Case study: Offshore move pays off for Westwools

As CEO of Western Australia’s only carpet manufacturer, Westwools Carpets Pty Ltd, Jim Coles is in no doubt about where he thinks the future of his company, and the manufacturing and textiles industries as a whole, needs to head in order to be competitive internationally.

“The textile industry in Australia is not going to make money at the lower end. We are bombarded by the rest of the world in that area, and we are not competitive,” Mr Coles told WA Business News.

“Relocating [to Thailand] was a major achievement for us, it was the right way to go, and it has made us more competitive in Australia.”

Westwools started manufacturing premium wool and synthetic carpets for both the commercial and residential markets in 1977.

In addition to the O’Connor factory and head office, Westwools also has a distribution and manufacturing facility in Melbourne.

Catering for both the low cost-high volume and unique-high quality ends of the market, Mr Coles said rising costs were making Westwools’ lower-end products uncompetitive.

In 2004, he decided to move this element of production offshore, in an effort to reduce costs, while retaining the higher-end production in Australia.

After first considering China and Indonesia, Mr Coles eventually settled on Thailand as the ideal location for his first offshore manufacturing operation.

With Thai partners he created a new, stand-alone business – Westwools Carpets Thailand – which manufactures carpets and sends the product back to Westwools Australia for value-adding, before on-selling to markets in Australia and New Zealand.

Thailand was chosen over other Asian locations because of its conducive business environment, cooperative government, its proximity to Australia and low level of bureaucracy.

The Australian-Thailand Free Trade Agreement, which reduced trade duties between the two countries, played a major role in the decision.

“The FTA was an enormous contributing factor,” Mr Coles said.

The company also received support from the Thai government, which wanted to create jobs for the local community.

With additional support from local banks, in the form of interest rate concessions on purchased property, Westwools Carpets Thailand officially opened in September this year.

The operation has 10 employees operating three machines, and Mr Coles expects this number to gradually increase to 40 employees and eight machines over the next 12 months.

According to Mr Coles, sending the low-cost production element offshore has benefited Westwools’ Australian operation, which has retained the IT centre, research and development and medium-high end design and production.

Currently, 61 staff are employed in Australia across Perth and Melbourne operations.

The company has hired extra staff in Australia to take care of customs, shipping and transport requirements, and has also engaged new supplier arrangements to cater for new product requirements.

With more efficient margins, and increased competitiveness for their lower-end products, Mr Coles said the company was now able to focus on growing the business.

This growth, he believes, will create more opportunities for the Australian operation, keeping them competitive at the low price-high volume end of the market, while remaining at the cutting edge of design and innovation for their high-end products.

The new manufacturing base also puts the company in the Asian free trade zone, which allows Westwools Thailand to export carpets from the factory straight into the Asian network, eliminating the need to pay high import duties.