at your company?
We have started the construction of new warehouses in Lodz. We are implementing a new computer system, our web-site is being modified and we are opening new branch offices, as I mentioned before. In 2010 we are going to start the next construction stage, which by 2012 will give us the potential to supply with our products the whole of Europe and the Near East.

We already know quite a lot about the construction of the new warehouses in Lodz from a presentation on your company web-site. Could you please tell us a bit more about what new functions will be introduced by the new computer system?
Our company web-site will be enriched with new functions. At the moment our web-site generates about 70% of our sales in terms of quantity- in terms of value it is a bit less, of course. The web-site content is available in 12 languages. On the other hand, at TME we are introducing the SAP system, which will let us take advantage of many new solutions and will be very convenient for our customers. First of all, we are introducing the option for tracking of ordered goods, the customers will be able to place standing orders and even negotiate some of the sales conditions. All these improvements aim at enabling the customer to place an order, receive the goods on time and pay for the goods, and all of these through our web-site.
Also, we still keep and develop our customer service department, as we believe that the web-site and the catalogue only are not enough. The catalogue and the web-site are just two tools enabling to choose and order the goods but direct contact with our employees is still vital, if not necessary. In many cases the customer wants to receive advice or lean more than he can read in the catalogue or on the web-site about the product.

Can you present the long- term development strategy of TME?
Our goal is to achieve the status of a leading electronic components supplier in Central and Eastern Europe. We have been working on achieving the goal for a couple of years now. We want to be able to offer for the area, that is from Scandinavia down to Greece, delivery of goods within 48 hours. Another goal is to supply the customers from this region with tools to communicate in their own languages. For example, we already print the catalogue in six languages: Polish, English, Russian, Romanian, Hungarian and Czech. We are also building a network of distributors.

Do the Central and Eastern Europe markets also experience fierce competition from the global suppliers?
The markets are quite promising. A general tendency is to transfer production from the West into Eastern or Central Europe, yet the intensity of competition is different in individual cases. For example, the Bulgarian market is not interested in attracting huge industrial investments, caring more for tourism. Nevertheless the potential of this part of Europe is enormous and everybody has already noticed it. In the strategic hierarchy of our competitors the expansion in Eastern and Central Europe is placed on an equal level with the expansion in China.

What will be the sources of financing of your planned development? Are you thinking of a capital partner or the stock exchange?
We finance most of the investments from our own resources, at the moment we actually have no debt. We do not plan to enter the stock exchange in the nearest future either. What’s more, we are thinking of organic growth rather, which means we are not thinking of any takeovers or fusions. Our development strategy is based on our own resource base in the shape of our branch offices where we have 100% capital interest.

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